External environment 23 2.1 Main trends in the Polish economy 24 2.2 Situation on the financial markets 25 2.3 Regulations pertaining to the insurance market and the financial markets in Poland 28 2.4 External environment in the Baltic States and Ukraine 30 2.5 Macroeconomic factors that can affect the operations of the Polish insurance sector and the PZU
Operating model - distribution, innovation 87 5.1 PZU Group 88 5.5 Management of the PZU Group’s brands 98
Financial Results 101 6.1 Major factors contributing to the consolidated financial result 102 6.2 PZU Group’s income 104 6.3 PZU Group’s claims paid and technical provisions 108 6.4 PZU Group’s acquisition and administrative expenses 108 6.5 PZU Group’s asset and liability structure 108 6.6 Contribution made by the market segments to the consolidated result 110 6.7 Issuer’s financial results – PZU (Polish GAAP) 121
Risk management 127 7.1 Objective of risk management 128 7.2 Risk management system 128 7.3 Risk appetite 129 7.4 Risk management process 131 7.5 PZU Group’s risk profile 131 7.6 Sensitivity to risk 137
PZU on the capital and debt markets 143 8.1 Equity and bond market 144 8.2 PZU’s share price 145 8.3 Debt financing 150 8.4 Banking sector on the Warsaw Stock Exchange 151 8.5 PZU’s investor relations 152 8.6 Analysts’ recommendations regarding PZU’s shares 156 8.7 PZU Group’s capital and Dividend Policy 158 8.9 Calendar of major corporate events in 2018 165
Other 201 10 Photos of PZU employees are used in the report - „People with passion”.
The most important transaction last year was the finalization of the acquisition of a 32.8% equity stake in Bank Pekao SA jointly with the Polish Development Fund for a total amount of
PLN 10.6 billion. It was one of the largest undertakings of its type in Europe in recent years. This strategic investment has enabled
After finalizing this equity stake acquisition, PZU faced the challenge of adapting to new conditions in a fashion that will not only enable it to achieve its ambitious objectives within the next several years but also build a rock-solid foundation to construct an entrenched technological advantage over the long-run. The gradual change in the insurer’s model (chiefly involved in the valuation and transfer of risk) toward the model of an advisory and service company (operating on the basis of technological know-how) constituted the basis for this transformation.
PLN 22.8 billion and a record-breaking net profit of PLN 4.2 billion
The analysts of the American S&P Global Ratings agency also appreciated the systematic improvement in the PZU Group’s financial condition. In October 2017 they raised PZU’s rating outlook from negative to stable.
The year has also elapsed under the motto of innovation and new technology. The Witello Fund established by PZU to support the building of an ecosystem facilitating the development of Polish entrepreneurship and investments in Polish startups that over time will augment the potential of innovative solutions that may be used directly in the PZU Group will provide material support in this area. In 2017 Witelo entered into agreements with some of the best VC funds in the world: Atomico, Evolution Equity
Thanks to that, the Polish cybersecurity sector has an opportunity to become one of the key competence centers in the world. The new office will be opened in cooperation with PZU. Entrusting funds to VC funds, we have certainty that we will attain our objective of supporting innovative projects in our country. This is an important element of the strategy, namely to make PZU the most innovative group in Central and Eastern Europe.
In 2017 the PZU Group became a member of Lloyd’s and closely collaborates with the Argenta Syndicate. Thanks to this investment we received a prestigious certificate entitled „Member of Lloyd’s”. In this fashion PZU has become a global player.
Presence on Lloyd’s market means more than prestige; it means access to international brokers and the ability to take advantage of the knowledge of the world’s best underwriters and risk engineers.
In 2018 challenges await us that are related to the strategic ambitions we have embraced. Some of them are as follows: radically simplifying our product offering and converting our sales network into a general sales network, investing in database integration to give us a full picture of our clients, cross selling and a loyalty program. Tightening cooperation with the Pekao and
I would like to thank all our employees and agents for the above average commitment to building the #newPZU and the
Polish stock market’s trading volume, PZU was one of the main companies driving this growth to the greatest degree. PZU’s market value at the end of 2017 had grown by PLN 7.7 billion y/y to PLN 36.4 billion.
The initiatives completed last year have been endorsed by the entire Supervisory Board and the market. In particular, it
Chairman of the Supervisory Board Statement is noteworthy that S&P Global Ratings, an American firm, has raised PZU’s rating outlook from negative to stable.
One of the most important transactions executed last year from PZU’s vantage point undoubtedly contributed to that rating, i.e. the finalization of the acquisition of a 32.8% equity stake in Bank Pekao SA jointly with the Polish Development
Fund for a total amount of PLN 10.6 billion. This acquisition confirms the Management Board’s determination in pursuing the PZU 2020 strategy calling for a strong footprint in Poland’s banking sector. This investment has enabled the PZU Group to become the largest group offering comprehensive financial services in Poland and Central and Eastern Europe with a total balance sheet value in excess of PLN 317 billion.
We stand behind the PZU Group’s growing commitment to sustainable development. As a company open to dialogue and social expectations, PZU endeavors to set trends and construe business solutions in line with the expectations of its key stakeholders. At present, PZU is more and more actively getting involved in social projects related to prevention, as well as employee and environmental issues, and in the future, this will drive the formation of its long-term competitive advantage.
Within the framework of the “New PZU” strategy the detailed indicators and ambitions have been presented as they address material non-financial issues. The implementation of these projects will augment PZU’s investment and image-related value while translating into its intrinsic value generated at the level of business profitability.
The PZU Group’s ambition is to accompany clients, to make it easier for them to make the right choices to help them protect their future and what they consider to be the most valuable.
Powszechny Zakład Ubezpieczeń Group (PZU Group, Group) is the largest financial institution in Poland and Central and Eastern Europe.
PZU comes in at 88%, while aided brand recognition is 100%, making
PZU is an organization operating at a large scale. It is also cognizant of the expectations various entities have of it, including investors, clients, employees, partners, industry experts and the social environment from which PZU’s employees and clients come. That is also why managing relations with stakeholders and their impact on the business community is accomplished in a deliberate and sustainable manner. PZU is a company that is open to social expectations. In the actions it takes it strives to set trends and construe business solutions responsibly. It also gets involved in actions to benefit the local communities in which the Group’s clients function. For the PZU Group, sustainable management is a deliberate choice of how it conducts its business, thereby making it possible to build the company’s long-term value in an ethical and transparent manner while giving consideration to stakeholder needs and expectations. The full range of information on the implementation of the principles of corporate social responsibility by the PZU Group, including all legally required non-financial information, is included in the Report on non-financial information of the PZU Group and PZU SA for 2017, which constitutes an annex to this Management Board’s Report on the Activity the PZU
We constantly adapt to our clients’ evolving needs; we actively endeavor to streamline how our company functions
Conducting banking activities, including accepting deposits, credits and loans, running bank accounts, handling cash settlements and rendering payment services
Accessible products and services to clients whenever and wherever they want them
Access to enormous data files, the ability to analyze and utilize them with lightning speed
Potential of the largest financial group in Central and Eastern Europe Understandable products suited to client needs and ensuring their financial security Extensive and multiple-channel distribution network Ecosystem of strategic partnerships
The PZU Group is characterized by a high level of security of its operations. This is confirmed by both high capital adequacy ratios and the rating of the American rating agency S&P Global
On 27 October 2017, the S&P agency upgraded PZU’s rating outlook from negative to stable. At the same time, PZU’s financial strength rating remained at A-. This is one of the highest possible ratings for a Polish company. In their report, S&P analysts emphasized that: „Group stability and transparency of investments in the banking sector supports the current creditworthiness of the PZU Group in the medium term.” Chapter 8.8 RATING
The PZU Group received numerous awards and distinctions for the activity in 2017. We present some selected ones below.
This certificate is awarded to: Powszechny Zakład Ubezpieczeń Spółka Akcyjna for achieving the: CIPS Corporate Certification Standard Award
This certificate is awarded by and remains the property of the Chartered Institute of Procurement & Supply
David Noble FCIPS • Chief Executive Richard Masser FCIPS • President
MARCH dismissal of Michał Krupiński from being the CEO of PZU
JUNE PZU and PFR finalize the acquisition of a 32.8% equity stake in Bank Pekao
APRIL Appointment of Paweł Surówka to be the CEO of PZU
OCTOBER Payment of a dividend from the profits generated in 2016 (PLN 1.40 per share)
OCTOBER S&P Global Ratings raises PZU’s rating outlook from negative to stable
Initially, I treated my adventure with sailing as a way of testing the boundaries of my own capabilities and a way of spending my leisure time. Over time, it turned into a passion interwoven with wind and water. Every sailing trip I take fills me with a feeling of unfettered freedom and independence.
ilk u, w w w .s ai lin ge ve nt .p l
In 2017 the circumstances on the labor market improved very markedly from an employee point of view. Employment was on the rise and the unemployment rate fell. At the same time, companies experienced greater difficulties with filling vacancies and the salary growth strongly accelerated.
The most readily available information about the labor market comes from the business sector. In 2017, average headcount grew by 257 thousand people, as compared to an increase of 158 thousand in 2016. In December 2017, average monthly headcount in businesses was 4.6% higher than one year before. According to BAEL statistics1, based on yet incomplete data,the increase in the number of persons employed was, less spectacular according to our estimates amounted to 1.4%
y/y in 2017. In the environment of limited supply of labor, businesses most likely sought to stabilize contracts with the personnel previously collaborating on a more flexible basis.
Employment growth, demographic trends resulting in a decrease in the number of people in working age and a reduction of retirement age resulted in a rapid decline in the unemployment rate. The registered unemployment rate in December 2017 was 6.6% compared to 8.2% in December
Polish economy was already clearly visible in 2017. The average monthly salary in the enterprise sector increased from 2016 to 2017 by 5.9% compared to a 3.8% increase in 2016.
A solid increase in real income in 2017 allowed for a fairly equal and relatively high growth rate of household consumption (4.8% y/y). It was assumed that the impact of transfers made under the “Family 500+” program on the annual consumption growth would expire roughly in mid-2017.
1 BAEL (Population Economic Activity Survey) is a survey of situation on the labor market conducted by the Central Statistical Office on a quarterly basis.
Source: Central Statistical Office, preliminary estimate of GDP in the fourth quarter of 2017
However, many households started to increase their goods and services purchases with some delay compared to the moment when the benefits were launched. Additionally, record high consumer confidence indicators were recorded in 2017, including increasing job and income security. At the same time, there was a clear increase in income mainly in the lowest earning groups, where the consumption growth effect was relatively the most pronounced.
According to the Ministry of Finance estimates, the state budget deficit in 2017 was PLN 25.4 billion, which is much lower than the PLN 59.3 billion planned. The Ministry of
Finance estimates on a preliminary basis that at the end of 2017 the ratio of the general government sector debt to GDP
2.2 Situation on the financial markets 2017 was a stellar year for investing on the global financial markets. The upward movement of global stock indices continued despite the fact that the ninth year of the bull market already begun in the United States. Sovereign bond yields on the core markets increased only slightly.
Korea’s nuclear programme. Despite the clear economic recovery, the announced reduction in the ECB net asset purchase programme and the commencement of contraction of the FED balance sheet, the effects of the “quantitative easing” policy still prevailed globally, which, in presence of relatively low inflation, helped to restrain the increases in bond yields on global markets.
Polish PLN government bonds, except for one-year bonds, also increased in value in 2017. From January to June, in connection with the decreasing uncertainty on global financial market, the unexpectedly high economic growth rate and the improving situation of the state budget in Poland, we could observe a decline in the yield of 10-year government bonds from about 3.90% to roughly 3.15%. From the end of June, the yield of 10-year PLN government bonds varied from 3.15%
Additionally, the Polish yield curve flattered in 2017. The yield of Polish government debt securities with 1-year maturity remained virtually unchanged, reaching slightly more than 1.45% at the end of 2017. The yield on 2-year government bonds decreased over the year by 32 basis points to 1.71%, while the yields on 5-year and 10-year bonds fell by 24 and 33 basis points to 2.65% and 3.30%, respectively.
In Q3 2017 Ukraine’s GDP grew compared to the corresponding period of 2016
External environment 2.3 Regulations pertaining to the insurance market and the financial markets in Poland
(EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (Insurance
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 (PRIIPs). The Regulation requires that a key information document (KID) on an insurancebased investment product must be drawn up and provided to the client. Violations of the Regulation are punishable by severe administrative sanctions. In the solutions adopted in the Act of 29 September 2017 amending the Financial
Activity Act, which is used to apply the said regulation, the regulatory authority may impose fines in the amount up to
PLN 21,569,000 or 3% of net revenues on the sale of goods and services and financial operations, and, in the case of an insurance undertakings, 3% of the gross written premiums reported in the most recent financial statements for the financial year as approved by the approving body, or twice the amount of benefits obtained or losses avoided as a result of the violation, if they can be determined.
European Parliament and of the Council on markets in financial instruments came into effect. They imposed new obligations on financial market entities in respect of, among others, protection of investors, market transparency and corporate governance. The new regulations force changes in the market infrastructure and envisage a number of new powers for the regulators.
and Delegated Directives are expected to come into effect at the turn of March and April 2018.
Trading Act and certain other acts. The purpose of the amendment is to implement Directive 2014/57/EU of the
European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive,
No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation,
MAR). The EU legislation introduces an utterly new regime for the handling of confidential information in public companies; its main element is a uniform definition of confidential information.
Act of 21 April 2017 on actions for damages caused by infringements of the competition law. The Act implements
Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union. The provisions of the act aim to improve effectiveness of action pursuing claims by all those affected by anti-competitive practices.
In addition to the implementation of EU regulations, a number of changes were introduced in Polish law that have impacted or will impact the functioning of the PZU Group. Some of those changes are presented below: Regulation issued by the Minister of Development and Finance of 9 December 2016 on entities authorized to audit financial statements auditing the solvency and financial condition reports of insurance and reinsurance undertakings. It sets out in particular the scope of audit of the solvency and financial condition report of an insurance or reinsurance undertaking, defines disclosure requirements for a statutory auditor’s report.
On 1 January 2017, the provisions implementing the Act on Rules for Managing State Property came into effect.
The Act distinguished a category of companies of significant importance for the state economy, subject to special governance by the Prime Minister. Pursuant to the Act, the
On 1 July 2017, due to the entry into force of the Act of 1
Managing Certain Companies, governing the methods of determining remuneration payable to members of managerial and supervisory bodies in companies with a State Treasury shareholding, in 2017 the Ordinary Shareholder Meeting of PZU SA adopted solutions delineating, in particular, the boundaries for fixed and variable portions of remuneration payable to Management Board members and setting the rules of correspondence between the variable portion of such remuneration and the degree of achievement of management objectives, including improvements in economic and financial indicators.
Drafted legal regulations that may have a significant impact on the PZU Group’s business
Legislative work is underway to adapt the provisions of Polish law to Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing
Regulation introduces, without limitation, changes to the list of events subject to current reporting, modifies the management board’s statement and adds a statement by the supervisory board in periodic reports.
(ECAP in English or PPK in Polish). ECAP is the newly proposed solution in the pension security system under which employers will be obligated to conduct capital accumulation plans for employees’ retirement. It will be launched on 1 January 2019 and it will sequentially apply to companies employing more than 250 persons, small and medium enterprises and public finance sector units. Every employer will have an obligation to establish an ECAP and offer enrollment in it to its employees while employee participation is not mandatory. Employees may retract their enrollment in the plan at any time.
In 2017, the rate of growth of the Lithuanian economy gained greater momentum owing to the improvement in the global situation. Global demand for investment goods swelled up, significantly improving the result on foreign trade. This growth in investment translated favorably into the development of imports and exports in a number of countries, including
Lithuania’s key trading partners. Another driver of growth in trade was the improved situation in countries with a heavy dependence on exports of commodities, which benefited from price hikes on the global market (mainly Russia, whose imports affect the results of foreign trade throughout the region). Accordingly, it is estimated that real GDP will increase by 3.6% in 2017 (seasonally adjusted data)2.
Inflation remained at a higher level, having reached 3.9% at the end of the year. Changes in prices remained affected by the domestic economic situation and shifting trends in the global commodities market. In the last months of 2017, the latter drove hikes in consumer prices above the previously expected levels. This increase was caused by changes in the commodity markets and Lithuania was not the only country affected by them. A similar phenomenon, that is hikes in food and fuel prices, was also observed in other EU countries.
2 Lithuanian economic review, 12/2017, published by the Bank of Lithuania.
The increase in GDP in Q3 20173 jwas consistent with the quick estimate and stood at 6.2% y/y (seasonally adjusted data). The improved picture of the Latvian economy in 2017 was driven by progress in almost every sector, including the construction industry, following its last year’s slump.
Since the end of 2016, the balance of foreign trade has mirrored the recovery in the global economy. Exports of
On a month-to-month basis, the prices of non-food products decreased slightly, whereas the prices of services increased.
In 2017, the Estonian economy, in line with its regional counterparts, grew stronger. According to data published by the Bank of Estonia4, the annual GDP growth in Q3 was 4.2%.
Like in other Baltic states, the spark that pushed the Estonian economy forward was the improvement in the economic situation of Estonia’s trading partners and other European economies. According to forecasts presented by the Bank of
Lower production led to higher prices in global markets to the largest extent in dairy products. Increasing energy prices also had their share in the overall impact.
3 Monthly Newsletter, 01/2018, Bank of Latvia 4 Estonian economy and monetary policy, 4/2017, published by the Bank of Estonia 5 Data published by the Estonian Statistical Office
R2017 was a yet another year of improvement in the country’s economic and political situation. In Q3 2017, Ukraine’s GDP
grew 2.1% compared to the corresponding period of the previous year. For the third year in a row, the inflation rate has remained high. In 2017, it stood at 13.7%. The inflation rate was driven largely by the following factors: increases in government-regulated prices (of gas, electricity and water), increases in the minimum wage (twice in 2017) and higher incomes of the population. Adverse weather conditions and poor agricultural production of certain fruits and vegetables also contributed to the increase in inflation.
After 11 months of 2017, a negative balance of foreign trade in goods and services was recorded (USD -5,775 million). This was another offshoot of the unresolved conflict in eastern
Ukraine. The loss of control over the resources in the eastern part of the country curtailed Ukraine’s export capacity (due to disrupted mining production and electricity generation).
The rate of growth in GDP in 2018 will again deviate significantly from the potential GDP growth rate (of just above 3%). However, there are currently no clear signs of imbalances in the economy. The average annual CPI in 2018 may still be below the NBP’s assumed inflation target (of 2.5%), with the upward trend in core inflation stronger than in 2017, reflecting the boost in wage growth and the rapid growth in demand. However, the subdued annual growth in food prices should dampen the rate of overall inflation in 2018. The overall CPI may oscillate significantly in 2018 due to the base effects on fuel and food prices, reaching approx. 2.5% y/y in the summer. Indications that a series of interest rate hikes may begin at the turn of 2018 and 2019 are supported by the situation on the labor market and by the widening pro-inflationary gap in demand as well as the upcoming commencement of a series of interest rate hikes in the euro area. However, the Monetary Policy Council indicated at the beginning of 2018 the high likelihood of maintaining the
Such macroeconomic developments should be conducive to higher sales of insurance products. At the same time, a number of risks to economic growth – which might also destabilize the financial markets – have weakened. In early 2018, GDP growth in the global economy is unexpectedly strong. The election results in major EU countries have not threatened the coherence of the European Union or the euro area. It also seems that the risk of a “hard Brexit” has subsided. On the other hand, the risk of a financial crisis in
Increase in individual consumption in % (y/y) 4.3 4.8 3.9 3.0 2.6
Gross fixed capital formation in % (y/y) 9.1 5.2 (7.9) 6.1 10.0
Increase in prices of consumer goods and services in % (y/y, end of period) (r/r, koniec okresu)
Unemployment rate in % (end of period) 5.8 6.6 8.2 9.7 11.4
The mere firing up of a motorbike gives me pleasure. I love that sound, the velocity, crossing barriers, setting goals for myself and gaining even better skills. It’s not important where I go, but who accompanies me.
The PZU Group conducts various activities in insurance and finance. In particular, the Group’s companies provide services in life insurance, non-life insurance, health insurance and they manage client assets within its open-ended pension fund and mutual funds, and thanks to its investment in Bank Pekao and
Alior Bank 3 Warsaw - Poland PZU – 32.1880% PZU Życie – 0.0376% PZU SFIO Uniwersum – 0.0023%
GSU Pomoc Górniczy Klub Ubezpieczonych Tychy - Poland PZU Pomoc – 30.00%
EMC Instytut Medyczny Wrocław - Poland PZU FIZ AN BIS 1 – 17.8066% PZU FIZ AN BIS 2 – 10.5010%
Arm Property Cracow - Poland PZU FIZ AN BIS 2 – 100.00%
Group in 2017 up to the date of publication of these financial statements: • On 7 June 2017 the deal initiated on 8 December 2016 was settled under which PZU and PFR entered into an agreement with UniCredit S.p.A. to acquire a 32.8% equity stake in Bank Pekao SA for a total amount of
PLN 10.6 billion. The price per share was PLN 123. It is one of the largest transactions in the European banking sector in recent years. SECTION 3.4 BANKING.
• On 1 June 2017, the Bank entered into a preliminary agreement to purchase a 51% stake in Pioneer Pekao
• PZU Zdrowie acquired shares in Revimed sp. z o.o. (in 2017). Elvita sp. z o.o. acquired shares in NZOZ Trzebinia sp. z o.o. (in 2017). Additionally, in 2017 the merger between Medicus sp. z o.o. and PZU Zdrowie took place.
• On 4 December 2017, the shareholder meeting adopted a resolution to open the liquidation process of Ardea Alba
Battersby Investments SA, representing 100% of the share capital and entitling it to 100% of votes at the shareholder meeting, and 100 shares in Tulare Investments sp. z o.o., representing 100% of the share capital and entitling it to 100% of votes at the shareholder meeting.
Measured by gross written premium in the first three quarters of 2017, the non-life insurance market in Poland grew by a total of PLN 4,718 million (+20.4%) in comparison to the corresponding period of the previous year.
PLN 811 million, +16.8%) made the largest contribution to the higher level of premium, chiefly as the outcome of the significantly higher average premium (the consequence of the price hikes rolled out in 2016 as a response to the persistently negative results on the motor insurance market) and the climbing percentage of premium originating from indirect activity (motor TPL insurance up PLN 332 million year on year).
In addition, higher sales of insurance against fire and other physical losses (up PLN 353 million, +7.7%, of which PLN
PZU Group’s operations contribution to the overall non-life insurance market’s growth, chiefly as a consequence of the upswing in the growth rate of motor insurance premiums.
It should be pointed out that, as a result of the transfer of the business of Liberty Seguros Compania de Seguros y
Non-life insurance market - gross written premium vs. technical result (in PLN million)
Source: KNF (www.knf.gov.pl). Quarterly Bulletin. Rynek ubezpieczeń [Insurance market] 3/2017, Rynek ubezpieczeń 3/2016, PZU’s data
In the first three quarters of 2017, the overall non-life insurance market generated a net result of PLN 2,984 million, signifying incremental growth of PLN 1,758 million in comparison with the corresponding period of 2016. Excluding the dividend from PZU Życie, net profit of the non-life insurance market increased PLN 1,154 million (287.8%).
(down PLN 122 million) and general third party liability insurance (down PLN 65 million) as a result of a slower growth in net earned premium (up PLN 112 million or +2.4%)
314 million or +13.4%), which was largely a consequence of many losses caused by the forces of nature in August
Capital groups: Allianz – Allianz, Euler Hermes; Ergo Hestia – Ergo Hestia, MTU; Talanx – Warta, Europa, HDI; VIG – Compensa, Benefia, Inter-Risk Source: PFSA Quarterly Bulletin. Insurance Market 3/2017
PZU Group’s share in the non-life insurance market at the end of Q3 2017 is 35.8% (direct business).
PZU Życie’s technical result margin on its gross written premium was nearly at the end of Q3 2017
The following entities in the PZU Group operate on the non-life insurance market in Poland: the Group’s parent company, i.e.
specialist who remotely connects to the client’s computer to remove the software defect that prevents its trouble-free use; • extended its offering of agricultural insurance, including the coverage of movable property in farms by introducing an “all risk” agricultural clause and insurance of structures located on the farm; • introduced, as the only insurer in Poland, an innovative method of verifying whether a vehicle had been seriously damaged in the past, to an extent rendering its repair economically unjustified or carrying the risk that the damaged vehicle will not be restored to a condition ensuring its safe use. In the process of offering motor own damage insurance, the Everest system will verify online if the vehicle has been entered in the database of over 11 million wrecked automobiles offered for sale in Europe and if the vehicle is found in this database, then the terms of insurance will be established by way of case-specific underwriting; • deployed a pilot program called PZU Drive as a forerunner of the new offering dubbed PZU GO to be available starting from spring 2018. This was the first step toward adopting solutions on the Polish market that are popular on certain foreign markets and which are rooted in the use of mobile technologies enabling the determination of the premium based on the profile of a specific driver. For the purposes of the pilot deployment, an application was developed which, when installed on a smartphone and used regularly, provides telematic data enabling the provision of information about various driving styles that in practice affect the insurer’s exposure to risk. PZU is hopeful that this solution will enable it to lower the premiums charged to “safe” drivers and popularize the Pay How You Drive
The new insurance offers protection against the adverse effects of hacking attacks, including by taking actions aimed at destroying the attack and restoring the company’s normal operations. This offering is targeted especially at those clients who are at risk of data leakage or operational paralysis caused by a cyber-attack. This insurance provides cover for the costs of extortion, image repair, expert reports and investigative actions.
In the domain of financial insurance, PZU was unswerving in its support for the Polish economy by providing insurance guarantees and securing the performance of contracts in such key areas of the economy as the power sector, the shipbuilding industry, the construction industry and the science and innovation sector. At the same time, reaching out to clients and their expectations, PZU deployed new financial insurance products, such as: • GAP insurance for financial losses targeted at lessees and borrowers signing agreements with banks or leasing companies. This insurance is against the risk of financial losses caused as a result of a total loss of the lessee’s or borrower’s vehicle covered by the insurance policy as part of a motor own damage insurance product or under the perpetrator’s third party liability insurance; • Mortgage loan repayment insurance tied to a decrease in the value of the real estate caused by a random event.
In 2017, PZU cooperated with 10 banks and 8 strategic partners. PZU’s business partners are leaders in their industries and they have client bases with enormous potential offering an opportunity to extend the offering to include more products, often based on innovative solutions. In 2017,
S.A. will enable the Company to offer its clients an extensive array of both financial and insurance services at each stage of their lives. In strategic partnerships, cooperation applied mostly to companies operating in the telecom and power sectors through which insurance for electronic equipment and assistance services were offered, e.g. the assistance of an electrician or a plumber.
LINK4, which entered the Polish market 15 years ago as the first undertaking offering direct insurance products, still remains one of the leaders on the direct insurance market.
In 2017, the company was focused predominantly on the development of new technologies and innovations, both in
The most important activities associated with modifying its product offering in 2017 were as follows: • a telematic program called LINK4 Kasa Wraca [LINK4
April, Link4 offers navigation with this application free of charge along with every TPL insurance or package. It uses telematic solutions to assess a driver’s driving style; • a short transportation calculator on mobile devices deployed in mid-2017 and a chat bot introduced as a new functionality in these communication channels; • launching innovative products offering among others insurance for household pets and ADD insurance along with insurance in the event of complications following tick bites or other insect bites; • completion of roll-out work on Link4Mama [LINK4Mom]
Warsaw offers two insurance options, namely a recommended option and a flexible option enabling the client to tailor the product to his or her specific needs; • in Q4 2017, enriching the residential insurance offering with smoke detectors proposed for each policy with a premium greater than PLN 210.
(TUW PZUW) has been actively operating on the insurance market since 29 February 2016 when it launched underwriting operations by selling its first policy.
TUW PZUW offers its clients a flexible insurance program to optimize the costs and scope of cover. Since 2016, it has been selling and handling insurance products targeted at clients from various industries, focusing predominantly on cooperation with large enterprises, medical centers (hospitals and clinics) and local government units. Such entities, within the framework of cooperation exercised under TUW’s model, are provided with the opportunity to dissipate their risks within the boundaries of mutual benefit societies adjusted to the specific nature of the pertinent group of entities and thereby reducing the costs of their insurance premiums. TUW has 182 members for whom 36 mutual benefit societies have been established.
Factors, including threats and risks that will affect the operations of the non-life insurance sector in 2018
Besides chance events (such as floods, droughts and spring ground frost), the following should be treated as the main factors that may affect the situation of the non-life insurance sector in 2018: • possible slowdown in economic growth in Poland. A poorer financial standing of companies may result in elevated credit risk and a higher loss ratio on the financial insurance portfolio; • case law regarding the amount of financial compensation for moral damages under TPL insurance held by owners of motor vehicles to the deceased’s closest family members for the suffered injury (art. 446 of the Civil Code); • increase in claims handling costs due to the implementation of VAT on motor claims handling services rendered in favor of insurance companies and their intermediaries; • increase in the prices of spare parts affecting claims handling costs due to the depreciation of the Polish zloty against the euro; • adjustment of insurance undertakings to the EU General
SECTION 2.3; • emergence of more regulations or financial burdens on insurance undertakings – among others, the possible reinstatement of the “Religa tax” (mandatory fee paid to the National Health Service on every TPL motor insurance policy).
Gross written premium reported by life insurance undertakings in Poland (PLN million)
In Q1-Q3 2017, periodic premium was 0.3% higher compared to the same period in 2016, with a cumulative average growth rate of 0.7% for the last 5 years.
This improved performance was caused by higher profitability, especially in life insurance (class I) and accident and sickness insurance (class V) – these classes recorded y/y increases in their bottom line of PLN 133 million (28.7%) and
PLN 96 million (7.4%), respectively, driven largely by lower acquisition expenses with a concurrent upswing in revenues, including from deposits, and a lower value of benefits disbursed in class I.
In this same period, life insurance undertakings generated a net result of PLN 1,859 million, representing a PLN 115 million
The value of the investments made by life insurance undertakings at the end of Q3 2017 was PLN 41,913 million, signifying 2.6% growth compared to the end of 2016. In turn,
At the same time, PZU Życie continued to be the clear leader in the periodic premium segment. In Q1-Q3 2017, it generated 45.8% of these types of premiums written by insurance companies, signifying growth of 0.8 p.p. in the market share in this segment and the highest market share level since 2010. The growth rate of gross written premium at PZU Życie was 2.1% y/y in this segment, compared to the negative growth rate posted by the other market players who reported an outcome of -1.2%. One of the major factors in this respect was the rapid growth in the health insurance portfolio. PZU Życie now has nearly 1.5 million policies of this type in its portfolio. From the outset of 2016, KNF has also been publishing data making it possible to depict as a matrix
Groups: Talanx - Warta, Europa, Open Life;VIG - Compensa Życie, Polisa Życie, Vienna Life;Aviva- Aviva, BZ WBK-Aviva Source: KNF’s Quarterly Bulletin. Insurance market 3/2017 periodic premiums. After Q3 2017, this share was 65.7% when measured by gross written premium and it was 72.9% when measured by the number of agreements in force. For this same group of risks, the market share split by the method of execution in the period under analysis was 68.3% for group agreements and 40.4% for individual agreements (when measured by gross written premium).
the way in which insurance is offered and sold (processes and front-ends) and enable the client to take advantage of various contact channels to reach the insurance undertaking (including in person in the branch, by phone, by e-mail, via the newly deployed client account, via the person providing technical insurance services at the workplace or through an insurance intermediary, either a tied one or an external one).
Wypadku [PZU In Case of an Accident] (WrW) intended to protect the insured against events related to accidents. The choice between the two bundles along with an extensive cover means that this offering is targeted at young and active clients practicing sports or otherwise exposed to events related to accidents. Moreover, this insurance, with a view to make it as comprehensible and clear to the client as possible, was written from the beginning to the end, as the first product in group insurance, using unsophisticated and consumer-friendly language (in cooperation with the
Polish Language Faculty of the University of Wroclaw); • a new protection and health insurance (POZ) bundle combining within a single product both a protective part and a health part, focusing largely on civilizational illnesses (cancers, cardiovascular diseases and neurological diseases). The structure of this product is unique in that it consists of three large modules: My Health, My Family and
product for small groups was launched and the system was completely rebuilt for the purposes of selling the new POZ
PZU Życie’s technical result represented more than half the result earned by all life insurance companies. This evidences the high profitability these products enjoy. PZU Życie’s technical result margin on gross written premium was two times higher than the overall margin generated by the other companies offering life insurance (19.6% versus 9.8%).
PZU Group’s operations risks, premium rate calculator and insurance and marketing documentation); • implemented was the proposal of insurance for persons withdrawing from group policies shaped in the form of the Kontynuacja dla Ciebie [Continuation For You] product providing an alternative to standard individual continuation for insureds aged 50 or under. This product comes with a much more extensive offering of riders which, it is assumed, should reflect as closely as possible the client’s insurance at the group phase. In 2017, this solution was tested in PZU’s selected branch networks.
In the area of health insurance, PZU Życie’s product offering in 2017 was focused on addressing to the largest possible extent the needs of specific client segments, creating solutions enabling an easy inclusion of health insurance agreements to
Regulation GLOSSARY. The changes affected the process of selling, implementing and servicing the product.
The following constitute the major risk factors on the life insurance market in 2018: • the prospect of a higher inflation rate and economic growth driving an increase in T-bond yields, which in the long term will be beneficial to the PZU Group, although in the short term may adversely affect investment income; • a downturn on the capital markets deteriorating the attractiveness of products, especially unit-linked products; • changes in the current mortality, fertility and morbidity levels; • continued pressure on the prices of group insurance products. A price war is underway along with a war for the possession of clients and their data, resulting in lowering both the insurers’ margins and the quality of the products offered to clients accompanied by the creation of barriers to entry and exit for clients at independent intermediaries; • changes in trends and clients’ behaviors toward the customization of proposals and an electronic, swift and paperless method of purchasing and handling insurance, forcing insurance undertakings to rapidly adapt to these expectations; • the emergence of new competitors and solutions, including the operators of large client bases or insurtech companies; • changes on the unit-linked insurance market and on the endowment insurance market resulting from the undertakings’ adaptation, as of 1 January 2018, to the PRIIP Regulation – SECTION 2.3 REGULATIONS.
Regulations pertaining to the insurance market and the financial markets in Poland; • adjustment of insurance undertakings to the EU General
The Polish banking sector is the largest one in Central and
The banking sector’s situation in 2017 was stable and boosted by the persistently vibrant economy and the operation of banks in a low interest rate environment. In 2017, the banking sector generated a net profit of PLN 13.6 billion, as compared to PLN 13.9 billion in the corresponding period of the previous year (down 2.3%). This slump in financial performance was caused chiefly by the sale of an equity stake in VISA Europe.
If it had not been for this event, the realized net financial result would have been higher than that generated in the corresponding period of the previous year.
December 2017 vis-à-vis the corresponding period of the previous year was caused by a drop in interest expenses (by 2.1% y/y) with a concurrent increase in interest income (by 7.9% y/y). This result was generated owing to both the high interest margin (2.38%) and the growing loan base (primarily in the area of loans granted to businesses and households).
The continuing economic recovery, the improved situation on the labor market and consumer sentiment, the good financial standing of the enterprise sector, the record low interest rates and the stable quality of the loan portfolio are contributing to the stable development of lending activity.
PLN 33 billion year-on-year. This increase was caused by higher employee expenses (up 5.8% to PLN 16.6 billion) and higher general and administrative expenses (up 2.8% to PLN
16.4 billion). It should be pointed out, however, that a clearly observable phenomenon is the continuation of the process of employment and sales network optimization along with the development of electronic banking leading to a gradual headcount reduction and a leaner sales network.
In 2017, the net asset value of the banking sector was PLN
At the end of September 2017, the banking sector’s own funds for capital multiples, calculated in accordance with the regulations laid down in the CRR Regulation, was PLN 187.3 billion, up 8.9% from the end of September 2016.
On 23 October 2017, Bank Pekao and Alior Bank signed a letter of intent to commence preliminary talks on potential cooperation strategies that might be developed to increase their value for shareholders and clients. Undertaking preliminary talks and carrying out pertinent analyses, taking into account exchange of information preceded by obtaining the requires authorizations will be aimed at assessing the viability of this cooperation based on different scenarios.
• Cooperation: on 20 November, the Polish Investment Forum was held and lasted for two days in New York. It is an initiative aimed at supporting the international expansion of
The Pekao Group is led by Bank Pekao S.A., a universal commercial bank offering a full range of banking services rendered to individual and institutional clients operating chiefly in Poland. The Pekao Group consists of financial institutions operating on the following markets: banking, asset management, pension funds, brokerage services, transaction advisory, leasing and factoring.
From 2017 Bank Pekao has been part of the PZU Group, one of the largest financial institutions in Central and Eastern
Europe. The bank’s strategic objectives announced in the new strategy for 2018-2020 “Strength of the Polish Bison” include becoming the leader of profitability in the Polish banking sector through embarking on the path of intelligent growth in a business model based on high efficiency and quality of processes. Business development is based on a strong capital and liquidity position, while maintaining the highest risk management standards and further improvement of cost effectiveness.
In addition, the Bank will realize the available synergies following from the cooperation in the PZU Group, which it announced in 2017. The bank’s innovation direction may also be an area for partnerships with technology leaders, other financial institutions and consumer companies.
The bank’s business model is based on client segmentation into the following groups: • Retail Banking – providing services to individual clients and micro businesses through a leading network of branches and partner outlets, supported by remote channels; • Private Banking – providing services to affluent clients and offering investment advisory services in private banking centers and remote channels; • Small and Medium Enterprises (SME) – newly established segment focused on providing services for one of the fastest growing sectors of economy. Clients are serviced by relationship managers supported by product specialists.
The service is provided in universal retail branches and in specialized Business Client Centers. Clients are offered professional products and services tailor-made to their individual needs based on the product solutions tested in corporate banking and adapted to the needs of the SME
Pekao Mutual Fund Company (Pekao TFI) is another member of the Pekao Group. Pekao TFI is the oldest mutual fund management company in Poland providing clients modern financial products, offering opportunities to invest in the largest capital markets on the globe. For many years it has been devising savings programs, including programs affording an opportunity to put aside more money for retirement under the third voluntary retirement pillar. Pekao TFI also offers a managed account service. At the end of 2017 the company had assets under management totaling PLN 18.4 billion, thereby giving it a market share of 6.6%.
Bank launched further functions – now each service user may view the exchange rates and use a convenient calculator to quickly calculate the conversion. The service also makes it possible to split the debt on the Elastyczna credit card into installments.
The Bank systematically expands the scope of services that can be effected via remote access channels. In 2017 the Bank launched new forms of contact with the clients using chats, video or audio calls, available after logging into the Pekao24
PLN 3 billion in net profit in 2020 and reduce the Cost/
Income (C/I) ratio to below 40%. The Bank’s current capital standing makes it possible to dynamically increase the scale of business, as assumed, while maintaining a safe level of solvency ratios and simultaneously paying out 100% of the net profit for 2017 and 2018.
On October 17, 2017, Pekao acquired a 35% stake in Pekao
PTE for a total price of PLN 8 million. As a result of the transaction, Pekao holds a 100% stake in Pekao PTE.
Pekao holds 100% of the equity of PPIM and indirectly 100% of the equity of Pekao TFI. As a consequence, the
PZU Pekao recognizes that it obtained control over these companies and included them in consolidation. In addition, on December 11, 2017, Pekao acquired 50% of Xelion shares providing 50% of the total number of votes at the
Alior Bank heads up the group. Alior is a universal deposit and credit bank, providing services to natural persons, legal persons and other domestic and foreign entities. The bank’s core business comprises maintaining bank accounts, granting cash loans, issuing bank securities and purchase and sale of foreign currencies. The bank also conducts brokerage activity, provides financial advisory and intermediation services, arranges corporate bond issues and provides other financial services.
As a result, Alior Bank systematically strengthens its market position and for years has been consistently setting new directions of development of the Polish banking.
OFE PZU Złota Jesień held of the total net asset value of the open-end pension funds operating in Poland
Lietuvos Draudimas held of the Lithuanian non-life insurance market at the end
Due to the uniqueness of the activity conducted in the retail segment, the bank distinguishes three additional retail areas that have a dedicated offer for a separate groups of clients: • mass clients (persons who have not been classified as affluent clients or Private Banking clients); • affluent clients (persons with monthly receipts on personal accounts exceeding PLN 5 thousand or holding assets worth more than PLN 100 thousand); • Private Banking clients (persons with assets worth more than PLN 1 million or investment assets over PLN 0.5 million).
Makers pertains to three areas: asset management (portfolio management for retail clients/private banking), unitlinked funds, and Alior SFIO sub-fund management. From 5 January 2017, Money Makers TFI S.A. has been listed on the alternative market of the Warsaw Stock Exchange
In 2017 the key new products and services in the Alior Bank
Group’s offering included: • implementation of the video conference process thanks to which users, without having to leave home, may open an account remotely via a video call; • implementation of the Konto Jakże Osobiste account – a unique account that flexibly adapts to fit the client’s needs; • implementation of mobile payments in the HCE technology; • implementation of the loan sales process in the new
Internet banking system; • implementation of the loan sales process in mobile banking; • FG POIR (Smart Growth Operational Program Indemnity
Fund) guarantee – as of September 2017 the offering has included a FG POIR guarantee addressed to clients executing innovative investment projects. Alior Bank is the first in Poland to grant loans secured by this guarantee; • Broadband loan – Alior was the first to sign with BGK an agreement on financing access to fast Internet. Based on the loan, it offers clients from the telecommunication industry the so-called broadband loan, i.e. investment financing for development of optical fiber networks. The broadband loan offering will be soon extended to cover liquidity financing for telecommunication companies from the SME sector.
ratio to 39% and provide Alior Bank’s shareholders with a return on equity from 8% in the first half of 2016 to 14%
in 2020.Alior Bank’s objective is to maintain its innovation leadership position in Poland and to become one of the top 5 most innovative banks in Europe. During the next 4 years, in addition to the previously planned expenditures for ongoing IT development and maintenance work, the bank will invest the additional PLN 400 m in innovative technology projects. These expenditures will drive Alior
The process was completed in less than 5 months of the legal merger and was thus the quickest merger in Poland ever. The total value of the integration costs incurred in 2017 was PLN 77 million.
Source: Chamber of Fund and Asset Management among others, to innovations, digital channels, IT, real estate, marketing, development projects, procurement and financial products.
Factors, including threats and risks which will affect the banks’ operations in 2018
The situation of the banking sector in 2018 will primarily be affected by: • operation in a stable environment of low interest rates, which puts pressure on the level of net interest margin; • high requirements regarding equity and solutions with regard to the latest accounting standards (IFRS9), which are likely to have negative impact on the level of capital accumulated in banks and may lead to increased risk cost volatility; • possible changes of the legal environment, including mainly the legislative solution of the issue of foreign currency residential loans and potentially an obligation to make additional contributions to BFG, may adversely affect the banking sector’s profitability; • a lower growth rate of the Polish economy and changes in the legal framework for the operation of enterprises may have an adverse impact on the financial standing of selected clients. Alior Bank’s credit portfolio includes exposure to over a dozen projects executed by companies operating on the renewable energy markets; • cost of adjustments to numerous regulatory requirements
• changes in the external environment and international events affecting the domestic economy.
As at the end of December 2017, the overall domestic mutual fund market’s assets were PLN 279 billion compared to PLN
In 2017, according to the estimates of the Analizy Online service, the balance of payments to and withdrawals from retail funds offered by investment funds in the domestic market exceeded PLN 14 billion. The most popular products among clients were cash and money market funds (with inflows of nearly PLN 8 billion and over PLN 9 billion increase in assets), debt funds (with inflows of nearly PLN 4 billion and an asset increase by over PLN 4 billion during the year)
and mixed funds (to which clients paid over PLN 3 billion and whose assets increased by as much as nearly PLN 5 billion).
operates on the mutual fund market in the PZU Group. It offers products and services for both retail and institutional clients – including additional investment and savings programs forming part of the third pillar of the social security system: Individual Retirement Accounts (IRAs), Specialized Investment
At the end of December 2017, TFI PZU managed net assets worth nearly PLN 20 billion, representing close to a 7.1%
PZU Group’s operations market share. Accordingly, TFI PZU is among the largest mutual fund companies in Poland – as at 31 December 2017 it was ranked third in Poland according to reports published by
IZFiA (Chamber of Fund and Asset Managers). TFI PZU is also a market leader in the employee pension plan segment among the institutions operating on this market with net assets of more than PLN 4 billion.
The condition and performance of the mutual fund market will depend mainly on: • developments in the geopolitical situation – potential military conflicts (Syria, South Korea); • increasing global protectionism – NAFTA, customs in USA-
China trade exchange; • political situation – including elections in Italy, Brazil,
As at the end of 2017, there were 13 companies operating in the non-life insurance sector (including 9 branches of insurance companies established in other EU member states).
compared to the previous year. The slowdown of the market growth rate was significantly affected by legislative changes
In the life insurance structure, unit-linked insurance represented the largest share at 59.2% of the portfolio value.
At the end of 2007, there were 8 companies operating in the life insurance sector. The Lithuanian life insurance market is highly concentrated. At the end of the year, the share of the largest three life insurance players in the total gross written premium was 60.4%.
The Latvian non-life insurance market recorded a gross written premium of EUR 237 million as at the end of Q3 2017. This is nearly EUR 31 million, i.e. 14.8%, more than in the same period of the year before.
In 2017, non-life insurance companies operating in Estonia recorded an increase in gross written premium by 11.1%, compared to 8.4% in 2016. Total gross written premium was
insurance accounting for 32.7%. Property insurance gathered 25.5% of the gross premium written in the market.
Lietuvos Draudimas is the leader of non-life insurance market in Lithuania holding a market share of 31.0%. In 2017 it recorded a 27.0% increase in gross written premium compared to the year before, reaching EUR 174 million. The biggest increase was recorded in motor insurance (37.1% y/y) in connection with an increase in the insurance rates in the region.
Collected written premium was EUR 14 million, representing an increase by 15.9% compared to the previous year. The highest sales growth was recorded in endowment insurance, which increased by 15.9% compared with 2016. The share of PZU Lithuania Life in the life insurance market was 5.9%
(in May 2015) the branch took over the PZU Lithuania branch operating in the Latvian market since 2012. At the end of Q3 2017, the total share of the non-life insurance market reached 27.2% and gross written premium was EUR 65 million (EUR 89 million at the end of 2017).
Since May 2015 the entity conducting operations in Estonia is a branch of Lietuvos Draudimas and was established as a result of merger of two entities – branch of the Lithuanian PZU
PZU Group’s operations compared to Q3 2016. This increase is attributable mainly to higher tariffs for mandatory insurance, increase in sums insured resulting from depreciation of the local currency and increase in inflation. Motor insurance (34.4% of the market share) recorded an increase in the premium written by 13.6%, including Green Card insurance by 4.0%. In the corresponding period, life insurance companies collected gross written premium of hryvnia 2 billion, signifying 1.7% growth compared to Q3 2016.
The Ukrainian insurance market is highly fragmented – as at the end of September 2017, there were 296 insurance companies operating in the country (34 of which offered life insurance). Despite the still huge number of insurance companies, the top 100 non-life insurance undertakings acquired 97.7% of gross written premium, while the top 20 life insurance undertakings acquired 99.8% of written premium.
In 2017, the gross written premium collected by PZU Ukraine was hryvnia 1 288 million, it was 14.9% higher than in the previous year. This increase arose from both the increase in the premium obtained through external entities (banks and travel agencies), as well as through its own distribution channels. Motor insurance played a special role in increasing the written premium – its sales growth rate was 21.8%. In 2016, gross written premium collected by PZU Ukraine Life was hryvnia 300 million, up 25.2% from 2016. This growth was mainly achieved in the bancassurance and broker channel, in particular as a result of sales of endowment policies.
The health market is a business area that is dynamically developing and prospective. The current trends are as follows: • continuation of the double digit pace of growth in the private health insurance market,
SME and micro business segment. Employers may purchase insurance in the sponsored or co-financed model, or negotiate a group offer for their employees.
VIP segment, the non standard offer based on PZU Group synergy was implemented. There were connected in one offer outapatient medical care, hospital, medications, travel and accident insurance and loyalty programme.
outpatient care hospital care rehabilitation prevention programs co-funding for medications occupational medicine
Mass clients buying non-life policies are offered additional health insurance of assistance nature, ensuring access to
Retail clients are provided with health care in the form of individual continuation or rider to life insurance. The following is offered as a rider to life insurance continued individually: PZU Antybiotyk IK [PZU Antibiotic IK], PZU Cztery Pory Roku IK [PZU Four Seasons IK]
arranging for and covering the costs of medical services in the event of accidental orthopedic injury
PZU Zdrowie as a medical operator offers health services both to individual clients using proprietary clinics and to corporate clients seeking an alternative to group insurance.
Fit Plus Card combination of the PZU Zdrowie medical subscription and a sports pass for the Calypso Fitness chain, with an extra PZU Pomoc concierge service
Medical Help the offer for clients ensuring access to medical services in PZU Zdrowie: doctors appointments, outpatients research and rehabilitation, in case of accident or health breakdown
PZU was the third largest pension fund, both in terms of the number of members, as well as in terms of net asset value: • the fund had 2,134 thousand members, or 13.3% of all participants in open-end pension funds; • net assets accounted for over PLN 23 billion, representing 13.0% of the total asset value of open-end pension funds operating in Poland.
OFE to the Demographic Reserve Fund; • preparation of pension fund companies for organizational and legal changes arising from transformation of open-end pension funds into mutual funds, and the companies into mutual fund companies; • opportunities arising from the achievement of the objectives specified in the Capital Formation Plan and the
Responsible Development Strategy the pursuit of which will depend on the development of detailed solutions and the entry into force of necessary legislative changes; Open-end Pension Funds - percentage of net asset value as at 31 December 2017 (%)
Source: PFSA, monthly data on the OFE market, Data for December 2017
• organizing motor assistance services for Link4; • conducting salvage auctions after a total loss; • supporting technical claims handling in motor claims; • handling assistance products for PZU and PZU Życie
(among others, legal consulting, organization of assistance services etc.); • managing the loyalty program, PZU Help in Life Club – at the end of 2017 approx. 1.7 million club members could take advantage of insurance discounts and products of cooperating companies (rebate programs from partners).
PZU CO is an auxiliary company for PZU Group companies, established to provide the following services: printing, IT, Data
Center, Contact Center, auxiliary services related to insurance and pension funds, constant intermediation in conclusion of insurance agreements, financial and investment agreements, assistance agreements and HR and payroll-related services.
PZU LAB is a company dealing with advisory services and assistance in implementation of all kinds of solutions improving the security of the strategic corporate clients of PZU
Tower) are PZU Życie - 73% shares and PZU - 27% shares.
Member Limited, entitling it to 100% of votes at the shareholder meeting.
The companies making up the Armatura Group specialize in the manufacture of bathroom and kitchen taps, aluminum central heating radiators, a wide range of valves and sanitaryware.
In this chapter: 1. Recap of Group Strategy “The New PZU – More Than Insurance”
PZU 2020 - More Than Insurance 4.1 Recap of Group Strategy “The New PZU – More Than Insurance”
Surówka, the CEO of PZU Życie up to that time with serving in the capacity of the President of the Management Board of PZU SA (CHAPTER 9 Corporate Governance). Under new leadership the PZU Management Board reviewed and updated its strategy.
The acquisition of a significant equity stake in Bank Pekao has opened up new opportunities for collaboration. This transaction announced in December 2016 was finalized on 7 June 2017. PZU and the Polish Development Fund (PFR)
UniCredit for PLN 10.6 billion. It was one of the largest transactions in the European banking sector in recent years.
Europe, with two banks playing an important role on the domestic financial market in its structure. Consequently,
The new approach will drive the gradual change in the insurer’s model (chiefly involved in the valuation and transfer of risk) toward the model of an advisory and service company
will become when it comes to insurance, finance and health services.
“I dream of a PZU that functions in a teenager’s mobile handset. (...) If PZU becomes a “great” company for young people, that will mean that we have won the future.” – Paweł
Board has undertaken to uphold the dividend policy adopted in 2016 calling for a dividend payout ratio of no less than 50%
PZU has approximately PLN 300 billion of assets under management and it renders services to 22 million clients in five countries. The Group companies are active not only in life and non-life insurance but also in investment, pension, health care and banking products. Moreover, it renders assistance services to retail clients and businesses through strategic partnerships.
PZU 2020 - More Than Insurance want to give them tools to help them protect what is the most valuable to them. The New PZU is much more than insurance.”
The PZU Group’s new mission has been defined in this spirit.
“Defining PZU as a company that helps clients on an everyday basis calls for considerable investments in the overall Group’s growth. Our client relationships and our knowledge of our clients are becoming our main value, while our chief product is our acumen in addressing client needs to build a stable future. That is why we devote so much space in this strategy to initiatives that will enrich our client knowledge and assist us in reaching clients even more quickly.”– Paweł Surówka, CEO
Package of services supporting operations (e.g. accounting services, security audits, OSH training)
PZU is planning its current and future actions based on responsible management in financial, employee, social, environment, human rights and anti-corruption areas
GROUP AND PZU SA FOR 2017) Representation concerning non-financial information). That is why operating processes in every stage of preparing, distributing and handling products
Its responsible approach to business is one of the key pillars for building long-term and partnership contacts that will be conducive to building mutual understanding and trust.
The New PZU entails 4 key business areas whose development has been defined on the basis of the most forward-looking economic, technological, regulatory and demographic trends.
New insurance products, e.g. innovative solutions based on telematics and protection against cyberrisk
New growth possibilities related to the better usage of data in actuarial and tariff-related processes and in cooperation with clients
Regulatory changes providing clients a higher level of security and greater transparency
Rising percentage of investment products in the mix of Poles’ savings as they accumulate wealth
Concurrently, PZU will augment its operating agility, the precision with which it sets its rates and its cost advantage, which, when taken together, will translate into a higher ROE
“The new strategy contains very ambitious objectives. In relation to 2016 (the most recently completed year), we are driven by our ambition to increase the Group’s ROE by more than 7 p.p. to more than 22% in 2020. We will generate one billion PLN in insurance premiums through our cooperation with banks. We will attract one million new clients for our banks. It is our wish to create a relationship that will
(return on equity) up to above 22%, i.e. it will be nearly twice as high as the mean for insurance companies in Europe.
be beneficial to both parties. We will materially grow our revenues in the health segment to one billion PLN in 2020.
We will develop all lines of business, while retaining our ability to generate an above average level of profitability 50% of the multi-product salespersons in proprietary networks 10 core products in broad distribution 50% share of insurance sales on the direct market
Time-to-market - 5 months on average to implement changes to IT systems 92% combined ratio in non-life insurance1 6.5% administrative expense ratio in insurance activity2
(CHAPTER 4.4 STRATEGY OPERATIONALIZATION). Better data utilization, process digitalization, additional client interactions with clients and more extensive cross-selling will act as a catalyst for these efforts.
1 PZU jointly with TUW PZUW and LINK4 2 This indicator pertains to PZU and PZU Życie
Net result on third party asset management (PLN mln)PZU Zdrowie’s EBITDA margin
Net result (in PLN mln) attributable to the PZU Group (banking)
Additional interactions with clients 1 Objective to be confirmed after the enactment of the Act on Employee Capital Schemes
Having a full client picture (360 degree view) will assist us in cultivating client relations while enabling us to standardize processes, grasp client needs better, underwrite risk in an optimum fashion, pursue more effective cross-sales efforts and manage the sales network more efficiently.
PZU intends to utilize the know-how and the best technological solutions in operation within the PZU Group while actively looking for new solutions enabling it to construe permanent advantages. Collaboration with the startup community (insurtech, fintech, technological firms) will act as one of the sources. The first business areas to benefit from these changes will be as follows: setting tariff rates and risk management, sales, client retention and claims administration as well as medical diagnostics.
PZU GO is a telematic application for a smartphone connected to a beacon attached to a car’s windshield. A set of sensors makes it possible to detect an emergency situation and dispatch a signal to PZU’s alarm center that will make contact with the driver in question to furnish the requisite support. If it is not possible to make contact with the car driver, rescue services will be sent to the accident site. Additionally, under partnership programs, PZU GO
will also provide a benefit package for drivers with a PZU policy and in the future also cheaper motor insurance policies for the best of them. The beacon is capable of operating on a single battery for three years.
Bank as well as PZU bringing insurance clients as new clients to these banks. The potential to generate cost savings has also been identified as a result of creating an integrated real estate administration system and a joint procurement model.
Special offers for PZU clients (discounts / cash back) and strategic partnerships
On 9 January 2018 (i.e. the date of publishing the “New PZU”
PLL LOT’s clients during their travels. This will entail travel insurance, other assistance and concierge services in channels for the distribution of PLL LOT’s air tickets. Travel insurance will be embellished with elements related to medical services. The second area of PZU’s strategic partnership with PLL LOT will involve extensive corporate collaboration.
PZU also entered into a strategic partnership with Allegro the internet sales leader in Poland. Cooperation will involve several elements. The most important ones will be the sales and distribution of innovative, fully digital insurance products customized to the specific nature of the needs of buyers and sellers on the allegro.pl service. PZU intends to conduct technological and service-related integration with Allegro’s processes. Matters related to service and claims handling will be the next areas of cooperation.
PZU will simplify its product offering in respect of the number of products and the language used (straightforward language).
PZU will utilize the potential of the financial market’s largest proprietary distribution network. By 2020 our general sales proprietary network operating in Poland under the PZU brand
(i.e. channels fully controlled by the PZU Group: branches, tied agents in life and non-life insurance and the corporate sales network) will consist of approximately 5 thousand general sales people (i.e. 50% of the Group’s proprietary network).
VIP care. We will continue to develop our proprietary branch network, among others, by pursuing greenfield projects and
developed a platform in cooperation with a Polish technology start-up, which is available on the patient portal, in an application and also in the form of a dedicated solution for medical hotline employees. The purpose of the platform is to conduct a patient check-up, which is very similar to when a physician conducts an examination, followed by presenting the most probable solution and defining the next steps. This may be phone consultation, video consultation or a chat with a doctor or a visit in a clinic to with a specific specialist.
Prophylactics and prevention coupled with encouraging people to lead a healthy lifestyle are an important aspect of the operation of PZU Zdrowie. Prevention campaigns are supposed to augment the effects while minimizing the consequences of possible damages. Every year PZU checks which dangers pose the greatest threat to Poles. For that and other reasons, it organizes testing of children in schools and it invests in educating people about health care. It also helps organize care for senior citizens, it provides support for innovative methods to detect tumors and it collaborates effectively with oncology centers.
PZU will be the unchallenged leader in the direct sales channel with a market share of at least 50%.
PZU will launch a loyalty program for the overall Group spanning all its products. The points collected by using these services as well as other activities (among others having a claim-free history and referring the program to a friend) may be converted into products and services from our partners.
The number of participants in PZU’s loyalty program in 2020 will be 3 million.
PZU will ramp up sales of group and property insurance to the small and medium enterprise segment (SME). Activities will be concentrated on reorganizing and unifying the sales and service model, developing its multi-agency channel and creating dedicated product offerings for the SME segment.
cost synergies (one investment product “factory”). The development of new investment products (inter alia, lifecycle funds and low-cost passive funds) and of new distribution channels (direct), also entering international markets is also being planned.
In 2020 the third party assets under management in the PZU
a product rider) – it should be no more than 4 months.
Insurance 1. Maintaining PZU Group’s leadership position on the non-life insurance market. According to the Q3 2017 data published by the Polish Financial Supervision Authority, the PZU Group’s market share (direct business) was 35.8% (unchanged y/y).
3. Maintaining the leading position in life insurance with periodic premium. Market share was 45.8% after the third quarter of 2017 (a year earlier 45.0%). In the whole life insurance market, PZU Życie’s share after the third quarter of 2017 was 34.8% (up by 1.1 p.p. y/y).
4. Strengthening the position of the market leader in Lithuania and Latvia. The share of the Lithuanian company in the non-life insurance market amounted to 31.0% (increase by 1.6 pp compared to the previous year), while the share in the Latvian market after the third quarter of 2017 remained at a similar level and amounted to 27.2%. The share in the Lithuanian life insurance market was 5.9% (up by 1.1 pp). The share of the PZU Group on the Estonian non-life insurance market in 2017 was 15.6%, up by 1.1 pp. After the third quarter of 2017, the Ukrainian non-life company recorded a decline in its market share (3.3%) by 0.4 pp. compared to the same period of the previous year, while the life company registered an increase in the share (10.4% vs. 8.5% y/y).
7. The PZU Group became a member of Lloyd’s and closely collaborates with the Argenta Syndicate. PZU received a prestigious certificate entitled „Member of Lloyd’s”.
8. Extending works aiming at the use of telematics in the PZU Group. After the solutions implemented in LINK4, start work on the PZU GO project, which aims to improve the safety of drivers.
9. Commencement of works aimed at introducing innovative solutions in the scope of tariffication and sales support in PZU.
11. PZU won the Polish Radio’s Economic Prize in the “National Treasure” category awarded to businesses that stood out in the past year on the market place and contributed to promoting Poland on the international arena.
12. PZU received a prestigious award as a Trusted Brand in 2017 conferred by the “My Company Polska” monthly for products and services that feature a special degree of trust according to commercial undertakings.
In 2017, the Group pursued the following goals in the individual business areas: Actions performed in 2017
2. Increase in the size of assets under the management of external clients from PLN 7.0 billion at the end of 2016 to PLN 7.3 billion at the end of 2017. The share of assets of external clients of TFI PZU in TFI market assets (excluding non-public assets) at the end of 2017 was 4.3%.
4. The net asset value of OFE PZU Złota Jesień at the end of 2017 was PLN 23.3 billion. Moreover, OFE PZU „Złota Jesień” achieved the highest rate of return in 2017 from all Pension Funds at the level of + 20.9% y/y. Net asset value of Pekao OFE at the end of 2017 at PLN 2.7 billion.
5. Net profit of PTE PZU at the end of 2017 at PLN 70.8 million. 6. A new strategy for managing the investment portfolio for the PZU Group’s account and at its risk has been devised.
Health 1. At the end of 2017, PZU Zdrowie’s revenues were PLN 455.6 million, signifying growth of 25.2% from the previous year.
2. 27.1% growth in gross written premium in group health insurance in comparison with 2016.
3. Acquisition of shares in Revimed by PZU Zdrowie and purchase of shares by Elvita in NZOZ Trzebinia in 2017. PZU Zdrowie merged with Medicus in Opole also in 2017. In addition, in January 2018, PZU Zdrowie acquired shares in Centrum Św. Lukasza.
2. An increase in the value of banking assets held by the PZU Group to the level of PLN 255 billion at the end of 2017.
4. Continuation of work aimed at achieving revenue and cost synergies resulting from cooperation between PZU and banks within the group (Alior Bank, Pekao).
1. Social commitment The strategic pillars for PZU’s social commitment are as follows: safety (road safety, public safety and local safety), health, culture and national identity.
Safety - leading area, actions involving road safety are under way: • education and training for users of the roads: conferences, hardware purchases, sharing experience and providing support in the form of expert knowledge, • remedying the aftermath of accidents: support for injured parties, i.e. providing psychological care to the children of injured parties in accidents in collaboration with non-governmental organizations – Teddy Bears Rescue Children Association (Stowarzyszeniem Misie Ratują Dzieci), Suddenly Alone Foundation (Fundacją Nagle Sami), Disabled Drivers Assistance Association – SPiNKa (Stowarzyszenie Pomocy Niepełnosprawnym Kierowcom – SPiNKa),
2. Launch of a new version of the web-based application “Self-Service Claims” making it possible to conduct an inspection and calculate the claim to be paid quick and simple. The entire process takes 5 minutes on average, while the person holding the record received the claim payment a mere 54 minutes after registration in PZU’s system.
3. Work was launched to automate and optimize the claims and benefits handling process based on solutions employing robotics.
4. Continuation of work to enhance procurement efficiency. 5. Work continued on deploying a Fraud Identification System in motor insurance. 6. Continuation of the process to sell redundant properties from the standpoint of the statutory activity of PZU and PZU Życie.
7. PZU was recognized as the Institution of the Year for its service in branch offices and remote channels. This distinction awarded by the mojebankowanie.pl portal promotes companies delivering the highest quality of service to their clients.
Cost effectiveness culture 1. Administrative expenses in the underwriting segments in Poland fell PLN 10 m at the end of 2017, i.e. –0.7% y/y.
3. The administrative expense ratio in the international companies improved by 1.3 p.p. At the end of 2017 this ratio was 9.8%.
4. Commencement of the downsizing process (Management Boards of PZU SA and PZU Życie SA) that concerned all of the company’s functional areas.
Capital and investment policy and integrated risk management system 1. Disbursement of a dividend in the amount of PLN 1.2 billion, i.e. PLN 1.40 per share. The dividend yield was 3.3%.
3. PZU raised PLN 2.25 billion in a private subordinated bond issue denominated in Polish zloty. It was the largest issue of subordinated bonds in the history of the Polish financial sector, while at the same time being the first issue in Poland complying with Solvency II requirements. The bonds are listed on the Catalyst market. PZU has been awarded the prize awarded by the Warsaw Stock Exchange for the biggest value of its debut on Catalyst in 2017.
* The full range of information on the implementation of the principles of corporate social responsibility by the PZU Group, including all legally required non-financial information, is included in the Report on non-financial information of the PZU Group and PZU SA for 2017, which constitutes an annex to this Management Board’s Report on the Activity the PZU Group and PZU.
PZU 2020 - More Than Insurance 4.7 Key financial indicators of the PZU Group’s Strategy 2020
8 Annualized revenues of proprietary centers and branches including revenues from PZU Zdrowie 9 Net of non-recurring costs; profitability computed using the sum of revenues generated by branches and earned premium 10 Economic result on investment activity including FX on own debt 11 Data at the end of Q3 2017, unaudited data
Along with the new Strategy for 2017-2020, the Group’s business model will also be modified assuming a shift from an insurer’s model (chiefly involved in the valuation and transfer of risk) toward the model of a service company (an advisory company operating on the basis of technological know-how). This will enable clients to optimize their decisions at all stages of their lives. It will ultimately translate into growing trust and loyalty placed in the brand of first choice which PZU will become when it comes to insurance, finance and health services.
On 9 January 2018, PZU published its Strategy for 2017-2020 entitled “The New PZU – More Than Insurance”, CHAPTER 4
PZU’s sales network is organized in a manner that ensures sales effectiveness along with high quality services. In Poland, the PZU Group boasts the insurance market’s most extensive network of sales and service outlets.
At yearend 2017, the PZU Group’s distribution network included the following: • tied agents – the PZU Group’s own agency network in
Poland consisted of 8,521 tied agents along with individuals performing agency activities (of which PZU: 6,776). Sales are conducted through the agency channel predominantly in the mass client segment, particularly of motor and non-life insurance as well as individual insurance (life insurance). In the Baltic states (the PZU Group is active on the non-life insurance market in Lithuania, Latvia and Estonia through Lietuvos Draudimas, AAS Balta and
in the area of protective insurance, in 2017 the PZU Group cooperated in Poland with 11 banks (of which PZU: 10) and 18 strategic partners (of which PZU: 8). The PZU Group’s business partners are leaders in their industries with client bases offering enormous potential. In strategic partnership, cooperation applied mostly to companies operating in the telecom and power sectors through which insurance for electronic equipment and assistance services was offered.
Scale from 1 to 3, where 3 means the highest share in gross written premium.
For clients, claims handling is the ‘moment of truth’ when the quality of the product purchased from an insurer is tested.
Poland Baltic states Ukraine relationships. For this reason, the PZU Group took a number of measures in 2017 to streamline and shorten this process.
A separate unit deals with technical issues related to claims arising from motor or property damage. A similar claims handling model is in place at PZU Estonia where there are 3 competence centers. Centralized among them is only the handling of certain types of damage, such as personal injuries, large property damages and marine damages. In other Group companies operating in the Baltic states and Ukraine, the claims handling process is entirely centralized.
Currently, DCH is executed in two forms: at an individual level or under the agreement worked out by PIU. At the moment,
Insurance Act since the beginning of 2015. In turn, clients in
Latvia who wish to take advantage of direct claims handling must purchase a rider on their insurance.
Currently, clients of Lietuvos Draudimas in Lithuania and the Lietuvos Draudimas branch in Estonia may benefit from replacement vehicle rental services and roadside assistance services. Moreover, since 2015, Lietuvos Draudimas as the only insurer in Lithuania has been arranging such services for holders of TPL insurance.
2017 was another year of cooperation with repair shops in the area of post-accident vehicle repairs in countries covered by the PZU Group’s insurance business. PZU has created Poland’s largest network of cooperating repair shops enabling the
Company to control the quality and speed of service already at the claim handling stage. Owing to this, every client who orders a repair in the PZU Pomoc repair network receives a Quality Certificate guaranteeing that the repair has been performed in accordance with the highest standards. PZU
Additionally, PZU has implemented a self-claim handling process activated by the client via a link sent by a text message or e-mail. In accident claims or benefits, the client may freely accept or reject the proposed amount of the benefit. In motor and property damage and in centers repairing devices damaged by a power surge, the client may also, prior to making a decision, assess on his or her own in a few steps the amount of indemnification payable. Such information is then forwarded online to the Case Manager who initiates the payment. This service enables the client to participate in the payout decision in a simple and convenient manner and accelerates the process itself by reducing the waiting time for the disbursement of the benefit. In 2017, the Company also introduced the possibility of calculating the amount of indemnification for a damaged vehicle at the claim reporting stage. Satisfaction surveys carried out among PZU
Online Case/Claim Status report available to the Group’s clients throughout Poland is a great convenience to clients. By visiting the www.pzu.pl website and logging into the claim/
case, clients may find out in exactly how many steps PZU will carry out the claim handling process, what it will involve, what the current stage of the case is and what has already been done. Also available on www.pzu.pl are video tips on how to handle the claim online. Short videos featuring PZU employees explain to clients how to report a case in a few simple steps and then how to check the status of the case or how to take advantage of the accident policy in case of an accident. PZU -
Manager). These are mobile members of staff who visit accident victims directly in their homes to determine the actual standard of living of the victim and in consultation with the victim assess his/her needs arising from the accident for which PZU is liable under TPL insurance. For severely injured accident victims, PZU Client Relationship Managers arrange a broad array of medical, social and occupational rehabilitation and psychological support. They provide advice to persons who have become disabled as a result of an accident on how to adapt the closest environment to the needs of a disabled person and how to properly select devices that compensate for dysfunctions or disability. PZU Client Relationship Managers explain to accident victims the rights they have and what documents they should produce. The most severely injured children are provide with comprehensive and long-term support aimed at regaining physical fitness and reducing the adverse consequences of post-traumatic stress.
Another innovative solution in the claims handling area is the use of the 3D software technology (the processing of two-dimensional photos into a 3D spatial model) to create damage documentation.
An invariably significant area of operation in claims and benefits handling is the prevention of insurance fraud. PZU
(e.g. with the “Insurance Innovation of the Month” prize awarded by the international organization EFMA for the Migam
Big Data, digitalization and new interactions with clients. The Strategy also defines a model-based process of the creation and deployment of innovations.
To date, one of the biggest innovations has been the PZU Everest
Central and Eastern Europe and at the same time the Group’s largest business transformation. The Platform is a state-of-the-art tool for sales of non-life insurance, underwriting and management of policies and settlements, the roll-out of which was
In the Baltic States the Group cooperates with 10 multi-agencies while in Ukraine it cooperates with multi-agencies
In the Baltic States the companies cooperated with more than 350 brokers, while the
At the end of 2017 Bank Pekao had branches while Alior Bank had proprietary and partnership branches
Platform is visited by over 35,000 users (agents, multi-agents and PZU employees).
In 2017, work was continued on the Self-Service platform for retail clients with a view to developing the current moje.
pzu.pl website. The purpose of the Platform is to provide clients with online access products and services offered by all
Group companies (purchase of insurance products, medical services, investment products or savings products) and their subsequent use (reporting claims, setting up a medical appointment, checking the valuation of mutual fund units or other products, paying premiums). On the other hand, after the platform is implemented, having aggregated information about its customers, the Group will be able to distribute information faster and recognize their individual needs.
LINK4 is the Group’s brand known for a long time for its innovative approach to motor insurance. In its efforts to increase the safety of Polish road users, the Company also uses telematic solutions. For every motor policy purchased, it offers a free NaviExpert navigation service that it uses to analyze the driver’s driving style. LINK4 wants to promote and reward those, whose driving style it considers to be smooth and safe; the reward is zlotys that accumulate on the client’s account and are then returned by the company to the client after the end of the one-year settlement period. The ability to receive a partial premium refund motivates drivers to improve their driving style, the additional benefit being the savings on fuel and consumption of car parts, but primarily the safety of the users of Polish roads.
Since weather conditions atypical for our climate (storms, flooding rain, tornadoes) have increased, the company, in cooperation with Skywarn Poland – Polish Storm Hunters, has developed weather alerts. The weather warning system must assist clients in preparing for adverse weather conditions and reduce the level of losses. Starting on 1 January 2018, clients holding house or apartment insurance will receive a text message with a warning of the anticipated dangerous weather conditions. In addition to information about the approaching threat, the text message will also contain a link to the mobile version of the website, where clients will find tips on how to prepare and how to deal with the upcoming danger.
The Bank offers its customers a wide distribution network with branches and ATMs conveniently located throughout Poland.
At the end of December 2017, the Bank administered 5,669.3 thousand current accounts in PLN, 354.1 thousand mortgage loan accounts and 620.8 thousand Express Loan accounts.
Bank Pekao S.A. is one of the electronic banking leaders on the Polish market. In its electronic banking operations, the bank offers its customers a full range of solutions such as: web and mobile sites, a mobile app for phones and tablets and PeoPay mobile payments. Since mid-2017, the Bank’s customers have been able to use Pekao24, a new mobile site for mobile phone browsers, which apart from the design change, friendly navigation and intuitive operation offers features known to customers from the mobile application on tablets and internet service.
In 2017, Bank Pekao launched a new PeoPay mobile app, a single application for banking and paying. This application had been designed together with the customers and offers all the functions they need. This is the first app in Poland that uses biometrics to confirm transactions, supports payments abroad in foreign currencies and allows users to pay for web-based shopping directly in their phones.
Pekao’s innovative projects were appreciated by the jury of the Innovation of the Year 2017 competition conducted under the auspices of the Faculty of Technical Sciences of the
In Q3 2017, contracts were signed with four successive universities to issue Electronic Student IDs with a payment functions. The “Family Dream Journey” contest was also launched, supporting parents in opening accounts for children and youth at Bank Pekao S.A. In Q3 2017, the Bank opened nearly 40,000 new savings accounts: Mój Skarb, Eurokonto
At the end of 2017, the bank had 905 outlets (248 traditional branches, including 7 Private Banking branches, 12 Regional
Centers, 10 cash centers and a network of roughly 10 thousand intermediaries.
IT platform incorporating: online banking, mobile banking, call centers and DRONN. The bank uses the Internet, including
Cooperation between the bank and its partner outlets is based on an outsourcing agency agreement. Under these agency agreements, agents provide exclusive agency services to the
Finance” project. As of 1 November 2017, Tesco Finance locations no longer offer Alior Bank’s product contracts and instructions for previously concluded contracts may no longer be submitted. The existing customers, will now be serviced by the chain of Alior Bank’s own branches.
PLN 400 million in innovative technology projects. These expenditures will drive Alior Bank’s digital transformation, in which motivated employees will guide the individual and corporate customers to the digital world, in a safe and friendly manner, which will also be profitable for the shareholders.
Alior Bank has also established the Fintech Department, a new unit responsible for seeking fintechs globally and for launching partnerships with those that are the best match with the bank’s strategy. Its goal is to launch cooperation with 20 companies by 2020 and establish the perception of the bank as the partner of first choice for European fintechs.
Health products – in the form of life and health and property insurance and non-insurance products – benefit from synergies within the PZU Group and are distributed through virtually all sales channels, however based on the corporate and agency chain of PZU and PZU Życie.
• development of IT solutions necessary to support the medical and operational processes of PZU Zdrowie outlets
Operating model - distribution, innovation physician interview, and then presentation of a most probable solution and indication of further steps. This may be phone consultation, video consultation or a chat with a doctor or a visit in a clinic to with a specific specialist. However in many cases such a discussion with a patient may end with an advice or a prescription sent without any need to leave home.
Group umbrella contains several brands. They differ in terms of the visual systems used, target groups and business models.
The dominating brand is the PZU corporate brand. This brand is used to identify the PZU Group itself as well as most of its 1 Study conducted by the Gfk Polonia institute, 2017 companies operating on the Polish market (PZU, PZU Życie,
The last level of brand architecture is the independent brands group. This category includes the brands within the PZU
Group, the names and visualization of which differ from the corporate brand, such as Lietuvos Draudimas and LINK4. Both companies are distinguished by their high prompted brand awareness on the Lithuanian and Polish markets, at 98% and 97% respectively.
I am active in physical therapy, massages and coordinating the Nordic walking section in the PZU Sport Team. I encourage others to be active, I show them how much satisfaction physical activity can bring. I have a host of ideas up my sleeve, though time has become a deficit product.
Net profit attributable to the parent company’s shareholders nearly PLN 1 billion higher than the value generated in 2016. Increase in gross written premium by 13.0% y/y and consolidation of the leading position in the Polish insurance sector. Greater exposure to the banking sector – commencement of Pekao’s consolidation.
In 2017, the PZU Group generated a result before tax of
The net result increased 97.5% compared to last year, net of non-recurring events.1 The operating profit in 2017 was PLN
Operating profit was driven in particular by the following factors: • higher gross written premium in motor insurance in the mass and corporate client segments following an increase in average premium and in individual insurance, in particular unit-linked products in the bancassurance channel; • the increase in profitability in the mass insurance segment associated mainly with a decrease in the loss ratio in agricultural insurance – in the corresponding period of the previous year, occurrence of numerous losses caused by forces of nature (adverse effects of ground frost) and, to a smaller extent, improvement of profitability in motor insurance; • lower profitability in the corporate insurance segment, mainly in the non-motor insurance product group following the reporting of a few claims with high unit values; • the decrease in profitability in group and individually continued insurance as a result of a higher loss ratio in protection products driven by the increase in the frequency of events associated with deaths in Q1 2017 and as a result of the absence of the non-recurring factor from 2016 involving an update in the assumption on future disbursements applied to the calculation of provisions; 1 Non-recurring events include the conversion effect caused by converting longterm policies into yearly renewable term agreements in type P group insurance, claims caused by weather conditions (storms), which were higher than the average of the last 3 years, claims in agricultural insurance, which were, in the comparable period, higher than the average of the last 3 years, updated assumptions as to future disbursements applied to the calculation of provisions, profit from the bargain purchase of a spun-off portion of BPH, cost of the restructuring provision in Alior Bank.
PLN 1,750 million to the operating result of the PZU Group and the bank segment respectively.
When compared to the previous year, premium rose by 13.0%, mainly in the motor insurance group in the mass and corporate client segments following an increase in average premium and in individual insurance, in particular unit-linked products in the bancassurance channel. After considering the reinsurers’ share and movement in the unearned premium reserve, the net earned premium was
697 million in the corresponding period of the previous year, associated in particular with the commencement of consolidation of Pekao and PZU’s PLN 2,250 million issue of subordinated bonds in June 2017; • higher level of claims and benefits paid. They amounted to PLN 14,941 million, which means a 17.3% increase compared with 2016.
Net revenues from commissions and fees 1,784 544 243 351 299
822 million, as compared to PLN 395 million in 2016 (as a result of the commencement of consolidating Pekao and the introduction of the tax since February 2016). Moreover, in 2016, a non-recurring gain was recognized on the bargain acquisition of a spun-off portion of BPH in the amount of PLN 465 million, partially offset by the restructuring provision at Alior Bank in the amount of PLN 268 million.
PLN 22,847 million or 13.0% more than in 2016.The individual segments recorded the following figures: • sales in the mass client segment higher by PLN 1,287 million (net of intersegment gross written premium)
commissions, revenues and expenses related to the service of bank accounts, payment and credit cards, fees charged for intermediation in insurance sales; • income on asset management in OFE Złota Jesień. It was
PLN 120 million (up 29.0% compared to the previous year, because of the higher average net assets of OFE PZU); • revenues and fees received from funds and mutual fund companies in the amount of PLN 277 million, or PLN 166 million more than in the previous year, mainly caused by the commencement of Bank Pekao’s consolidation.
In 2017, the PZU Group’s investment activity focused on the continuation of strategic assumptions, in particular on the optimization of profitability of investment operations through greater diversification of the investment portfolio, as well as ensuring financing for the transaction of PZU’s acquisition of an equity stake in Bank Pekao.
In 2017, the PZU Group’s net investment result was PLN 8,502 million compared to PLN 3,511 million in 2016 (up 142.2%).
Movement in net investment result after factoring in interest expenses and factoring out the impact of banking operations (PLN million)
* Derivatives linked to interest rates, foreign currencies and securities prices, respectively are presented in the categories: Debt market instruments - treasury, money market instruments and listed and unlisted equity instruments.
Structure of the portfolio of investments net of the impact of banking activity* (%)
• decrease in the valuation of real properties, in particular due to the appreciation of PLN against the euro, partially offset by better performance of derivatives hedging these positions; • performance in the portfolio of assets to cover investment products up PLN 174 million y/y, including in particular funds in the unit-linked portfolio, even though it does not affect the PZU Group’s total result.
Eq ui ty in st ru m en ts , in cl ud in g he dg in g in st ru m en ts
N et in ve st m en t re su lt an d in te re st e xp en se (in cl ud in g ba nk in g ac tiv ity )
(hurricanes, hail storms). Higher level of claims in the corporate client segment in general TPL insurance and fire insurance after several claims with high unit value were reported; • in life insurance – higher amounts paid by clients to their accounts and significantly improved results of investing activity in the period under analysis for individual unitlinked products in the bancassurance channel and to a lesser extent the same type of group and individual products offered within PZU’s own network (mostly IRAs); • in protection insurance – an increase in Q1 2017 in the incidence of deaths compared to last year, confirmed by statistics published by the Central Statistical Office [GUS]
In 2017, acquisition expenses went up PLN 288 million compared to the corresponding period of the previous year.
PLN 5,364 million compared to PLN 2,923 million in 2016, i.e.
PLN 317,405 million, up PLN 192,109 million compared to the end of 2016. This increase was driven predominantly by the commencement of Pekao’s consolidation.
Non-current assets consisting of intangible assets, goodwill and property, plant and equipment were recognized in the statement of financial position in the amount of PLN 10,521 million. They accounted for 3.3% of the assets. The balance increased in 2017 by PLN 6,008 million as compared to 2016, mainly because of the commencement of Pekao’s consolidation, including recognition of goodwill related to the bank’s acquisition in the amount of PLN 1,586 million and intangible assets identified as a result of PZU’s acquisition of the equity stake in Bank Pekao.
PLN 8,239 million of cash and cash equivalents (2.6% of assets). At yearend 2016, this value was PLN 2,973 million and the movement occurred mainly in the cash accumulated by
At yearend 2017, consolidated equity hit PLN 37,601 million, up from the end of 2016 (120.1% growth). The growth in consolidated equity pertained mainly to non-controlling interests that in connection with commencement of Pekao’s consolidation in June 2017, among other factors, reached
PLN 22,979 million, increasing more than five-fold from the end of 2016. Equity attributable to the parent company’s shareholders rose by PLN 1,624 million compared to the end of the previous year – as an effect of the net result attributable to the parent company generated in 2017, partially offset by of the distribution of profit for 2016, including the allocation of PLN 1,209 million as a dividend.
The movement in this item resulted in particular from: • higher provision for unearned premiums in non-life insurance and resulting mainly from increased sales of motor insurance in Poland; • higher provisions for unit-linked life insurance products if the policyholder bears the investment risk because of sales exceeding surrenders and a high positive investment result; • higher mathematical provisions in continued business associated with the indexation of sums insured and the higher average age of the insureds.
At the end of 2017, the value of contingent liabilities stood at PLN 58,978 million. This major increase compared to the previous year resulted from business development in the banking segment, including the commencement of Pekao’s consolidation. The value of contingent liabilities granted to the clients of Alior Bank and Bank Pekao was PLN 57,836 million.
6.6 Contribution made by the market segments to the consolidated result
(e.g. employer, trade union) enroll in the insurance agreement and individually continued insurance in which the policyholder acquired the right to individual continuation during the group phase. It includes the following insurance types: protection, investment (which however are not investment contracts) and health insurance; Structure of PZU Group’s liabilities and equity (%)
• Banking segment – a broad range of banking products offered both to corporate and retail clients by Pekao and
• Baltic States segment – includes non-life insurance and life insurance products provided in the territories of Lithuania,
◦ the lower level of claims in the group of insurance for other damage to property, mostly for subsidized crop insurance – in the corresponding period of 2016 there were many losses caused by frost and winterkill; ◦ the improving profitability of the motor insurance portfolio, in particular Motor TPL insurance, following the changes introduced in the tariff. This effect was partially offset by the observed growth in the average claim; ◦ decrease in the profitability of insurance against damage caused by the forces of nature and general third party liability insurance, which was largely a consequence of the losses caused by the August and December 2017 hurricanes
482 million, down 6.8% year on year, which was caused in particular by the declining EUR exchange rate vs. PLN; • acquisition expenses reached PLN 1,745 million, rising by 12.5% as compared to 2016, mainly due to the higher direct acquisition expense (also on the coattails of the growing insurance portfolio). The additional factor that had a positive effect on acquisition expenses was the fact that, according to the requirements of the Insurance Activity Act, the rules for paying consideration to policyholders in group contracts were altered – as of 1 April 2016, these expenses are treated as administrative expenses.
In 2017, the net result of the mass insurance segment was PLN 1,327 million, almost twice as much as in 2016
Insurance result in the group and individually continued insurance segment (PLN million)
group insurance. As a result of the conversion, in 2017 provisions were released for PLN 35 million, i.e. PLN 5 million less than in the corresponding period of 2016.
Insurance claims and benefits and the net movement in other net technical provisions totaled PLN 5,142 million (up 9.7% y/y). This change was driven by the following factors in particular: • in December 2016, as a consequence of the level of benefits awarded for permanent dismemberment falling in recent years, the assumptions were checked and updated for expected future payments for this purpose used to calculate provisions for this risk and this made it possible at the time to reverse 216 m PLN in provisions, mostly in continued insurance; there was no factor like that in 2017; • higher number of deaths in Q1 2017 compared to last year and the number of claims paid for that reason in protection insurance. This uptick was justified by the higher number of deaths in the overall population of Poland at
Administrative expenses in 2017 remained at a level similar to that recorded in 2016. The PLN 2 million (0.3%) change was caused mainly by: • the signing, in Q2 2016, of a new agency agreement in the bancassurance channel as a result of which the fee for performing agency activities involving participation in the administration of protection insurance agreements is treated as an administrative expense, unlike to the agreement previously in force that treated it as an acquisition expense, including increasing level of this sale y/y; • this adverse factor was counterbalanced by cost cutting in project-related activities and in current activity by constantly maintaining cost discipline.
After excluding the one-off effect related to conversion of long-term contracts into renewable contracts in type P
In 2017, the insurance result in the individual life insurance segment was PLN 209 million, or 14.3% less than last year.
The main factors affecting the segment’s insurance result are described below.
Net insurance claims and benefits together with the movement in other net technical provisions were PLN 1,672 million, reflecting an increase in costs by PLN 629 million compared to 2016. This was caused by significantly higher increases in provisions, predominantly for unit-linked products in the bancassurance channel and to a lesser extent the same type of products offered within PZU’s own network (mostly IRAs).
In both cases, this resulted both from an increase in customer deposits in unit-linked fund accounts and significantly better results of investment activity in the reporting period.
In 2017, acquisition expenses increased in the individual insurance segment by PLN 28 million to PLN 135 million. This was driven by a significantly higher volume of sales of unitlinked products in the bancassurance channel with prepaid commissions and, to a lesser extent, by additional expenses resulting from the growing involvement of own network in the acquisition of individual protection products.
Administrative expenses in 2017 remained at a similar level as the year before, i.e. at PLN 61 million compared to
Życie over the income allocated at transfer prices to insurance segments.
(excluding external operations) amounted to PLN 111 million and was higher than in the previous year, in particular as a result of better climate in the Polish equity and bond market, and acquisition of high-margin exposures to debt portfolios.
The banking activity segment consists of the following groups: Pekao, from June 2017 (effect of settling the transaction and start of consolidation) and Alior Bank.
The key element of the segment’s income is investment income, which in 2017 increased to PLN 6,506 million y/y (up
Pekao and Alior Bank, among others thanks to the favorable economic climate and the low level of interest rates.
(interest income minus interest expenses) by 46.0% as a consequence of acquisition of a spun-off portion of Bank
N et c la im s a nd b en ef its
Financial Results 40% of the housing loan portfolio and Alior Bank – over 35%
– PLN 1,837 million. In 2017, Alior Bank recorded an increase in personnel costs, which resulted among others from the pay pressure and the bank’s strategy focusing on innovative solutions requiring qualified IT staff.
in both banks. The ratio was 46% for Pekao and 49% for Alior
Both of the above values were allocated to the Bank Pekao purchase price.
◦ personnel costs mainly due to higher bonus costs and changes in the employment structure.
Premiums in life insurance increased by PLN 7 million (or 13.7%); • decrease in investment income. In 2017 the result stood at PLN 20 million and was 13.0% lower than in the year before, primarily as a result of lower increase of investment property prices; • increase in net claims and benefits. They amounted to PLN
The change in the result generated by the segment was caused by the following factors: • growth of gross written premium. It amounted to PLN
223 million and increased compared to the previous year by PLN 13 million (or 6.2%). The increase in non-life insurance premiums (4.6% y/y) occurred primarily in motor insurance, both as a result of increasing sums insured and tariffs in mandatory insurance. Premiums in life insurance increased by PLN 5 million (or 13.5%); • lower income from investing activities. The segment generated PLN 18 million, which was 21.7% less than in 2016. This resulted from, among others, positive foreign exchange differences in the portfolio of USD-denominated investments including in investment income in the previous year; • increase in net claims and benefits. These reached PLN 56 million and were 3.7% higher than in the previous year.
In life insurance the value of benefits paid decreased in relation to the previous year by PLN 4 million (or 19.0%).
The loss ratio calculated on the basis of the net earned premium in non-life insurance was 47.0%, up 2.4 p.p.
from the corresponding period of 2016 as a result of a decrease in the portfolio of agreements in this segment.
In 2017 the return on equity attributable to the parent company (PZU) was 21.1%. ROE was 6.2 p.p. higher than in the prior year. The profitability ratios achieved in 2017 by the
In the consolidated financial statements investment contracts are recognized in accordance with the requirements of IAS 39.
In 2017 the PZU Group earned PLN 4 million of operating profit compared with PLN 2 million in the previous year
One of the fundamental measures of operational efficiency and performance of an insurance company is COR – Combined
The PZU Group’s combined ratio (for non-life insurance) has been maintained in recent years at a level ensuring a high profitability of business. In 2017, the ratio declined mainly due to the lower loss ratio in agricultural insurance as a result of the occurrence of numerous losses caused by forces of nature
2. Net claims and benefits ratio (net claims and benefits/net earned premium) x 100% 70.0% 68.4% 68.2% 70.3% 68.7%
6. Combined ratio in non-life insurance (net claims and benefits + insurance activity expenses) / net earned premium x 100%
7. Operating profit margin in life insurance (operating profit/gross written premium) x 100% 19.3% 25.3% 22.3% 24.4% 22.3%
In 2017, the issuer recorded a technical result at a level of PLN
1,218 million compared to PLN 537 million in the preceding year, which signifies an over double increase in the result year on year. Net profit was PLN 2,434 million compared to PLN
1,573 million in 2016 (up 54.7%). Without taking into account the dividends received from PZU Życie, PZU’s net profit was PLN 1,005 million and was higher by PLN 256 million compared to 2016.
In the individual net result items, PZU recorded: • an increase in gross written premium to PLN 12,433 million, or 16.4%, compared to the previous year, mainly in motor insurance as a result of an increase in the average premium (driven by a gradual shift in the average price)
and in insurance of property damage. After consideration of the reinsurers’ share and the movement in the provision for unearned premiums, net earned premium was PLN 11,181 million, up 21.4% from 2016; • a higher level of claims and benefits totaling PLN 7,169 million, up 16.6% compared to 2016. The main change was recorded in the motor insurance group driven by growth of the insurance portfolio and in the insurance against damages caused by the forces of nature; • the net investment result, higher by PLN 95 million, as a result of a higher dividend from PZU Życie offset by the one-off effect of realization of the result of valuation of participation units in the Universum PZU Specialist
Inwestycyjny Otwarty Universum) in 2016, which until redemption of the units was captured through a change of the revaluation reserve; • higher acquisition expenses (an increase by PLN 270 million), mainly due to an increase in direct acquisition expenses driven by the growing insurance portfolio. The additional factor that had a positive effect on acquisition expenses was the fact that, according to the requirements of the Insurance Activity Act, the rules for paying consideration to policyholders in group contracts were altered – as of 1 April 2016, these expenses are treated as administrative expenses; • a decrease in administrative expenses to PLN 693 million compared to PLN 724 million in 2016, primarily as a result of the application of cost discipline measures both in current and in project activities.
In 2017 PZU collected gross written premium of PLN 12,433 million, i.e. 16.4% more than in 2016. They comprised mainly: • motor TPL insurance premiums, accounting for 42.4%
of PZU’s insurance portfolio (38.1% in the prior year). In 2017, their value was 29.4% higher than in the previous year, mainly as an effect of increase in the average premium as a result of the tariff changes introduced in 2016 and higher number of insurance policies; • Motor own damage insurance premiums with a 25.3%
- increase (+13.8% y/y) associated with a higher number of insurance and gradual introduction of increases; • insurance against fire and property damage premiums, accounting for 19.2% of PZU’s premium portfolio. In 2017 their share in the insurance portfolio did not change, but their value was 16.7% higher in relation to the previous year – the effect of higher sales of agricultural insurance (in particular subsidized crops) and household insurance; • accident and other insurance premiums. Their share amounted to 7.3% (a decline of 3.1 p.p. compared with 2016). This insurance category recorded a decline of the premiums on assistance insurance and various financial risks insurance, as a result of TUW PZUW being joined by several existing strategic partners and ending cooperation with a large entity (client) under an obligatory quota share inward reinsurance treaty.
In December 2017, the value of PZU SA’s investment portfolio was PLN 36,576 million compared to PLN 31,375 million at year end 2016. The increase in the portfolio value resulted primarily from PZU’s issue of PLN 2,250 million subordinated bonds in June 2017, higher cash flows in connection with the dynamic development of the insurance portfolio, and the investment resulted generated. Compared to the year before, the share of debt securities and other fixed income securities decreased, driven mainly by reaching the maturity of part of the bond portfolio in 2017.
The balance of other technical income and expenses in 2017 was negative and stood at PLN 177 million. Compared to 2016, the company recorded a result that was PLN 8 million worse, driven by significantly higher write-offs and impairment losses.
In 2017, the net balance of other operating income and expenses was negative and amounted to PLN 217 million compared with the also negative balance for 2016 of PLN 362 million. Starting in mid-2014 the balance of other operating expenses was charged with the interest expense and change of the valuation on account of foreign exchange differences on the loan taken from PZU Finance AB for the total amount of EUR 850 million (EUR 500 million in July 2014 and EUR
The main component of PZU’s assets were investments which amounted to PLN 36,576 million (up 16.6% compared to the end of 2016), which accounted for 86.3% of PZU’s total balance sheet value compared to 84.1% as at the end of the previous year. With the exclusion of investments in subordinated entities, this level was 9.3% lower. The main reason behind the increase in the value of investments in subordinated entities was the acquisition of a stake representing approx. 20% of the total number of votes in
PZU’s receivables stood at PLN 2,315 million and accounted for 5.5% of assets. For comparison, at the end of 2016, they amounted to PLN 2,252 million (6.0% of PZU’s assets). The biggest increase was recorded in the value of receivables on direct insurance, as a result of the dynamic increase of the insurance portfolio (mainly motor insurance). Non-current assets – in the form of intangible assets, goodwill and property, plant and equipment – were disclosed in the balance sheet at PLN 463 million. They constituted 1.1% of assets.
As at 31 December 2017, PZU’s cash amounted to PLN 982 million (2.3% of assets). A year earlier, they amounted to PLN
At the end of 2017, technical provisions were the main component of PZU’s equity and liabilities. They reached the amount of PLN 19,969 million, i.e. 47.1% of equity and liabilities. Their share in the balance sheet decreased by 3.0 p.p. compared to 2016, while in terms of value they rose by
PLN 1,254 million, in particular due to higher provisions for unearned premiums in the group of motor insurance.
PLN 259 million compared to the year before. They comprised among others: guarantees and sureties received, bills of exchange issued on account of granted insurance guarantees and other contingent receivables comprising mainly securities in the form of mortgage on the debtor’s assets and other contingent receivables.
In 2017, PZU generated a return on equity of 18.9%. ROE was up by 6.1 p.p. compared to the previous year.
In 2014 - 2017, the average return on equity (ROE) was
4. Acquisition expense ratio* (acquisition expenses/net earned premium) x 100% 19.0% 20.1% 19.9% 19.3% 16.9%
5. Administrative expense ratio (administrative expenses/net earned premium) x 100% 6.2% 7.9% 9.5% 9.2% 8.2%
6. Combined ratio (COR GLOSSARY) (net claims and benefits + insurance activity expenses) / net earned premium x 100%
In this chapter: 1. Objective of risk management 2. Risk management system 3. Risk appetite 4. Risk management process 5. PZU Group’s risk profile 6. Sensitivity to risk 7. Reinsurance operations 8. Capital management
Risk management in the PZU Group aims to do the following: • enhance the PZU Group’s value through active and deliberate management of the extent of risk taken; • prevent the acceptance of risk at a level that could pose a threat to the PZU Group’s financial stability.
The main elements of the integrated risk management system are aligned to one another in all of the PZU Group’s insurance companies. They have been implemented to ensure the execution of the various companies’ strategic plans and the overall PZU Group’s business objectives. They include the following: • systems of limits and limitations on the acceptable level of risk, including the level of risk appetite; • processes involving the identification, measurement and assessment, monitoring and controlling, reporting and management measures pertaining to various risks; • risk management organizational structure in which the management boards and supervisory boards of the companies and dedicated committees play a crucial role.
Entities from other financial market sectors are required to apply the standards applicable to a given sector. The adopted internal regulations specify among others: • processes, methods and procedures facilitating risk measurement and management; • segregation of duties in the risk management process; • scope and conditions and the frequency of risk management reporting.
PZU exercises supervision over the PZU Group’s risk management system on the basis of cooperation agreements entered into with other Group entities and the information provided thereunder. It manages risk at the PZU Group level on an aggregate basis, especially with respect to capital requirements.
The organizational structure of the risk management system that is identical across the PZU Group and the PZU Group’s various insurance entities has four decision-making levels.
The fourth decision-making level pertains to operational measures and is divided into three lines of defense: • the first line of defense – entails ongoing risk management at the business unit and organizational unit level and decision-making as part of the risk management process; • the second line of defense – entails risk management by specialized cells responsible for risk identification, monitoring and reporting and controlling the limits; • the third line of defense – entails internal audit that conducts independent audits of the elements of the risk management system as well as control activities embedded in operations.
The role of the PZU Group Risk Committee is to provide support to subsidiaries’ supervisory boards and management boards in implementing an effective risk management system coherent for the entire PZU Group. The operational objective of the PZU Group Risk Committee is to coordinate and supervise activities related to the PZU Group’s risk management system and processes.
The risk appetite in the PZU Group has been defined as 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.
Management actions These activities encompass among others risk mitigation, risk transfer, risk avoidance, specifying risk appetite, acceptance of risk tolerance levels, as well as tools which facilitate such activities, i.e. thresholds, reinsurance plans and reviews of underwriting policy.
Group. The management board of each company determines the risk appetite, risk profile and tolerance limits reflecting its strategic plans and the objectives of the entire PZU Group.
This approach ensures the adequacy and effectiveness of the risk management system in the PZU Group and prevents the acceptance of risk levels that could jeopardize the financial stability of individual companies or the entire PZU Group. The determination of the appropriate level of risk in each company 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, with all actions being coordinated at the
Risk appetite is determined on an annual basis also in the PZU
Group’s banking sector entities. This process is carried out based on the applicable regulatory requirements (including those arising from remedial plans) and good practices. This process is tailored for both banks, taking into consideration the nature and the business and capital structures of both these entities. Risk appetite in banking entities is a topic for consultation with the PZU Group’s parent company and the subject matter of opinions issued by the PZU Group Risk
The following two levels have been distinguished in the risk management process: • the PZU Group level – ensuring that the PZU Group attains its business objectives in a safe manner appropriate to fit the scale of the risk incurred. Monitored at this level are the limits and risks specific to the PZU Group such as: catastrophic risk, financial risk, counterparty risk and risk concentration. The PZU Group provides support for the implementation of an integrated risk management system, including the introduction of compatible mechanisms, standards and organization of an efficient operation of the internal control system (with particular emphasis on the compliance function), the risk management system
This is the possibility of incurring a loss or unfavorable movement in the value of liabilities that may ensure from the executed insurance agreements and insurance guarantee agreements in connection with improper assumptions regarding the measurement of premiums and establishment of technical provisions.
Risk identification commences with a proposal to start developing an insurance product, buying a financial instrument, modifying an operating process and also with the moment when some other event occurs that may potentially lead to the emergence of risk in the Company and it is in play until the time when the related liabilities expire. The identification of actuarial risk is performed, among others, as follows: • analyzing the general terms and conditions of insurance with respect to the risk being undertaken and compliance with the generally binding legal regulations; • analyzing the general / specific terms and conditions of insurance or other model agreements with respect to the actuarial risk being undertaken on their basis; • 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 the Company’s capital requirements and risk margin computed using the standard formula; • verifying and validating modifications to insurance products; • assessing actuarial risk through the prism of similar existing insurance products; • monitoring current insurance products in the Company’s portfolio; • analyzing the policy of underwriting, tariffs, technical provisions and reinsurance and the claims and benefits handling process.
Assessing actuarial risk entails recognizing the degree of the threat or the group of threats determining the possibility of a loss emerging and analyzing the elements of that risk in a manner enabling one to make a decision to accept that risk to be insured and for the Company to incur liability. The purpose of underwriting is to assess the future loss ratio and curtail adverse selection. Assessing actuarial risk also involves measures to reinsure the largest risks posing the greatest threat.
The measurement of actuarial risk is performed in particular using: • analyzing selected ratios; • scenario method – analyzing the loss of value caused by the implemented change in risk factors; • factor method – simplified version of the scenario method reduced to a single scenario for a single risk factor; • statistical data; • exposure and sensitivity measures; • expert knowledge of the company’s employees.
The management actions contemplated in the actuarial risk management process are performed in particular by doing the following: • defining the level of tolerance for actuarial risk and monitoring it; • business decisions and sales plans; • calculating and monitoring the adequacy of technical provisions; • tariff strategy and monitoring current estimates and assessing the adequacy of the premium; • process of assessment, valuation and acceptance of actuarial risk; • application of tools to mitigate actuarial risk, including in particular reinsurance and prevention.
Moreover, to mitigate the actuarial risk inherent in current operations the following actions in particular are undertaken: • the scopes of liability are defined in the general / specific terms and conditions of insurance or other model agreements in financial insurance; • the exclusions of liability are defined in the general /
This is the risk of a loss or unfavorable movement in financial position stemming directly or indirectly from fluctuations in the level and variance of the market prices for assets, credit spread, value of liabilities and financial instruments.
Group has materially increased its exposure to interest rate and credit risk.
The process of identifying the market risk associated with insurance liabilities commences with the process of developing an insurance product and involves an identification of the interdependencies between the magnitude of that product’s financial flows and market risk factors. The identified market risks are subject to assessment using the criterion of materiality, i.e. does the materialization of risk entail a loss capable of affecting its financial condition.
When measuring market risk, the following stages, in particular, are distinguished: • collecting information regarding assets and liabilities generating market risk; • computing the value of the risk.
Risk is measured: • for instruments’ exposure and sensitivity measures; • using a partial internal model.
The application of limits is the primary management tool to maintain a risk position within the acceptable level of risk tolerance. The structure of limits for the various categories of market risk and also for the various organizational units is established by dedicated committees in such a manner that the limits are consistent with risk tolerance.
The credit risk and concentration risk management process consists of the following stages: • identification; • measurement and assessment; • monitoring and control; • reporting; • management actions.
Risk assessment consists of estimating the probability of realization of a specific risk and estimating the potential impact of its realization on the Company’s financial standing.
Concentration risk for a single entity is calculated using the standard formula.
The following are subject to monitoring: • exposures to financial insurance; • exposures to reinsurance; • exposure limits and VaR limits.
Management actions in respect of credit risk and concentration risk involve in particular: • establishment of limits on exposure to a single entity, a group of entities, sectors or states; • diversification of the portfolio of assets and financial insurance, especially with regard to state, sector; • acceptance of collateral; • execution of transactions serving the purpose of mitigation of credit risk, i.e. selling a financial instrument, closing a derivative, purchasing a hedging derivative, restructuring a debt; • reinsurance of the financial insurance portfolio.
To minimize credit risk, security interests are established in line with the level of exposure to credit risk and in accordance with the client’s ability to provide the required collateral.
The establishment of a security interest does not waive the requirement to examine the client’s creditworthiness.
Operational risk is the risk of suffering a loss resulting from improper or erroneous internal processes, human activities, system failures or external events.
Group or persons acting on its behalf suffering legal sanctions, financial losses or a loss of reputation or trustworthiness.
Compliance risk is identified and assessed for each internal process at PZU and PZU Życie, in line with the demarcation of reporting responsibilities. Moreover, the Compliance
In turn, activities related to ongoing risk management, include in particular: • identification and evaluation of compliance risk in the supervised area; • measurement of compliance risk; • determining the instruments to provide protection and limit the number and scale of irregularities; • reporting any threats and events in the compliance risk area to the Compliance Department; • taking mitigation activities; • ongoing monitoring of compliance risk.
In 2017 the PZU Group entities had compliance systems adapted to the standards designated by PZU.
These units are required to assess and measure compliance risk and take appropriate remedial actions aimed at mitigating the likelihood of realization of this risk.
On an ongoing basis, PZU Group entities provide information on compliance risk to the Compliance Department at PZU and
Compliance risk includes, in particular, the risk that the operations performed by PZU Group entities will be out of line with the changing legal environment. This risk may materialize as a result of the absence of clear and unambiguous laws or their non-existence manifesting itself in the form of ‘legal loopholes’. This may cause irregularities in the PZU Group’s business, which may then lead to an increase in costs (for instance, due to the imposition of financial penalties) and an increase in the level of reputation risk, thus in a drop of the
Compliance risk is assessed and measured by calculating the effects of risk materialization of the following types: • financial, resulting, without limitation, from administrative penalties, court judgments, decisions issued by Office of
Competition and Consumer Protection (UOKiK), contractual penalties and indemnities; • intangible, pertaining to a loss of reputation, including damage to the PZU Group’s image and brand.
Compliance risk is monitored, in particular, through: • analysis of reports obtained from the heads of organizational units and cells; • monitoring of regulatory requirements and adaptation of the business to the changing legal environment of PZU
Management actions in the area of response to compliance risk include in particular: • acceptance of risks arising, without limitation, from legal and regulatory changes; • mitigation of risks, including by: adjustment of procedures and processes to changing regulatory requirements, evaluation and design of internal regulations to suit compliance needs, participation in the process of agreeing on marketing activities; • avoidance of risks by preventing any involvement in activities that are out of compliance with the applicable regulatory requirements or good market practices or activities that may have an unfavorable impact on the entity’s image.
PZU Group entities; • participation in consultations with legislative and regulatory authorities (supervised entities within the PZU Group)
In 2017, partly in response to a significant increase in the volume of regulatory requirements, including supervisory recommendations in the area of insurance products, the development of the product compliance function was continued, aiming at supporting business operations to effectively manage compliance risk in insurance products.
The table on page 137 summarizes the results of analysis of the sensitivity of the PZU Group’s net financial result and equity to changes in interest rate risk, foreign exchange risk and equity instruments price risk. This analysis does not take into account the impact of changes in interest rates on the insurance agreements presented in the liabilities or the investment contracts and receivables of bank’s from its clients and loans to customars.
Sensitivity of the asset portfolio (PLN million) Change of the risk factor
Interest rate risk decrease by 100 bp 1,244 542 increase by 100 bp (1,169) (522)
In the table on page 139, a sensitivity analysis is presented of the net result and equity to changes in the assumptions used to calculate the provision for the capitalized value of annuities.
The table below depicts the estimated change in the valuation of a given transaction/item as a result of a parallel shift in the yield curve from a given point by 1 basis point (BPV)
among others through a catastrophic non-proportional excess of loss treaty and against the consequences of large single losses 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 limited by reinsuring the financial insurance portfolio.
Życie, the PZU Życie portfolio is protected against the accumulation of risk and it has protection for individual policies with higher sums insured.
QBE, Mapfre, Nacional De Reaseguros and Sava Re are the partners that extend reinsurance protection to PZU Życie. Its reinsurance partners have high S&P ratings. That evidences the reinsurer’s robust financial position and affords the
This value is calculated daily for all areas responsible for risk taking and risk management, both on an individual and collective basis.
That evidences the reinsurer’s robust financial position and affords the Company security.
Group’s other insurance companies. The greater exposure to protection of the Baltic companies, Link4 and TUW PZUW has led to a higher gross written premium by virtue thereof.
In addition, PZU generates gross written premium on inward reinsurance under its operations on the domestic and international market, mostly through facultative reinsurance.
Reinsurance treaties in the PZU Group’s international companies, Link4 and TUW PZUW
The PZU Group endeavors to manage capital effectively and maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions.
On 3 October 2016, the PZU Supervisory Board adopted a resolution to approve the PZU Group’s Capital and Dividend
Policy for 2016-2020. The introduction of the Policy follows from implementation, as of 1 January 2016, of Directive 2009/138/EC of the European Parliament and of the Council
Risk management of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (“Solvency II”), as amended, the Insurance and Reinsurance Activity Act of 11
However, the rapidly increasing appetite for risk among investors did not ignite a sell-off of safe assets. Yields on 10year T-bonds of major developed economies ended the year at levels similar to those at the beginning of the year.
Index), based on stocks from 46 different countries, of which 23 are classified as developed markets and the remaining 23 are considered emerging markets, hiked up 21.6%, setting a record high of 513 points (USD) at the end of the year, which was roughly 20% more than the peaks prior to the collapse of the global economy in 2008-2009. Many economists ascribed this global recovery to the high degree of synchronization between the constituent parts of the world economy, from economic and geographic perspectives alike.
The largest beneficiary of this improved economic situation on the global markets was the United States where the main stock market indices climbed to their historical highs. Downward corrections of stock prices were shallow and limited in coverage, and trading on the stock markets was accompanied by declining volatility (measured by the VIX index – see the
Committee (FOMC) to launch a balance sheet value reduction program, that is to reverse the effects of the quantitative easing (QE) policy applied in 2008-2013. The economic recovery was backed by fundamental advances as companies kept improving their performance from quarter to quarter. In the wake of these developments, analysts’ forecasts for the coming years were more and more optimistic.
The situation on the Polish debt market was undisturbed by the interest rate hikes, reduced values of central banks’
balance sheets, improving macroeconomic indicators or growing appetite for risky asset classes. In H1 2017, yields on 10-year treasury bonds dwindled from 3.9% to 3.2%, and then oscillated between 3.2% and 3.5% in the second half of the year.
Yields on 2-year treasury bonds declined by 32 bps in 2017 to 1.71%, whereas yields on 5-year and 10-year T-bonds decreased by 24 bps and 33 bps, respectively, ending the year at 2.65% and 3.30%. SECTION 2.2 SITUATION ON THE
In 2017, Poland’s key WIG20 index evolved within the range of 1,957-2,552 points (in 2016: 1,674-1,999 points), wrapping up the last session of the year at a level close to the annual high of 2,461 points (up by 26.4% y/y, or with a rate of growth almost six times greater than that in 2016).
In H1 2017, all major WSE indices were on the rise. In the second half of the year, this trend was maintained only by large companies. WIG20 increased by 7.0%, while sWIG80 declined by 9.2%. This, however, did not prevent the WIG
ended 2017 at 63.7 thousand points, having improved by 23.2% y/y. The year 2017 was the best one for the Warsaw
In 2017, PZU’s shares remained among the most liquid companies traded on the WSE. With the market capitalization of over PLN 36.4 billion as at the end of 2017, PZU was the
MSCI Emerging markets WIG20 35,000 pts 40,000 pts 45,000 pts 50,000 pts 55,000 pts 60,000 pts 65,000 pts 70,000 pts
PZU on the capital and debt markets fourth largest Polish company listed on the Warsaw Stock
PZU’s min/max share price at session closing from May 2010 to 2017
In 2017, PZU’s stock maintained very high liquidity. The average daily spread on PZU’s shares was a mere 7 bps (the lowest on the whole market). PZU’s stock accounted for 8.0%
The largest daily turnover (of 7.7 million shares) was recorded on the falling (-4.5%) trading session of 23 March 2017.
Afterwards, in less than two weeks, the PZU stock price returned to its pre-23 March level. A further improvement in investor sentiment came as a result of the appointment of
Investors were especially fond of the new CEO’s public statements on the continuation of the Company’s strategy, including its dividend policy. Later in the year, the better performance of PZU’s shares vis-à-vis WIG20 was backed by the improving bottom line, in its insurance and investment business alike.
The largest single-session increase in the PZU stock price (+ 4.7%) was recorded on 19 May 2017, that is two days after the publication of the Company’s very good financials for Q1
PFR announced the finalization of the deal to acquire a 32.8%
PZU highs and lows 3,500 pts 3,250 pts 3,000 pts 2,750 pts 2,500 pts 2,250 pts 2,000 pts 1,750 pts 1,500 pts
Closing price on the last trading session of the year (PLN) 42.16 33.21 34.02 48.60 44.90
Capitalization at the end of the period (PLN m) 36,406 28,677 29,377 41,967 38,768
PZU’s total shareholder return, calculated as the stock price difference plus the value of the distributed dividend, was 31.2% as at yearend 2017 (in 2015 and 2016, it was -23.8%
and 3.7%, respectively). The dividend yield (calculated using the price per share of PLN 42.16 as at the end of 2017) was 3.3% (a dividend of PLN 1.40 share), which was 1.4 p.p.
higher than the average of 1.9% for the WIG20 and WIG
PZU and PFR finalize the acquisition of a 32.8% equity stake in Bank Pekao for a total amount of PLN 10.6 bn
Dismissal of Michał Krupiński from being the CEO of PZU Appointment of Paweł Surówka to be CEO of PZU
Main Securities Market of the Irish Stock Exchange and on the
EUR 500 million and EUR 350 million issued on 3 July 2014 and 16 October 2015, respectively.
EUR. The funds obtained from the bond issue were to increase the exposure in the investment portfolio to investments denominated in Euro, manage the FX position and harness debt financing that is less expensive than equity.
EPS (PLN) Equity holders’ net profit (loss) / number of shares * calculation using the PZU Group’s data (according to IFRS)
On 30 June 2017, PZU effected the largest issue of subordinated bonds (denominated in Polish zloty) in the history of the Polish financial sector, while at the same time being the first issue in Poland complying with Solvency II
requirements (download the information note here). The bonds with a nominal value of PLN 2.25 billion bear interest at WIBOR6M + 180 bps. The maturity date is 29 July 2027, or 10 years after the issue, with an option of early redemption 5 years after the issue date.
Bank regularly issues debt instruments. In 2017, the following debt issue programs were in place in Alior Bank: • Own bond issue program capped at PLN 2 billion; • Public Subordinated Bond Issue Program capped at PLN
All the subordinated bond series issued by Alior Bank under these programs are classified as Tier II capital instruments referred to in Article 63 CRR.
Management Board to repeatedly contract financial liabilities by issuing unsecured, ordinary or subordinated bonds. The total nominal value of the bonds issued under the Second
The issue program is limited to PLN 2 billion. Pekao Bank
In October 2017, Pekao placed its first issue of subordinated bonds with a value of PLN 1.25 billion in order to improve its capital ratios. The bonds have a 10-year maturity with an early redemption option five years after the date of issue. The bonds bear interest at a floating rate based on WIBOR 6M plus a margin of 1.52%.
2 It is an income-based index and thus, when it is calculated, it accounts for both the prices of underlying shares and income from dividends and pre-emptive rights.
undertakes various investor relations activities aimed at improving transparency in the company and procuring equal access to information. Therefore,
PZU has consistently applied the “Principles for PZU to Conduct its Information Policy for Capital Market Participants”.
„We are building PZU’s value through active communication with our stakeholders while utilizing modern channels of communication. We are building trust and we care about good relations. Geographical structure of PZU’s shareholders years. The share of foreign individual investors remained unchanged compared to 2016 and stood at 1.1%.
As at the end of 2017, the share of Polish institutional investors declined by 3.5 p.p., partly caused by a reduction in exposures of open-end pension funds and mutual fund companies. As at the end of 2017, their shares were 18.0%
2017 marked another year in a row with an increase in the share of foreign investors in the PZU shareholder structure
Europe institutional investors excl. Polish State Treasury * – 348.8 m shares
< 0.25 m shares * Polish State Treasury – 34.2% share in capitalchange 2017 vs 2016 change 2017 vs 2016
• numerous investor meetings at the company’s headquarters: one-on-one, group meetings and conference calls.
(+1.1 p.p.) was recorded in UK-based investors whose share as at the end of 2017 was 22.0%. Exposure of investors from the Netherlands also increased: by approx. 2.1 p.p. to 3.5%.
In 2017, PZU broadcasted all key corporate events live, namely: • PZU Group’s financial results (for 2016, Q1 2017, H1 2017 and Q1-3 2017); • Ordinary Shareholder Meeting; • two Extraordinary Shareholder Meetings; • announcement by PZU and PFR of finalization of the transaction to purchase a 32.8% stake in Bank Pekao SA.
Number of sell-side recommendations for PZU’s shares at the end of 2017 7 buy maximum target price
Average number of transactions per session share of North America based investors
In 2017, PZU engaged in active dialogue with retail investors, in particular by providing reliable and up-to-date information on the activities of PZU, the insurance industry and financial markets. In this respect, PZU implemented both communication projects (e.g. the online report, a newsletter, a factsheet) and took active steps to enable direct contact
PZU on the capital and debt markets between investors and the Company’s representatives, including, among others: • for the seventh time, it participated in the largest conference for individual investors organized in Poland by the Association of Individual Investors: the 21st WallStreet
Conference in Karpacz, which is the largest meeting of individual investors in Central and Eastern Europe; • organized four chats with individual investors hosted by a
Without interruption since 2012, PZU has also been participating in a program conducted by the Association of
whose purpose is to develop high communication standards between public companies and retail investors.
• third place for Tomasz Kulik in the ranking of the best CFOs for investor relations in Poland and Central and Eastern
Europe in the Extel 2017 survey; • third place for the Investor Relations team in the ranking of the best investor relations in Poland in the Extel 2017 survey.
Board and the community of investors; • ensure understanding and approval for PZU’s business strategy among investors and analysts; • secure a deep and broad market for PZU’s shares and bonds by continuing investor-friendly measures to build a diversified base (in terms of geography, numbers and profile) of an appropriate number of well-informed investors familiar with the company; • ensure broad coverage for PZU shares by sell-side analysts of investment banks and brokerage houses and accurate valuation of PZU shares by providing analysts with high quality information about PZU’s operations, industry trends, drivers of financial performance and feedback after analysis of their recommendations; • setting standards in investor relations that may serve as an example to be followed by other public companies; • provide the PZU Management Board with regular feedback concerning the perception of PZU among capital market players and broad knowledge of current and potential shareholders of the company; • monitor investor sentiment towards PZU shares and changes in the shareholder structure in order to adopt the most adequate investor relations measures and tools; • introduce standards of PZU Group’s non-financial reporting.
Price variance of the recommendations from the share price at the end of 2017
Analysts’ expectations towards the price of PZU shares in 2017 based on recommendations in effect at the end of
(7 buy, 3 hold and 2 sell). The median of their price targets was PLN 51.1 and was 41.8% higher than the median price at the beginning of the year. The maximum target price was PLN
In 2017, in their recommendations, analysts focused mostly on evaluating the impact that the growing share of the banking segment in PZU Group has on the company’s results and stock market valuation, better prospects in property insurance due to the improved situation on the motor insurance market, sustainability of the high-margin business model of group insurance and individually continued insurance and the impact of the investment result on PZU’s profits in connection with the situation on financial markets.
In April 2017, the price of PZU shares started to appreciate sharply to about 10% more than the average prices expected by analysts. As a result, analyst valuations also started to trend upward. In August 2017, the maximum target price reached 55.4 (21% above the market price at the time of issuing the recommendation), while the average target price increased to
PZU on the capital and debt markets 8.7 PZU Group’s capital and Dividend Policy
On 3 October 2016 PZU Supervisory Board adopted a resolution (Current Report 61/2016 of 4 October 2016) to approve the PZU Group’s Capital and Dividend Policy for 20162020 (“Policy”).
The introduction of the Policy followed from implementation, as of 1 January 2016, of Directive 2009/138/EC of the
Institutions issuing recommendations for PZU shares in 2017 (as at the end of December 2017)
expiration of the PZU Group’s Capital and Dividend Policy for 2013-2015 updated in May 2014.
In accordance with the Policy, the PZU Group endeavors to do the following: • manage capital effectively by optimizing the usage of capital from the Group’s perspective; • maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions; • ensure sufficient financial means to cover the Group’s liabilities to its clients.
The capital management policy rests on the following principles: • the PZU Group’s capital management (including excess capital) is conducted at the level of PZU as the parent company; • sustain target solvency ratios at the level of 200% for the
The PZU and PZU Group’s dividend policy rests on the following principles: • The PZU Group endeavors to manage capital effectively and maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions; • the dividend amount proposed by the parent company’s
Maintain the PZU Group’s financial leverage ratio at a level no higher than 35%
* in 2013 a dividend was paid from excess capital (PLN 2 per share)
Dividend distributions and total shareholder return (TSR) of PZU (2010 - 2017)
On 29 June 2017, PZU’s Ordinary Shareholder Meeting adopted a resolution to distribute PZU’s net profit for the financial year ended 31 December 2016, in which it resolved to distribute the amount of PLN 1,208,932,200, or PLN 1.40 per share, as dividend. The date on which the list of shareholders entitled to a distribution was 29 September 2017. The dividend was paid on 19 October 2017.
The Polish FSA’s recommendation on dividend payments from the profits generated in 2017
Consolidated profit attributable to the parent company (in PLN m) 2,910 1,935 2,343 2,968 3,293
Dividend paid for the year (in PLN m) *** 1,209 1,796 2,591 4,663
Dividend per share for the year (PLN) *** 1.40 2.08 3.00 5.40**
* dividend paid from excess capital in 2013 (PLN 2 per share) not included in dividend payment ratio ** ratio calculated as dividend as at the record date to the share price at the end of the reporting year *** up to the date of preparing this Report on the activities of the PZU Group, the Management Board has not adopted a resolution concerning the proposed distribution of profit for 2017
Dividend paid by PZU from its earnings in the 2012 - 2017 financial years
As recommended by the supervisory authority, dividends should be paid only by insurance undertakings meeting certain financial criteria. At the same time, the dividend payments should be limited to no more than 75% of the profit earned in 2017, while the coverage of the capital requirement for the quarter in which the dividend was distributed should be maintained at no less than 110%. At the same time, the
at the end of 31 December 2017 and for the quarter when the dividend is paid, is at least 175% for companies operating in section I and at least 150% for companies operating in section
Up to the date of preparing this Report on the activities of the PZU Group, the Management Board has not adopted a resolution concerning the distribution of profit for 2017.
Cumulative dividend per share Book value per share The closing price from the last session (market value)
Credit rating (long-term in local currency) A- /Stable/ 2 December 2016 A- /Negative/ 15 January 2016
Credit rating (long-term in foreign currency) BBB+ /Stable/ 2 December 2016 BBB+ /Negative/ 15 January 2016
Credit rating (short-term in foreign currency) A-2 2 December 2016 A-2 15 January 2016
Since 2004, PZU and PZU Życie have undergone regular reviews by the S&P Global Ratings (S&P) rating agency. The rating assigned to PZU and PZU Życie results from an analysis of the financial information, competitive position, management and corporate strategy as well as country financial situation.
It also includes a rating perspective (an outlook), namely, an assessment of the future position of the company in the event specific circumstances occur. As of 25 March 2014, PZU’s rating is one notch above Poland’s rating for foreign currencydenominated debt.
(negative). The rating was affirmed in connection with PZU’s announcement of a PLN 2.25 billion subordinated debt issue on 30 June 2017.
On 28 March 2017, S&P Global Ratings affirmed the financial strength and credit strength ratings for PZU and its main subsidiaries at “A-”. The outlook remained unchanged
Company name Rating and outlook Updated on Rating and outlook Updated on
On 20 June 2014, Standard & Poor’s awarded a rating of A- for unsecured debt for Eurobonds issued by PZU Finance AB. In
October 2015, PZU issued bonds in the amount of EUR 350 million. These bonds have been assimilated and now form a single series with the “tap” bonds with the nominal value of
Service. In the case of the first two agencies, the ratings are prepared upon the Bank’s commission based on contracts.
Global Ratings, the highest Baseline Credit Assessment rating and short- and long-term counterparty credit risk ratings awarded by Moody’s Investors Service (“Moody’s agency”)
Since the day when its shares were admitted to trading on a regulated market, PZU has followed the corporate governance rules laid down in the Best Practices of WSE listed companies.
The Corporate Governance Rules constitute a set of guidelines that should be applied by regulated entities from 1 January 2015 under the applicable laws giving consideration to the rule of proportionality.
Presently, PZU shareholders may follow the broadcast of the shareholder meeting. However, the Company has not elected to introduce an electronic shareholder meeting. According to PZU, there are many technical and legal factors that may affect the proper course of the shareholder meeting. The legal doubts pertain to the ability to identify shareholders and check the legitimacy of participants in the shareholder meeting. The risk of the occurrence of technical difficulties, e.g. with the internet connection or possible external interference in the
IT systems may disrupt the work of the shareholder meeting and evince doubts concerning the efficacy of the resolutions adopted during its course. The appearance of these risks may affect the proper application of this rule to a full extent.
Information on the status of PZU’s application of the recommendations and rules laid down in the Best Practices of WSE Listed Companies 2016 is available on PZU’s website: gieldowe 9.3 Application of Corporate Governance Rules for Regulated Institutions
Financial Supervision Authority on 22 July 2014, except for certain specific rules waived by the PZU Ordinary Shareholder
Corporate Governance Rules concerning the enabling of all shareholders to participate in the Shareholder Meeting, including by procuring the possibility of actively participating electronically in the Shareholder Meeting, it should be noted that, presently, PZU shareholders may follow the broadcast of the Shareholder Meeting, however the Issuer decided not to introduce the so-called e-Shareholder Meeting, because, in PZU’s opinion, there are a number of factors of a technological and legal nature which may affect the proper conduct of the Shareholder Meeting. Legal concerns include the possibility of identifying the shareholders and verifying their legitimacy; the risk of the occurrence of technical difficulties, e.g. with the Internet connection or possible external interference in the IT systems, may disrupt the work of the Shareholder Meeting and evince doubts concerning the efficacy of the resolutions adopted during its course; the materialization of the above risks may affect the proper application of this rule to its full extent; • in respect of the rule laid down in § 21 section 2 of the
Corporate Governance Rules according to which within the supervising body there should be a separate function of the chairperson in charge of managing the work of the supervising body, and the selection of the chairperson of the supervising body should be accomplished on the basis of experience and team management skills while giving consideration to the criterion of independence, it should be emphasized that, in accordance with the Commercial
PZU applies the rules laid down in § 14 of the Rules to their full extent, which means that the PZU Management Board is the sole body empowered to, and responsible for, managing the Company’s activity; moreover, according to the labor law regulations, the managing body exercises labor law activities; on account of the foregoing, PZU has adopted a solution that anticipates that the selection and dismissal of the person managing the internal audit cell is accomplished while taking into account the opinion of the Supervisory
– 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.
– 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; • the rule laid down in § 52 section 2 reading as follows: “In a regulated institution in which there is no audit or compliance cell or no cell responsible for this area has been designated, the information referred to in section 1 shall be conveyed by the persons responsible for performing these functions.”
– audit and compliance cells operate in PZU; • the rules laid down in Chapter 9 entitled “Exercising rights from assets acquired at a client’s risk”, because PZU does not offer products entailing asset management at a client’s risk.
Activities within the consolidated financial reporting processes are coordinated through the organizational structure of the
Finance Division in the PZU and PZU Życie Head Offices which is shared, i.e. organized based on a personal union.
Consolidated financial reporting is governed by a number of internal regulations concerning the accounting principles
(policy) adopted by the PZU Group and applied accounting standards as well as detailed schedules including the key activities and control points with assigned liability for timely and correct completion.
The Audit Committee is an advisory and consultative body to the Supervisory Board of PZU and is appointed to improve the effectiveness of supervision of the correct financial reporting at
PZU and the effectiveness of internal control, including internal audit and risk management, exercised by the PZU Supervisory
A statutory auditor appointed by the PZU Supervisory Board, based on a recommendation of the Audit Committee, reviews interim standalone and consolidated financial statements, audits annual standalone and consolidated financial statements and audits annual solvency and financial standing reports required by the Solvency II Directive (for PZU and the PZU
Audyt has covered, without limitation, audits of solvency and financial standing reports required by the Solvency II
adopted a resolution to split all PZU shares by decreasing the par value of each PZU share from PLN 1 to PLN 0.10 and increasing the number of PZU shares making up the share capital from 86,352,300 to 863,523,000 shares. The split was effected by exchanging all the shares at a ratio of 1:10. The share split did not affect the amount of PZU’s share capital.
On 3 November 2015 the District Court for the capital city of
PLN 1 each into 863,482,890 PZU shares with a par value of
Fee charged by the entity authorized to audit PZU financial statements (PLN thousands)
compulsory audit of the annual financial statements / consolidated financial statements 4,950 1,365 other certifying services, including a review of the financial statements / consolidated financial statements 1,793 1,350 tax advisory services - other services - 27
On 29 May 2017, PZU was notified of a change in the holding of PZU’s shares by Aviva Otwarty Fundusz Emerytalny Aviva
BZ WBK (“Aviva OFE”), informing the Company that as a result of PZU share purchase transactions executed on 24 May 2017, as at 26 May 2017, Aviva OFE decreased its stake in PZU to 4.89% of PZU’s share capital, which represents 4.89% of the total number of votes at the PZU Shareholder Meeting.
The PZU Management Board does not have any information about executed agreements as a result of which changes may transpire in the percentages of shares held by its shareholders to date.
In 2013-2017, PZU did not have any employee share programs in place.
voting rights have been limited in such a manner that no shareholder may exercise more than 10% of the total number of votes in existence in PZU at its Shareholder
Meeting on the date of holding a Shareholder Meeting subject to the reservation that for the purposes of determining the obligations of the buyers of significant equity stakes contemplated by the Act on Public Offerings and the Insurance
Activity Act, such limitation of voting rights shall be deemed not to exist. The limitation of voting rights does not pertain to the following: • shareholders who on the date of adopting the Shareholder
Source: current report no. 42/2017 relationship are totaled in accordance with the rules described in the Articles of Association.
In the event of doubt, the provisions regarding the restriction of voting rights are subject to interpretation according to
In line with PZU’s Articles of Association, the said voting restrictions will expire starting from the moment when a share of a shareholder who, at the date of adopting a resolution of the Shareholder Meeting introducing the restriction, held shares carrying the right to more 10% of the total number of votes in the Company drops below 5% of the share capital.
Shares or rights to shares held by members of management or supervisory bodies and Directors of the PZU Group
Neither as at the date of this Activity Report nor as at the date of the Activity Report for 2016 (i.e. 15 March 2017) did any of the members of the Management Board or the Supervisory
Board or the Directors of the PZU Group hold any PZU shares, and shares in entities related to PZU, entitlements to these shares or shares or rights to PZU shares.
Shareholder Meeting provided that a resolution is adopted by a majority of three fourths of the votes, KNF’s approval is issued in the cases referred to in the Insurance Activity Act
The Shareholder Meeting is a body authorized to make decisions concerning issues related to the organization and operations of the Issuer. Resolutions of the Shareholder
Board, subject to the right granted to the State Treasury to appoint and dismiss one member of the Supervisory Board; • establishing the rules for remunerating members of the
(thirty million euros), subject to § 18a of the Articles of
Accounting Act of 29 September 1994 (Journal of Laws of 2016, items 1047 and 2255) classified as intangible assets, property, plant and equipment or long-term 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, whereas the handing over of assets for use in the case of the following: ◦ lease, rental and other agreements to hand over an asset for use to other entities against payment, the market value of the subject matter of a legal act is defined as the value of benefits for: - one year – if the asset was handed over under agreements signed for an indefinite term, - the entire term of the agreement – in the case of agreements signed for a definite term,
• purchase of non-current assets within the meaning of the Accounting Act of 29 September 1994, with the value exceeding: ◦ PLN 100 million or
• subscription or acquisition of shares in another company, with the value exceeding: ◦ PLN 100 million or
Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements,
Shareholder Meeting resolutions concerning the following issues require a three-fourths majority of votes: • amendments to the Articles of Association; • decrease in the share capital; • selling or leasing a business or an organized part thereof or establishing a limited right in rem thereon.
Corporate governance who were shareholders of the issuer sixteen days prior to the date of the Shareholder Meeting have the right to participate in the Meeting (date of registration of attendance at the
Board is composed of seven to eleven members. The number of Supervisory Board members is specified by the Shareholder
As at 1 January 2017, the following persons sat on the PZU
On 8 February 2017, Eligiusz Krześniak tendered his resignation from membership in the Supervisory Board effective as of 8 February 2017. On 8 February 2017, the PZU
Supervisory Board effective as of 8 February 2017. At the same time, on 8 February 2017, the Extraordinary Shareholder
PZU Supervisory Board was as follows: • Paweł Kaczmarek – Supervisory Board Chairman
On 12 April 2017, effective as of 12 April 2017, the Minister of
Development and Finance, acting pursuant to § 20 Section 7 of the PZU Articles of Association, dismissed Jerzy
Paweł Kaczmarek from the Company’s Supervisory Board and appointed Robert Śnitko and Katarzyna Lewandowska to the
On 13 April 2017, the PZU Supervisory Board entrusted the function of being the PZU Supervisory Board Chairman to
Supervisory Board was as follows: • Katarzyna Lewandowska – Supervisory Board Chairwoman
Board will expire not later than on the date of the Shareholder
Katarzyna Lewandowska Supervisory Board Chairwoman since 13 April 2017 (in the Supervisory Board since 12 April 2017)
Aneta Fałek Supervisory Board Deputy Chairwoman since 13 April 2017 (in the Supervisory Board since 12 April 2017)
On 9 January 2018, the PZU Supervisory Board entrusted the function of Chairman of the PZU Supervisory Board to Maciej
Maciej Łopiński Supervisory Board Chairman since 9 January 2018 (in the Supervisory Board since 8 January 2018)
Paweł Górecki Supervisory Board Deputy Chairman since 9 January 2018 (in the Supervisory Board since 8 February 2017)
He has been an active participant of conferences organized by Polish academic centers. He specializes in the providing legal services to companies and applying administrative, fiscal and court-and-administrative procedures.
Regional and Local Studies and the Faculty of Journalism and Political Sciences of the
Management Board of Urbino sp. z o.o., a licensed coach and consultant specializing in strategic and organizational planning and project management.He has been working for the University of Warsaw, the Collegium
Champaign in the United States and completed studies in banking, finance and capital markets at the University of
Supervisory Board made on 8 January 2018 and 9 March 2018, the changes in the composition of the presidium of the PZU Supervisory Board made on 9 January 2018 and the expiration of the mandate of Bogusław Banaszak, the composition of the Supervisory Board is as follows:
Science at the University of Warsaw and. She has obtained a postgraduate diploma in media management from the
Warsaw. From 2006 to 2012 she was professionally associated with Telewizja
S.A. Foundation, in 20132014 she was an Assistant to the President of the
University of Warsaw. In 2001 he obtained the academic degree of doctor of legal sciences in the law, and in 2009 he obtained the academic degree of a habilitated doctor. He is the author of more than 80 academic publications. Winner of awards and distinctions, including, among others, an Award from the
Completed post-graduate studies in intellectual property law and postgraduate studies in evidence law. Graduate of the Center for American Law
Adwokaci i Radcowie Prawni sp.p. He has acquired experience in corporate governance as a member of the supervisory boards in various companies.
The Supervisory Board continuously oversees the Company’s business in all areas of its operation. In accordance with the
Articles of Association, the powers of the Supervisory Board include: • evaluating the Management Board’s report on the
Company’s activity and the financial statements for the previous financial year for compliance with the accounting ledgers and documents as well as the facts,
• evaluating the Management Board’s motions to distribute profit or cover loss,
• submitting a written report to the Shareholder Meeting on the results of the evaluation referred to in the foregoing items and submitting a concise annual evaluation of the
Company’s standing with an assessment of its internal control system and the system for managing significant risks to the Company, and an annual report on the
Management Board members and setting the rules for their compensation; • appointing, suspending and dismissing the President of the Management Board, Management Board members or the entire Management Board and making decisions to discontinue such suspension; • granting consent to transferring an insurance portfolio in whole or in part; • accepting motions submitted by the Management Board to purchase, subscribe to or sell ownership interest and shares in companies and on the Company’s participation in other entities – the Supervisory Board may define the maximum amount, the terms and conditions and the procedure that the Management Board may use to conduct the foregoing activities without the obligation to obtain approval from the
• accepting instructions for the Company’s representatives to vote at Shareholder Meetings of PZU Życie SA in the following matters: increasing or decreasing the share capital, issuing bonds, selling or leasing PZU Życie SA’s enterprise or establishing a usufruct right on the enterprise, splitting PZU Życie SA, merging PZU Życie SA with another company, liquidating or dissolving PZU Życie SA; • selecting an entity authorized to audit financial statements to audit the Company’s annual financial statements; • establishing the consolidated text of the amended Articles of Association; • approving the Company’s long-term development plans and annual financial plans devised by the Management Board; • approving of the rules and regulations of the Management
Code; • paying out an interim dividend; • creating and shutting down regional or foreign branches; • executing an agreement to provide legal, marketing, public relations and public communication services or management consulting services if the total net fee to be paid for such services is greater than PLN 500 thousand annually; • amending an agreement to provide legal, marketing, public relations and public communication services or management consulting services by increasing the said fee above and beyond the net amount of PLN 500 thousand annually; • executing an agreement to provide legal, marketing, public relations and public communication services and management consulting services which do not specify the maximum amount of the fee; • executing a donation or other agreement having a similar effect, the value of which exceeds PLN 20 thousand or 0.1% 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; • executing a debt forgiveness or other agreement having a similar effect, the value of which exceeds PLN 50 thousand or 0.1% 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.
The Supervisory Board adopts the Rules and Regulations of the Supervisory Board which define its organization and manner of acting. The Rules and Regulations of the
Board and the way in which its members are appointed, the tasks and the scope of its activities and the manner of convening its meetings and conducting debates.
The Articles of Association stipulate that the Supervisory Board should meet at least once every quarter. The Supervisory
The Supervisory Board adopts its resolutions by an absolute majority of votes. In the event of a voting tie, the Chairman of the Supervisory Board has the casting vote. Resolutions of the Supervisory Board may be adopted using means of direct remote communication and circular vote. Additionally, the Articles of Association stipulate that a vote may be cast in writing through another member of the Supervisory Board.
Resolutions of the Supervisory Board are adopted in an open ballot, except for resolutions concerning the appointment of the Chairperson, Deputy Chairperson or the Secretary of the
Board and other persons invited by the Supervisory Board may take part in Supervisory Board meetings without voting rights. In specific cases, the Supervisory Board may also invite members of the management board or supervisory board of other PZU Group member companies. Moreover, members of the Supervisory Board, with the consent of the
Supervision, at least one member of the audit committee appointed by the Supervisory Board should hold qualifications in accounting or financial audit. Furthermore, the majority of the audit committee members 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.
In accordance with the rules and regulations of the audit committee adopted by a resolution of the Supervisory Board, the audit committee is an advisory and consultative body to the Supervisory Board and is appointed to improve the effective supervision of the correctness of financial reporting and the effectiveness of internal control, including internal audit and risk management, exercised by the Supervisory
The Supervisory Board appointed the Audit Committee on 3 June 2008. Composition of the audit committee as at 1
January 2017: • Piotr Paszko – Committee Chairman; • Marcin Chludziński – Committee Member; • Jerzy Paluchniak – Committee Member.
Supervisory Board as a member of the audit committee satisfying the requirements provided for in Article 86 Section 4 of the Act on Statutory Auditors and their Self Regulation,
On 18 September 2017, the PZU Supervisory Board changed the composition of the audit committee to the following: • Bogusław Banaszak – Committee Chairman; • Marcin Chludziński – Committee Member; • Maciej Zaborowski – Committee Member.
Section 3 of the Act on Statutory Auditors, Audit Firms and
Public Supervision, and Marcin Chludziński was indicated as a member holding accounting or financial audit qualifications.
Board’s oversight activities related to establishing the management structure, including organizational issues, the remuneration system and principles and the selection of properly qualified staff.
Composition of the nomination and compensation committee as at 1 January 2017: • Radosław Potrzeszcz – Committee Chairman; • Marcin Gargas – Committee Member; • Paweł Kaczmarek – Committee Member; • Eligiusz Krześniak – Committee Member.
Board, on 23 February 2017 the PZU Supervisory Board resolved that the nomination and compensation committee will be composed of 3 persons and established the following composition of the committee: • Agata Górnicka – Committee Chairwoman; • Paweł Górecki – Committee Member; • Paweł Kaczmarek – Committee Member.
In connection with the changes in the PZU Supervisory Board, on 13 April 2017 the PZU Supervisory Board resolved that the nomination and compensation committee will be composed of 3 persons and established the following composition of the committee: • Aneta Fałek – Committee Chairwoman; • Paweł Górecki – Committee Member; • Katarzyna Lewandowska – Committee Member.
Board, on 9 January 2018 the PZU Supervisory Board resolved that the nomination and compensation committee will be composed of 3 persons and established the following composition of the committee: • Paweł Górecki – Committee Chairman; • Agata Górnicka – Committee Member; • Katarzyna Lewandowska – Committee Member.
According to the rules and regulations of the strategy committee adopted by a resolution of the Supervisory
Composition of the strategy committee as at 1 January 2017: • Alojzy Nowak – Committee Chairman; • Marcin Chludziński – Committee Member; • Marcin Gargas – Committee Member; • Piotr Paszko – Committee Member; • Radosław Potrzeszcz – Committee Member; • Maciej Zaborowski – Committee Member.
In connection with the changes in the PZU Supervisory Board, on 23 February 2017 the PZU Supervisory Board resolved that the strategy committee will be composed of 6 persons and established the following composition of the committee: • Alojzy Nowak – Committee Chairman; • Bogusław Banaszak – Committee Member; • Marcin Chludziński – Committee Member; • Agata Górnicka – Committee Member; • Łukasz Świerżewski – Committee Member; • Maciej Zaborowski – Committee Member.
Śnitko as a Committee Member. Following this change, the composition of the strategy committee was as follows: • Alojzy Nowak – Committee Chairman; • Bogusław Banaszak – Committee Member; • Marcin Chludziński – Committee Member; • Agata Górnicka – Committee Member; • Robert Śnitko – Committee Member; • Maciej Zaborowski – Committee Member.
On 9 January 2018, due to his demise, the mandate of
On 13 March 2018 Robert Jastrzębski joined to the strategy committee.
• 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,
A Management Board Member may not be a person who fulfills at least one of the following conditions: • acts as a social associate or is an employee of an MP’s office, senator’s office, MP-senator’s office or office of a member of European Parliament pursuant to an employment agreement or provides work on the basis of a mandate agreement or other similar agreement,
• is a member of a body of a political party that represents the political party externally and is authorized to incur liabilities,
Supervisory Board dismissed Michał Krupiński from the position of President of the PZU Management Board and from membership in the Management Board. On 23 March 2017, effective as of 23 March 2017, the Supervisory Board seconded PZU Supervisory Board Member Marcin Chludziński to temporarily act as the President of the Management Board until the President of the Management Board is appointed, for a period of up to 3 months.
On 12 June 2017, effective as of 13 June 2017, the
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.
Resolution of the Management Board of 8 April 2013 and approved by Resolution of the Supervisory Board of 16 April 2013.
Management Board members; • principles and organization of the Management Board’s activities, including its meetings and decision-making procedures; • rights and obligations of Management Board members upon dismissal.
Company’s activities; • approval of a motion to distribute profit or cover loss; • determination of premiums in compulsory and voluntary insurance and the general terms and conditions of voluntary insurance; • determination of the scope and size of outward reinsurance and the tasks for inward reinsurance; • adoption of an annual audit and control plan and a report on its implementation with conclusions; • determination of the terms and conditions of investment, prevention and sponsoring activities; • granting sureties and guarantees (excluding insurance operations) and contracting or providing credit facilities or loans by the Company (excluding credit facilities and loans granted from the Company Social Benefits Fund); • appointment of a commercial proxy.
Shareholder Meeting a report on representation expenditures and expenditures for legal, marketing, public relations and public communication services and management consulting services.
PZU Management Board Member since 14 October 2016 / PZU Życie Management Board Member since 19 October 2016 finance, investments, actuarial affairs
Tomasz Karusewicz PZU Życie Management Board Member / PZU Group Director since 29 January 2016
Bartłomiej Litwińczuk PZU Życie Management Board Member / PZU Group Director since 19 August 2016 security, legal services, HR management
Management Board members in office as at the end of 2017:
(LMU) in Munich. From 2007 to 2013, he held the position of financial advisor with Bank of America Merrill Lynch. From 2013 to 2015 he served as a
Management Board Member in Boryszew SA, Director of the Automotive Sector
January 2016, he was an advisor to the CEO of PKO
GE Capital where he held various managerial positions in finance and operations.
From 2007 to 2008 he was the CEO of AAS Balta – the largest insurer in Latvia.
SA Management Board. Since 2015, he has been working for TFI BGK S.A., where he has been discharging the function Management Board
Accountants (ACCA). Through most of his professional career, he was associated with the Aviva Group (former
In 2007, she was the Secretary of the State on labor and social policy at the Prime Minister’s
Office. In 2015-2017, she served as Head of the Chancellery of the President of the Republic of
HDI (currently Warta S.A.), she managed the product marketing team, developing and executing sales support campaigns. Then she headed the Marketing Intelligence team at Sony Europe. At
Intelligence team in 17 countries of the region. As an external consultant, she advised among others Aviva on the implementation of distribution channel projects.
Graduated from the Faculty of Law and Administration at the University of
Practiced as an advocate specializing in civil law. He combines the knowledge of business with extensive experience resulting from his provision of legal assistance services in cases related to commercial company law, copyright law, administrative law and criminal law. He also served as an advisor to the
February 2017 in the matter of determining the compensation of the Management Board members amended by resolution 38 adopted by PZU’s Ordinary Shareholder Meeting of 29 June 2017 in connection with the Act of 9 June 2016 on the Rules for Shaping the Compensation of Persons Managing Some
The foregoing rules adopted by a Supervisory Board resolution 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 consists of the following: • fixed compensation - flat monthly base compensation (for a calendar month) that cannot exceed the reference range established pursuant to art. 4 section 2 of the Act on the
Moreover, Management Services Provision Agreements entered into with Management Board members and accepted by a Supervisory Board resolution regulate their term of notice and issues related to refraining from engaging in competitive activity to the Company’s after their termination in consideration for damages to be paid as determined on the basis of the aforementioned act. In 2016-2017, 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.
A joint management model is in place at PZU and PZU Życie
SA. Under this model, the positions of Directors of the PZU
Group 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 this model, the persons discharging the functions of Management Board members at PZU Życie SA
As at 1 January 2017, the following persons served as directors of the PZU Group: • Aleksandra Agatowska; • Tomasz Karusewicz; • Bartłomiej Litwińczuk; • Sławomir Niemierka; • Roman Pałac; • Paweł Surówka.
University. Certified internal auditor. In 2006-2008, he worked for the Ciech Group.
Control Department. He also served as a member of the supervisory boards of Enea
Including bonuses and special awards: Including bonuses and special awards: High-level managers (PZU Group Directors), including: 5,138 1,381 4,503 199
Salaries and other short-term employee benefits paid by other PZU Group entities (in thousands)
Bartłomiej Litwińczuk 455 66 147 1 ) remuneration for fulfilling the function of a Member of the SB of Alior Bank in the period of January 1, 2017 - June 14, 2017 2) including remuneration resulting from competition prohibition clause of PLN 149 thousand (PZU Życie) 3) including remuneration resulting from competition prohibition clause of PLN 119 thousand (PZU Życie) 4) including remuneration resulting from competition prohibition clause of PLN 138 thousand (PZU Życie) 5) including remuneration resulting from competition prohibition clause of PLN 179 thousand (PZU Życie) 6) including remuneration resulting from competition prohibition clause of PLN 30 thousand (PZU Życie) 7) including remuneration resulting from competition prohibition clause of PLN 150 thousand (LINK4) 8) including remuneration resulting from competition prohibition clause of PLN 168 thousand (PZU Życie) 9) including remuneration resulting from competition prohibition clause of PLN 200 thousand (PZU Życie) 10) including remuneration resulting from competition prohibition clause of PLN 168 thousand (PZU Życie)
Total estimated value of non-cash benefits granted by PZU and PZU’s subsidiaries (in thousands) 1 January – 31 December 2017 1 January – 31 December 2016
Respecting individuality, promulgating equal treatment and combating discrimination at work are accomplished in practice by supporting procedures and initiatives: • countering mobbing – support is given by the Antimobbing Procedure contemplating 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 convey information pertaining to the breach of a rule through the intranet platform.
PZU Group’s consolidated financial statements, PZU’s financial statements and comparative data have been prepared in line with the prevailing accounting principles, and honestly, accurately and clearly reflect the PZU Group’s and the Issuer’s assets and financial position as well as their financial result, and that the Management Board’s report on the PZU Group’s and PZU’s activity shows a true picture of the PZU Group’s and the Issuer’s development, results and position, including a description of the major threats and risks.
Sp. z o.o. sp. k. – auditing the consolidated financial statements and PZU’s financial statements, has been selected in compliance with the law and that this entity as well as the statutory auditors performing the audit of these statements have fulfilled the conditions for expressing an impartial and independent opinion on the audited consolidated financial statements and PZU’s financial statements in accordance with the laws and professional standards in force.
300 million in securities under the subordinated bond issue referred to below.
European Investment Fund under the European Employment and Social Innovation Program CHAPTER 3.4 BANKING
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.
Pekao S.A. for a total amount of PLN 10.6 billion. CHAPTER
On 8 November 2017, PZU executed a mandate contract with Alior Bank on periodic granting of insurance guarantees constituting unfunded credit protection and a framework mandate agreement on the periodic granting of counterguarantees (Current Report No. 64/2017). The maximum exposure limit for guarantees is PLN 5 billion (say: five billion
On 25 September 2014, a Tax Group agreement was signed between PZU Group companies: PZU, PZU Życie, Link4
Office on a monthly basis. PZU makes advance payments to the Tax Office for the CIT tax due from PZU’s overall Tax
Group, while the member companies transfer the amount they owe in advance payments to PZU’s specified bank account.
The tax group agreement for fiscal years 2018-2020 was signed on 20 September 2017. According to the agreement, the tax group will be formed by PZU, PZU Życie, Link4, PZU
According to the agreement, the new tax group will not include TFI PZU and Ardea Alba SA in liquidation, which previously comprised the Tax Group established for the period