External environment 23 2.1 Main trends in the Polish economy 24 2.2 Financial markets situation 25 2.3 Insurance sector in Poland and in the Baltic states compared with Europe 28 2.4 Regulations on the insurance and financial markets in Poland 29 2.5 External environment in the Baltic states and Ukraine 31 2.6 Macroeconomic factors which can affect the operations of the Polish insurance sector and PZU
Activity of PZU Group 35 3.1 Structure of PZU Capital Group 36 3.2 Non-life insurance market (PZU, LINK4 and TUW PZUW) 37 3.3 Life insurance market (PZU Życie) 43 3.4 Banking activity (Alior Bank, Bank Pekao) 47 3.5 Investment fund market (TFI PZU) 50 3.6 Foreign activity 53 3.7 Medical services (PZU Zdrowie ) 55 3.8 Pension funds market (PTE PZU) 55 3.9 Other areas of activity 56
Organization, infrastructure and human resources 77 5.1 PZU Group’s business model 78 5.2 Business model – insurance 78 5.3 Business model – banking 85 5.4 Human resources management 86 5.5 Management of PZU Group’s brands 88
Consolidated financial results 91 6.1 Key factors affecting the achieved financial results 92 6.3 Claims and technical provisions 97 6.4 Acquisition costs and administrative expenses 98 6.5 Structure of assets and liabilities 98 6.6 Share of industry segments in the result 100
Table of Contents 7.7 Reinsurance activity 122 7.8 Capital management 123
PZU on capital and debt market 127 8.1 Share and bond market 128 8.2 PZU share prices 129 8.3 PZU and Alior Bank debt financing 133 8.4 Banking sector on WSE 134 8.5 PZU investor relations 135 8.6 Analysts’ recommendations for PZU shares 140 8.7 PZU Group’s capital and dividend policy 142
Corporate social responsibility 151 9.1 We address the needs 153 9.2 We hold our people in high esteem 154 9.3 We support the community 157 9.4 We care about the environment 161 9.5 Selected initiatives of social responsibility of business in other companies of PZU Group 161
Corporate governance 167 10.1 Corporate governance principles applied by PZU 168 10.2 Application of Good Practices of Companies Quoted on WSE 168 10.3 Application of Corporate Governance Principles to Supervised institutions 169 10.4 Control system applied during preparation of the financial statements 170 10.5 Entity authorized to audit financial statements 171 10.6 Share capital and shareholders of PZU, stock held by members of its authorities 172 10.7 By-laws of PZU 173
10.8 General Shareholders’ Meeting, Supervisory Board and Management Board 173 10.9 Remuneration of the members of the Group’s bodies 197
At the beginning of the year, the PZU Management Board, under my leadership, reviewed the operations of the entire Group. We identified potential risks and established new operating directions. We set ambitious goals based on both the development of core insurance activity, and complementary ventures such as investments in the banking sector, asset management, and health care, which will provide the generation of high growth dynamics and exceptional profits.
In implementing the strategic direction for the development of the PZU Group, our main plans include the growth of the
By 2020, we want to be perceived as a stable, strong, highly profitable, and innovative financial center providing insurance, health, asset management, and banking products.
a foundation of rational and responsible financial, human, social, environmental, and intellectual capital management.
I am convinced that the existence of such a strong financial institution with its registered office in Warsaw will significantly impact the financial stability and prospects for the responsible development of the Polish economy.
Besides our acquisitions in the banking sector (other than the purchase of shares in Bank Pekao, we also provided financial support to Alior Bank for the acquisition of separated business of Bank BPH), we did everything in our power to return our core insurance business to the proper development path.
I expect that we will continue to improve the profitability of our activity in 2017, including that of the motor insurance segment. We will be able to do this thanks to i.a. a consistent cost discipline, which saved the Group almost PLN 80 million in 2016 alone. We will also support processes by implementing innovative solutions. Last year alone, we implemented claim self-service, which allows the client to monitor the whole process via mobile channels.
At this point, I would like to thank our employees and agents for their efforts in building PZU value. I would also like to thank the Supervisory Board for the trust and cooperation during Group Strategy realization.
scale and profitability of activities, and the implementation of innovative solutions based on a digital operating model. There will be considerable support for new technologies provided by the Witelo fund, which was established in the second half of 2016 to support the development of an ecosystem that allows for the growth of Polish entrepreneurship and investments in Polish start-ups that will, with time, raise the potential of innovative solutions applicable directly to the PZU Group.
The ambitions presented in Strategy 2020 include numerous options that are associated with the Government’s Capital
The year 2016 saw many changes in the PZU Group, which are making it a bigger and stronger entity, with a growing prominence in the Polish economy. The past 12 months were also important from the perspective of the Group’s focus on long-term development and the building the value for shareholders.
The PZU Group’s Strategy 2020 was presented in August 2016, while the Capital and Dividend Policy was presented in
October. According to the chosen plan, PZU will continue to provide an attractive stream of dividends at no less than 50%
A fundamental event for PZU in 2016 was the signing of the agreement with UniCredit S.p. A. to purchase 32.8% of Bank
Pekao S.A. shares for a total amount of PLN 10.6 billion, in consortium with PFR. The finalization of this transaction will open a path for PZU Group to a more extensive use of bank synergies, to be able to ensure more efficient use of surplus capital, and will make PZU the biggest asset manager in
On the one hand, after the tremendous losses recorded in past years by the insurance industry in this market segment, the motor insurance pricing trend reversed in 2016. On the other, there were numerous factors contributing to a decrease in the loss ratio; including more payments in TPL insurance claims from before 2008, PFSA’s introduction of pro-client guidelines concerning claims handling, more claims concerning replacement cars and car repair costs, judgments by the
Supreme Court associated with i.a. the introduction of VAT in estimated cost settlements and treatment cost reimbursement, as well as a growing activity of insurance claim agencies.
Despite these problems, the effective use of a competitive advantages allowed the PZU Group to improve its position and record a growth of over 20% in non-life insurance premium to
From the beginning of 2017, we have witnessed improvements in the economic situation: rising GDP, dropping unemployment, rising household consumption, and a clear capital markets recovery. This situation will benefit the realization of the chosen strategic objectives. I am certain that PZU will continue to generate high added value for its shareholders, clients, and employees with its strong foundations and high safety ratios.
For over 200 years, the core of PZU Group is insurance activity, which aims to ensure a sense of peace and security for our clients through the offered comprehensive insurance protection in all crucial areas of private, public, and economic life.
PZU brand goes back to 1803 when the first Polish insurance company was established.
As it searches for new directions of development and responds to the needs of its clients, PZU Group is expanding in the field of investments and health. Furthermore, PZU Group’s strategy for the years 2016–2020, which was released on 24 August 2016, was followed by attempts to raise investments in the banking sector. In 2015, PZU Group initiated the process by purchasing 25.19% of shares in the share capital of Alior Bank
While monitoring potential objectives fitting PZU Group’s strategy of building a large-scale and profitable bank group,
Fund – 32.8%). When the transaction is finalized, PZU will become the largest financial group in Central and Eastern
We are here to provide our clients with peace of mind and safety. Our clients can always rely on us.
Pilar III of the pension system (employment pension products - EPP, individual pension accounts – IKE, and individual pension security accounts –
Our offer is clear and satisfies real expectations of our clients; we follow transparent rules in operating the organization
We offer friendly customer service and competitive prices to our clients; we control the costs, ensure that processes are smooth
We continually adapt to the changing needs of the clients; we proactively search for ways to improve our business.
The changes in the motor insurance market (especially growth of insurance prices) and dynamic developement of TUW PZUW allowed for the increase of gross written premium at the end of 2016 to: PLN 11 billion (+20.4% y/y) PLN 9.1 billion in 2015; PLN 8.4 billion in 2014
* data on an annual basis regardless of the moment of the purchase; revenues of the branches – presented in the same way like in the case of other branches, ie., including revenues from PZU Zdrowie
Maintaining second place on the market in terms of assets under management
TFI’s flexible offer allowed for maintenance of leadership on the market of Employee Pension Programs (EPPs). At the end of December 2016, TFI PZU was handling the total of 122 programs for 123.5 thousand people with total net assets almost: PLN 4 billion (+17.2% y/y) PLN 3 billion in 2015; PLN 3 billion in 2014
At the end of December of 2016, TFI PZU was managing net assets of PLN 22 billion, including PLN 7 billion in assets obtained from external clients, up by 2.8% year-on-year.
Bank assets in PZU GroupIn 2016, PZU increased involvement in the banking sector through Alior Bank’s acquisition of an independent part of Bank BPH. Alior Bank’s contribution to the operating result of the Group in 2016 amounted to: PLN 691 million Furthermore, on 8 December 2016, PZU concluded an agreement with UniCredit to purchase 20% of Bank Pekao S.A. shares (together with the PFR Polish Development Fund – 32.8%).
Rate of return of PZU shares in 2016 Solvency II* ROE*
* shortcuts explained in Glassary of terms *estimated value of bank assets in PZU Group after the finalization of the agreement for purchase of Pekao shares from UniCredit (data at the end of 2016) * after Q3 2016 * non audited data * parent comapany ROE
As a mature and reliable organization, PZU Group makes all efforts to ensure that its operations are performed in line with rational and responsible management of capital : financial, human, social, environmental, and intellectual. The
In accordance with the adopted guidelines, the strategic objectives specified in PZU Group Strategy 2020 will be realized in a client-centric environment. That philosophy continues to be implemented at every stage of the process of creating services and products. The implementations will be accelerated by the development of a digital operating model, which will make it easier to build customer relations and manage customer experience. CHAPTER 4.4 MAIN STRATEGIC
OBJECTIVES. It is also planned to implement innovative self-service and sale processes, as well as CRM (Customer
Relations Management) tools in order to ensure that the ambitious plans defined in Strategy 2020 translate into solid results and PZU Group becomes that most innovative company in Central and Eastern Europe.
PLN 14.6 mln women serving in Board Management and Supervisory Boards (including PZU subsidiaries)
Net profit attributed to the parent company 1,947 2,343 2,968 3,293 3,255 * restated data for the period 2012-2015.
Characteristic feature of the PZU Group’s business is its utmost security. This is evidenced by both high capital adequacy ratios and the A- rating assigned by S&P Global Ratings. The above rating is one notch above foreign currency sovereign rating on
“The affirmation and removal from CreditWatch reflect our view of the group’s revised business strategy announced in
August 2016 after a change in the management board, as well as our view of the group’s future banking strategy in Poland.
On 22 December 2016, after the announcement of the contract for purchase of Bank Pekao shares, the S&P analysts affirmed the high rating for PZU.
In 2016, PZU Group received numerous awards and prizes. Some of them are listed below.
AWARDS: Service Quality: “Insurance Manager of the Year 2016” for Michał Krupiński, CEO of PZU
for PZU “Best Service Quality in Outlets and Remote Communication Channels”
SEPTEMBER foundation of Witelo fund Foundation of the Witelo fund in cooperation with bussines partners, its objective is to invest in the leading global VC funds.
NOVEMBER acquisition of Polmedic in Radom Polmedic offers both basic and specialist health care, advanced diagnostics, and one-day- surgery. The center provides services to NFZ patients, commercial patients, and holders of company health care packages.
OCTOBER publication of PZU Dividend Policy 2016-2020 Approval of PZU Dividend Policy 2016-2020 by the Management Board and Supervisory Board. In accordance with the new guidelines, it was approved that at least 50% profit will be paid out as dividend, 20% will be allocated to organic growth, and not more than 30% will go towards financing strategic mergers and acquisitions.
Contents: 1. Main trends in the Polish economy 2. Financial markets situation 3. Insurance sector in Poland and the Baltic states compared with Europe 4. Regulations of the insurance and financial markets in Poland 5. External environment in the Baltic states and Ukraine 6. Macroeconomic factors which can affect the operations of the Polish insurance sector and the operations of PZU Group in 2017
The situation on the labor market improved significantly in 2016. The registered unemployment rate fell to the lowest level since mid-1991 and amounted to 8.3% at the end of
The annual consumption dynamics rose to 3.9% year-on-year from the 3.3% year-on-year in the second quarter of 2016.
The annual average decline in prices in 2016 happened mainly due to the very low prices of fuels and energy. However, the net inflation rate also declined (-0.2% – CPI excluding the prices of food and energy), indicating the lack of inflationary pressure in the face of a negative output gap, moderate average nominal remuneration dynamics, and weak growth in prices abroad. However, at the end of the year, the annual dynamics of consumer prices began to grow, which was caused by an increase in global fuel prices (as well as food prices in November and December), with the prices being lower and decreasing in the previous year.
The Monetary Policy Council did not change interest rates in 2016 and January 2017. They remained at the level established in March 2015 – the reference rate is currently 1.5%. According to the Monetary Policy Council, the current level of interest rates is conducive to keeping Polish economy on the path of sustainable growth and preserving its macroeconomic stability.
According to initial estimates, the state budget deficit for 2016 was approximately PLN 46.3 billion, which is considerably less than the planned PLN 54.7 billion. The Ministry of Finance estimated initially that the public finance sector deficit in 2016 amounted to 2.8–2.9% of GDP. Poland had no problems in obtaining debt financing – approximately 26% of borrowing needs planned for 2017 have already been financed at the end of 2016.
and WIG20 also registered losses. The declines on the Polish stock market resulted mainly from the situation on the global markets.
In that period in Poland, the interest rate market priced in a 25 bps reduction of the reference rate, which was driven, among others, by a very low rate of inflation and an accommodative monetary policy path communicated by major central banks.
Polish GDP dynamics in the first quarter of 2016 and the higher probability of Fed raising the interest rates in mid-2016.
In Poland, the weakened valuation of big companies resulting from market and regulatory risks was particularly visible. This concerned mainly banks, retail chains, or raw material and energy companies. By the end of May 2016, WIG and WIG20 dropped below their level from the end of 2015.
Polish treasury bond yields. The slope of the Polish yield curve significantly flattened due to the upward shift of its short end, which resulted from, among other things, a reduction in expectations of a possible interest rate cuts in Poland.
This discrepancy can be explained by specific risks significant for large Polish stock market companies, for example financial or energy enterprises. Still, it should be noted that the August publication of a presidential draft of the act concerning the issue of mortgage loans in Swiss francs had a positive impact on the bank share prices, as it was received as lenient towards lenders.
In July and August, when the market calmed down after the
Brexit shock, Polish 10-year treasury bonds gained in value, which was further supported by a short-lived increase in probability of another reduction of interest rates in Poland.
decision led to the yield curve steepening in Germany. On the one hand, the start of purchase of securities with yields lower than the ECB deposit rate and minimum maturities of 1 year resulted in a fall in yields at the short end of the yield curve.
On the other hand, reduction of the total monthly volume of purchases lowered the prices of long-term securities.
In 2016, the GDP of Poland grew by with the main factor of economic growth still being domestic demand
The GDP growth projection for Latvia in Q4 of 2016 was 0.8% y/y
In Q4 of 2016, the Estonian economy recorded a GDP growth of 2.7% quarter-onquarter, which corresponds to annualized growth of roughly the growth resulted mainly from domestic demand
The average monthly remuneration in the national economy increased by the weaker growth of the Latvian economy resulted from considerable decline of investments
The yield of Polish one-year treasury securities remained almost unchanged, reaching level slightly lower than 1.45%.
(PZU Group operates in Latvia through AAS Balta, the second biggest on the market) spent 112 euro on insurance and an
It was not until September that the trend of a strong appreciation of the US dollar to the euro became noticeable.
Solvency II Directive GLOSSARY, whose requirements have been implemented in the new Act dated 11 September 2015 on the Insurance and Reinsurance Activities and Implementing
Regulations. The vast majority of provisions of this act came into force on 1 January 2016.
Authority has issued Recommendations for insurance companies regarding: • product adequacy tests – they apply in particular to life insurance contracts, if they are unit-linked, life insurance contracts in which the provision of insurance is determined based on certain indexes or other basis values; • product management system – they provide a framework for the proper organization of the product management process covering the full product life cycle (from its design until its withdrawal from the market), as well as identification, measurement, monitoring, management and reporting of risks associated with this process; • process of determining and paying compensation for non-material damage from the TPL insurance of motor vehicles owners – they indicate the PFSA expectations concerning sound and prudent management of the process for determining and paying compensation for non-material damage, including risks associated with this process.
„tax avoidance clause”; • Act dated 5 September 2016 on Trust Services and
Electronic Identification. The Act imposes on qualified trust service providers an obligation to conclude TPL contracts for damage caused to trust service users during the provision of these services; • Act dated 23 September 2016 on Out-Of-Court Settlement of Consumer Disputes. The aim of the Act is to provide customers with a possibility to submit requests for resolving disputes with traders to entities offering independent, impartial, transparent, effective, and fast alternative dispute resolution procedures, that is, to create a system of out-of-court settlement of consumer disputes (ADR).
The Act dated 9 June 2016 on the Terms of Setting the
The Act dated 10 June 2016 amending the Act on Medical
Activity and Several Other Acts. The legislator abolished the obligation for the health care institution running a hospital to have an insurance against medical events, as defined in the
An EU legislative package on fraud prevention on the capital market, which came into force on 3 July 2016, is to improve investor protection and increase confidence in the European financial markets. The basis of the package is formed by: Regulation (EU) No. 596/2014 of the European Parliament and of the Council dated 16 April 2014 on market abuse (MAR)
and Directive 2014/57/EU of the European Parliament and of the Council dated 16 April 2014 on criminal sanctions for market abuse (MAD). The EU regulations introduce a whole new confidential information regime in public companies, whose main feature will be a single definition of confidential information. The regulatory package will influence the creation of a uniform communication policy of public companies.
Directive are an important part of the package. The Directive introduces common definitions for such offences as: insider dealing, unlawful disclosure of inside information and market manipulation, and sets maximum penalties for committing such offences.
Ordinance of the Minister of Development and Finance dated 5 October 2016 on the documents related to the conclusion and implementation of insurance contracts prepared in electronic form. The Ordinance defines a detailed way of creating, recording, storing and securing documents related to the conclusion and implementation of insurance contracts with the help of an electronic signature or seal.
On 16 November 2016, the Parliament (Sejm) passed the act lowering the retirement age to 60 for women and 65 for men from 1 October 2017. It will have the effect of increasing payments of pension benefits from both the Social Security
Article 137 paragraph 1 point 5 of the Act dated 29 August 1997 – Banking Law. In its new version, Recommendation
C supplements and further develops provisions concerning issues related to the concentration risk management in banks, caused by developments in the banking sector, the acquisition of new experiences by both banks and financial supervision, as well as development of European regulations over the past several years. It is addressed to all banks regardless of the consolidation.
In addition, from 1 January 2016, in accordance with the provisions of Recommendation S of the PFSA, banks are supposed to require bigger own contribution from their clients applying for mortgage loans. The minimum amount committed by the borrower is to correspond to 15% of the property value, whereby it is imperative for the client to provide a 10%
The projected legal regulations which may have significant influence on the operations of PZU Group
The new rules are subject to severe administrative sanctions applied in case of a breach of any obligations or rules governing the sale.
The Responsible Development Plan announced by the government provides changes in, inter alia, the current pension system. The reform resulting from the statutory review of the pension system envisages in particular a transfer of 25% of the funds from the Open Pension Funds to the
For some sectors whose situation in 2015 was less positive, 2016 turned out to be a much better year, while in other sectors the situation deteriorated. Therefore, the economy as a whole recorded only a small growth rate – according to the publication of the Bank of Lithuania, the GDP growth amounted to 2.2% year-on-year, mainly due to improved export situation. Significant changes were noticeable also on the labor market. Employment grew, but the market lacks skilled workers, which is why the pressure on salaries remains quite strong.
In contrast to the previous year, inflation in 2016 was positive, was amounted to 0.9%. According to forecast it will amount to 1.9% in 2017. Just as in the previous years, the dynamics of prices will be determined mainly by the changing global trends in commodity prices. Global prices of energy sources had been falling until the beginning of 2016 when the trend reversed and they began to grow again. In 2016, food prices in Lithuania indicated a slight growing trend, and they are expected to continue rising. This year, the base inflation, which includes the prices of services and industrial goods, was higher than the headline inflation; however, in contrast to the previous two years, their growth was halted.
The projection of the GDP growth in the fourth quarter of 2016 amounted to 0.8%. The weaker growth of the Latvian economy is a result of a significant decline in investment. The main reason for the fall in investment is an investment gap in the structural measures of the European Union, which leads to, among others, the lower level of residential construction and infrastructure construction. Despite a slow growth of remuneration, the domestic consumption remains stable. In the first ten months of 2016, export declined by 1.7% yearon -year, mainly due to the negative impact of lower exports of mineral products, mechanical and electrical equipment, metal products, and textiles. The decline in export and increase in import had a negative impact on the trade balance for 10 months of 2016.
growth year-on-year and 2.7% growth in fourth quarter. So far, the increase was driven mainly by domestic demand.
The situation changed in the third quarter, in which export became more important driver of growth. Further significant remuneration increases, high employment rate and more
External environment optimism resulted in households being both more able and more willing to increase their consumer spending.
2.6 Macroeconomic factors which can affect the operations of the Polish insurance sector and PZU Group’s activities in 2017
and limits of labor supply. The increase in inflation may be the signal for the increase in remuneration pressure.
It seems that the biggest risks for this scenario are related to the external situation. The most dangerous risk seems to be related to a rise of protectionism in the global economy, which would lead to a slowdown in world trade and GDP. There will be a series of elections in the major EU countries in 2017, which means a potential threat to preservation of coherence of the European Union, and, furthermore, for sure – a temporary increase in uncertainty associated with said elections. It is difficult to fully predict economic and market consequences of the probable strategy of „hard Brexit”. Risks associated with the problems of European banks and Greece also remain relevant. Higher US interest rates and a strong dollar increase the risk of financial turmoil in emerging markets. The risk of a financial crisis in China, as well as geopolitical risks, still remain. Internal factors which could limit the growth of GDP
include such issues as an increasingly noticeable problems with recruiting suitable employees, a possible prolonging of stagnation in private investments, or a sharper than expected rise in inflation, eroding real revenues of households.
Inflation will increase rapidly at the beginning of 2017 in response to a gradual disappearing of the effects of a sharp fall in fuel prices (and, partially, food) in the previous year and its annual average may amount to approximately 2% year-onyear. We expect stabilization of the NBP interest rates in 2017.
We estimate that the state budget deficit and the general government deficit (2.9% of GDP) planned for 2017 can be implemented – especially with a probable buffer in the form of another, much higher than expected payment from the profit of NBP. In the context of the deficit of the entire sector, the risk is associated with an increase in the deficit of local governments due to the beginning of their investments. At the same time, the implementation of the announced transfer of 25% of the funds from the Open Pension Funds to the
Demographic Reserve Fund would temporarily help to reduce the general government deficit below 3% of GDP.
Gross fixed capital formation in % (y/y) 4.9 (5.5) 6.1 10.0 (1.1)
Nominal wage growth in national economy in % (y/y) 5.0 3.6 3.5 3.2 3.7
Unemployment rate in % (end of period) 7.6 8.3 9.7 11.4 13.4
NBP base rate in % (end of period) 1.50 1.50 1.50 2.00 2.50 * Forcast as at 15 February 2017 Source: PZU Macroeconomic Analysis Office
Grupa Armatura * Cracow PZU FIZ AN BIS 2 – 100.00%
PZU Ukraine Life Kiev PZU – 53.4723% PZU Życie – 0.0053% PZU Ukraina – 46.5224%
Through its representatives in the supervisory bodies of the companies and voting during General Shareholders’ Meetings,
Series I shares of Alior Bank were taken up in a closed subscription performed through the public offer in observance of the pre-emptive right on the account of the existing shareholders of the bank. CHAPTER 3.4 BANKING
Armatura Tower Sp. z o.o. to Pawo Borek Sp. z o.o. This company is no longer an Armatura Group company.
The non-life insurance market in Poland measured by the gross written premium in the first three quarters of 2016 increased by a total of PLN 2,841 million (+14.2%) compared with the corresponding period of the previous year. Increased sales of MTPL insurance (by PLN 2,141 million, +34.7%) and motor own damage insurance (by PLN 694 million, +16.9%), mainly as a result of substantial growth in premium average
(drop by PLN 196 million, -11.8%, PLN 161 million of which concerns direct business), legal protection insurance (drop by
PFSA recommendations causing raise in average payment as well as from strong price competition ongoing in recent years.
Simultaneously, a technical result decline was recorded in the group of insurance for damage caused by forces of nature
PZU Group’s share in the non-life insurance market after Q3 of 2016 reached 36.0%, including Link4 share of
PZU Życie’s technical result margin on gross written premium was after Q3 of 2016, which was more than two times higher than the margin obtained by all other companies offering life insurance in total
The technical result of the non-life insurance market after Q3 of 2016 was lower by
After the first three quarters of 2016, the share of PZU’s technical result in the market’s technical result was 169.7%, which, with the market share of 33.3% calculated using the gross written premium, confirms the high level of profitability of the insurance.
In the changing conditions and in the face of new needs and interests of the clients, PZU introduced new solutions to its insurance offer in 2016. In the mass client insurance: • PZU DOM [PZU HOME] product was introduced to online sales of household insurance, offering, among others, protection from all risk, which covers also the damage caused by uncommon and unpredictable events. The offer was accompanied by „Od Wszystkich Ryzyk” [From all risks]
marketing campaign conducted through i.a. TV, radio, and social media; • existing offer of personal insurance was made more attractive by broadening the catalogue of additional benefits and introducing to the market a new comprehensive PZU Edukacja [PZU Education] product for educational establishments as well as individual client; • offer of general TPL insurance was extended in terms of the scope of responsibility by the addition of clauses covering environmental damage, damage due to package and label defects, and damage resulting from providing IT
In corporate insurance segment, the majority of changes concerned regular introducing the products dedicated to corporate client to service and sales through the Everest system of, including: • change in the approach towards pricing by implementing the model basing on the size of the fleet, which replaced the previous one that depended on the client’s segment; • modification of the existing distribution model, which allows the agents and multiagents to offer and sale basic nonmotor products on their own by using the Everest platform; • starting the works on extending the existing offer with new risks, including cybernetic risk incurred by enterprises.
In 2016, PZU cooperated with 8 banks and 8 strategic partners. The partners of PZU are the leaders in their fields and have customer bases with great potential to expand the offer with successive products. The cooperation in the scope of strategic partnership concerned mainly the companies operating in telecommunications and energy, which were used to offer insurance of electronic equipment and assistance services. The sales of protective non-life insurance performed within bancassurance covered mainly the insurance of buildings, structures and residences, as well as insurance dedicated for payment cards.
• introduction of a solution facilitating concluding insurance contracts, which consists of decreasing the number of declarative data and replacing them with confirmed data coming from external Insurance Guarantee Fund bases (the project: „short calculator”).
In case of business client insurance, the strategic decision was made to transfer the corporate client service to PZU. Taking into account definitely greater experience in quotation and amount of regulatory capital, from Q2 2016 the insurances for corporate clients are offered under the PZU brand.
PLN 110 million, which composes 15.1% of the entire insurance portfolio.
Ubezpieczeń Wzajemnych (TUW PZUW) has been active on the insurance market since 29 February 2016, when it started its insurance business by concluding its first insurance contract. The offer of TUW PZUW covers the products for enterprises from different industries, both medical establishments (hospitals and outpatient clinics) and larger economic entities (i.a. local governments and private companies). The entities cooperating under the TUW model are able to distribute the risk in the scope of mutual relations adapted to the specifics of a given group of medical entities, which will reduce the costs of insurance premium. The
Company has 76 members for which 25 mutual relations for members have been created.
138 million, most of which concerned property insurance, including: • insurance for damage caused by forces of nature –
The insurance portfolio offered by TUW PZUW is covered by a substantial reinsurance in PZU.
Factors, including risks and dangers, which will impact the activities in the non-life insurance sector in 2017
In consequence, the limitation of household spending, including purchase of motor policies (as a result of lower new car sales), lower sales of mortgages and the mortgage related insurance, as well as lower demand for other nonlife insurance. The poorer financial standing of businesses can result in a growth in credit risk and an increase in the level of claims in the financial insurance portfolio; • stronger than expected inflation growth not compensated with growth of nominal salaries entailing decline in dynamics of real remuneration and limited household expenses – including those for non-life insurance; • prospect of higher inflation and economic favoring growth of government bond yields, which in the long term is beneficial for PZU Group, although in the short term, it may adversely affect the investment income. Numerous risk factors escalating volatility on financial markets in 2017 and potentially serious effects of unpredictable political decisions or election results in key European Union countries, which may considerably alter perspectives of individual asset classes on financial markets; • decisions of supreme courts in the scope of monetary compensation from the MTPL insurance of owners of motor vehicles to the closest relative of a person for pain and suffer claims resulting from the violation of his or her personal welfare even if the damage took place before 3
concerning claims handling, especially personal claims; • raise of spare parts prices with effect on claims handling costs resulting from the successive drop of PLN against
– e.g. a possible reinstatement of the so-called Religa tax (i.e. compulsory fee payable to NFZ from every MTPL
The dynamics for the corresponding period of 2014 were also negative at -5.0%.
(the so-called polisolokaty) thereby generating greater interest in other investment products. Additionally, a tax on revenue from short-term endowment products with fixed rate of return and index-based return was introduced on 1
January 2015, which also reduced customer interest in such products and, eventually, led to removing them – especially the former – from the offer of insurers. In the last year, the further guidelines of the supervisory body and, once again, the situation on the financial market and related to it decrease of client’s interest in this form of saving led to a considerable reduction of sales of the unit-linked products – a year-on-year decline of PLN 2,603 million, i.e. 25.5%.
gross written premium 1 January-30 September 2016 1 January-30 September 2015
Source: PFSA (www.knf.gov.pl), Quarterly Bulletin. Insurance market 3/2016, Insurance market 3/2015, data of PZU Życie periodic single periodic single
During this period, life insurance companies generated the net result of PLN 1,745 million, which constituted a year-on-year drop of 26.3% (by PLN 622 million). This drop results mainly from the investment results of insurers, concerning mainly excess funds of these companies, which were lower than in the corresponding period of 2015. In addition, it is also a result of the introduction of the tax on financial institutions, the so-called financial institution tax, which is in effect from
The value of investments of life insurance companies at the end of the third quarter of 2016 was PLN 41,466 million, which means a drop by 0.7% compared with the end of 2015. Meanwhile, positive result on investments contributed to increasing the net unit-linked assets (1.5% growth to PLN
PZU Życie SA (PZU Życie) operates on the Polish life insurance market within PZU Group. The Company offers a wide range of life insurance products, which, for management purposes, are reported and analyzed by three segments: group and individually continued insurance, individual insurance, and investment contracts.
of such premiums of all insurance companies, which means a growth of share in this market segment by 1.1 p.p. in comparison with the previous year and the biggest share in the market since 2010. The annual dynamics of the gross written
PFSA published data which make it possible to show in a form of a matrix PZU’s share exclusively in the life insurance segment
PZU Życie’s technical result constituted the majority of the result achieved by all life insurance companies. This is the evidence of the high profitability of the products offered.
In the face of the risks related to civilization diseases and loss of income source in difficult life situations, PZU Życie consistently extends its offer of protection insurance in both individual and group insurance. In addition, in connection with the amendment to the Act on Insurance and Reinsurance
Activity, life insurance products offered by PZU Życie SA from 1 January 2016 were adjusted to the new legal requirements.
Since 1 January 2016, the following have been introduced in the group and individually-continued (protection) insurance: • modified additional group insurance in case of surgical operation. The main changes in the revitalized version of the product include updating the List of Surgical Operations on the basis of the International Classification of Medical
stand out positively in comparison with the competition; • additional group insurance in case of surgical operation
is performed outside the territory of Poland. The product is an innovation on the market – no insurer has in its offer the option to expand the classic addition in case of surgical operation with the events mentioned above; • additional group insurance in case of child death caused by a personal accident and in case of death of the insured’s parent and death of a parent of the insured’s spouse caused by a personal accident. The current offer of PZU
In 2016, in scope of health products, the product offer of PZU
Życie was adapted to current and future market needs and expanded with innovative service solutions. Changes in the product offer include the following: • launching pilot outpatient care insurance for small enterprises, the so-called SOHO clients (small office/home office), who run their businesses on their own or hire no more than one employee. The offer is available in two scopes: in sponsored version and with co-payment for medical services. The product permits access to medical consultations and diagnostic investigation; • implementing the new offer of group insurance for children and youth aged 6–16 who take part in team sports. The offer addresses the needs concerning orthopedic supplies and treatment related to fracture, dislocation, sprain or rupture of joints and ligaments, as well as injuries to muscles and tendons. Besides medical consultations, the catalogue of medical services covers diagnostics, orthopedic supplies, rehabilitation, and surgeries; • starting the sales of the new product, „Z Miłości do
Mystery Shopping test (for the main health care providers it is -80% on the scale of client service). The indicators will be used to verify the assumptions of quality scoring, thus supporting the process of guiding the patients to the best medical establishments; • expanding the network of medical establishments available to health insurance clients to the amount of approximately 1,800, with simultaneous optimization and control of purchase costs of medical benefits; • increasing the number of pharmacies supporting medicine insurance in a non-cash form (medicine card) from 4,270 to 6,125 as at 1 January 2017.
January 2017; • removal of a short-term life and endowment insurance
Individual subscriptions offered diverse investment strategies, which adapted to the changing market conditions. Besides the payout of the guaranteed capital, certain closed subscriptions concluded with a payout of the profit.
The situation on the life insurance market in 2017 will primarily be affected by: • prospect of higher inflation and faster economic development favoring growth of government bond yields, which in the long term is beneficial for PZU Group, although in the short term, it may adversely affect the investment income; • potentially serious effects of unpredictable political decisions or election results in key European Union countries, which may considerably alter perspectives of individual asset classes on financial markets; • declined business climate on the capital markets reducing attractiveness of products, especially unit-linked ones; • change of previous rates of mortality, fertility, and morbidity; • emerging role of so-called insurance claim companies into claims filed in previous years; • no precisely established range of exemptions concerning e.g. insurance services or medical services in the amended
Act on VAT; • changes on the individual insurance market caused by modifications to products in accordance with Council
European Parliament and of the Council of 20 January 2016 on insurance distribution (EU Official Journal L 26 of 02.02.2016, p. 19) so-called IDD.
On 8 December 2016, PZU and PFR concluded an agreement with UniCredit to purchase 32.8% of Bank Pekao shares for the total amount of PLN 10.6 billion. The purchase price per share amounts to PLN 123. It is one of the largest transactions performed in the bank sector in Europe in the recent years.
Pekao development strategy, while maintaining the current low-risk profile of the bank, sound profitability level and stable long-term policy concerning dividend payout from the result.
Enterprises, LCC (GE Capital Group) the sale of shares and division agreement, which concerned the acquisition of the separated part of Bank BPH. The transaction did not involve the purchase of the mortgage portfolio denominated in CHF, other foreign currencies and PLN, and the purchase of BPH
As a result of making an entry in the National Court Register, a legal merger of Alior Bank with the separated part of Bank
PLN 11.2 billion in the corresponding period of the previous year (up by 24.3%).
The net result of the sector was determined mainly by the growth of result on banking activity (to PLN 59.3 billion, i.e. up by 6.1% from 2015), which was produced by the considerable growth of the interest result (by 7.6%) with simultaneous decline of the result of fees and commissions (by 5.4%).
The total value of assets of the banking sector as at the end of 2016 reached PLN 1,711.3 billion and was 7.0% (i.e.
The produced financial result was determined by the Bank’s operating activity driven by organic growth of the balance total resulting from credit sales (net organic growth of consumer credits in 2016 amounted to PLN 6.9 billion) and the acquisition of the separated part of Bank BPH (entailing growth of the credit portfolio by PLN 8.5 billion).
Furthermore, the revenue takeover saw Alior Bank raise its profit with the acquisition of the separated part of Bank BPH, raising its revenue in 2016 by PLN 508 million. Simultaneously, the decision was made to establish a restructuring provision of
and had the share of 10.4% in the income generated in 2016.
Furthermore, the Group’s revenue generated in 2016 was considerably impacted by the result on trading activity, which composed 10.1% of revenue, specifically the result generated with transactions on the currency market and interest rate transactions made for the benefit of the clients.
Broker Office of Alior Bank S.A, especially credit products, deposit products and investment funds, personal accounts, bancassurance products, transaction services, and foreign currency products; • business client (business segment) – for SMEs and large corporate clients, to whom the Bank offers full scope of bank products and services, especially credit products, deposit products, current and secondary accounts, transaction services, and treasury products; • treasury activity – includes operations on interbank markets and involvement in debt securities. This segment reflects the results of managing the global position (liquidity position, interest rates position and currency position resulting from bank operations).
Disbursement Register), or invoicing system. In addition, thanks to cooperating partners, the website presents special offerings for the clients and publishes articles and manuals related to certain aspects of managing business. Thanks to social functionalities, it allows establishing relations between registered entrepreneurs and giving recommendations under shared economic operations. The new tool will support the entrepreneurs in terms of accessing new internet tools, enhance exchange of information related to changes of regulations within business environment, as well as provide a new form of establishing business relations.
On 14 January 2016, the National Bank of Romania (Romanian bank regulator) registered Alior Bank S.A. Varsovia – Sucursala
Wyszyńskiego. The decision of the committee means that the Management Board of Alior Bank SA is responsible for managing the assets of SKOK Powszechna and SKOK
– 23 thousand members and PLN 42 million in deposits, respectively.
Factors, including risks and dangers, which will impact the activities of Alior Bank in 2017
The situation in the banking sector in 2017 will primarily be affected by: • new tax burden applicable as of 1 January 2016 resulting from the tax on certain financial institutions CHAPTER 2.4
REGULATIONS ON THE INSURANCE MARKET; • the Financial Stability Committee’s adoption of the resolution on recommendations for restructuring the house credit portfolio in foreign currencies in January of 2017.
At the end of 2016, the funds managed by domestic investment funds amounted to PLN 259 billion, in comparison with PLN 252 billion at the end of the previous year – which means a growth by almost 2.7%.
Alior Bank, as a result of acquiring separated part of Bank BPH, was 9th on the market concerning gathered assets establishments at their disposal
In the segment of health insurance and health care services provided by PZU Group, the clients have almost
Association PZU (TFI PZU). It offers products and services to both mass market and institutional customers, including additional investment/savings programs within pillar III of the social insurance system: Individual Pension Account (IKE),
PLN 22 billion giving a market share of 8.6%. This makes
Chamber (IZFiA). TFI PZU is also the leader in the segment of employee pension programs among institutions operating on this market – with net assets worth nearly PLN 4 billion.
Factors, including risks and dangers, which will impact the activities of investment funds in 2017
• local factors – the future of OPFs or inflation (which influences i.a. attractiveness of bank deposits and profitability of instruments).
Lietuvos Draudimas. At the end of 2016, the market share of this company was 29.5%. Taking into account recent acquisitions, the total share of the four largest companies in the non-life market was 81.2%.
Latvian non-life insurance market recorded gross written premium in the amount of EUR 206 million at the end of Q3 2016. It was EUR 11 million more than in the corresponding period of the previous year, i.e. growth by 5.4%.
Motor insurance had the biggest share in the market measured at gross written premium level. Motor own damage insurance accounted for 25.2% of the market, and for motor
In 2016, 15 insurance companies were operating on domestic non-life insurance market, and 4 biggest ones held the approximate share of 65.4%.
In 2016, non-life insurance companies conducting operations in Estonia recorded a growth in gross written premium of 8.4% in comparison with 6.7% in 2015. The gross written premium amounted in total to EUR 302 million, of which EUR
13 companies were operating in the non-life insurance sector at the end of 2016 (including 4 branches of foreign insurance companies), of which 4 largest companies held the market share of 69.8%.
From November 2014, PZU Group has been operating on the Lithuanian non-life insurance market through Lietuvos
compared with the previous year and reached the level of EUR 137 million. The greatest growth was recorded in property (9.9% year-on-year) and motor (7.2% year-on-year)
one of the leaders on the market – which entered the Group in June 2014 and, subsequently, acquired the PZU Lithuania branch operating on the Latvian market since 2012 (in May 2015). At the end of Q3 2016, the share of both entities in the non-life insurance market was 27.2%, and the total gross written premium was EUR 56 million.
From May 2015, the entity conducting business in Estonia is a branch of Lietuvos Draudimas and was established through the merger of two entities – the branch of PZU Lithuania, registered in 2012, and the Estonian branch, acquired in 2014, which had been operating under the Codan brand. In 2016, the share in the Estonian non-life insurance market was 14.5% (13.8% in 2015). The acquired gross written premium was EUR 44 million.
Regardless the still-enormous number of insurance companies, the TOP 100 largest non-life insurance companies generated 97.0% of the entire market’s gross written premium, and the
During the first three quarters of 2016, PZU Ukraine had obtained 3.7% (growth of 1.0 p.p. in relation to three quarters of 2015) of the gross written premium on the Ukrainian nonlife insurance sector, achieving the fifth place on the market.
In 2014, PZU Group made the decision to expand its medical services and health insurance. The expansion included establishment of PZU Zdrowie to serve as the platform integrating acquired medical service companies and managing health subscribers.
Warsaw, Radom and Kielce in scope of NFZ contracts covering general health care and ambulatory special care; • services in scope of additional health care packages for corporate and individual customers in Płock, Włocławek and cities of Upper Silesia, Opole, Warsaw, Poznan, Radom, and Kielce; • medical services for people who have health insurance in
In 2016, PZU Zdrowie implemented project consisting in: • development and implementation of patient service standards in medical centers owned by PZU Zdrowie; • development of IT solutions indispensable to facilitate medical and operational processes of the PZU Zdrowie establishments (implementation of Assistance system and
The total cost of purchase of the aforementioned companies was PLN 41 million in 2016 and the goodwill recognized in the consolidated financial statements amounted to PLN 32 million.
In 2016, the merger of Nasze Zdrowie Sp. z o.o. and CM
At the end of 2016, the net assets of open pension funds were at the level of PLN 153 billion and grew by 9.2% with respect to the end of the previous year.
The OFE PZU Złota Jesień (Open Pension Fund, OPF), which is managed by PTE PZU , is one of the largest players on the pension funds market in Poland. At the end of 2016, OFE
PZU was the third largest pension fund, both in terms of the number of members, as well as in terms of net asset value: • Fund had 2,188.1 thousand members, i.e. 13.3% of all participants of open pension funds; • net assets were at the level of PLN 20 billion, or, in other words, they represented 13.0% of the total value of assets of the open pension funds operating in Poland.
Source: PFSA, monthly data on the OFe market, data for December 2016
As a result, it maintained its position as one of the leaders in the non-compulsory pension funds segment. The 2016 rate of return was 16.2%.
The main challenges for the pension funds market in 2017 are: • business climate on the capital market and, in particular, on the WSE, affecting the value of the assets of open pension funds and the level of management fees collected by PTEs; • reform of pension system in Poland and results of the statutory review of the pension system, as well as legal risks related to these matters, especially the assumed transfer of 75% of the funds from OPF to newly-created
Building for Responsible Development, whose performance will depend on developing detailed solutions and indispensable legislative changes coming into effect; • active participation in the works for the implementation of solutions improving the effectivity of operations of pillar
Discount, incentive and loyalty programs addressed to the mining industry are being developed within this entity.
IT, Data Center, Contact Center, insurance and pension fund assistance, permanent intermediation in the conclusion of insurance contracts, financial and investment contracts and assistance agreements, and human resources and salaries services.
Ogrodowa-Inwestycje Sp. z o.o. (Ogrodowa-Inwestycje) is the owner of the City-Gate office building (Ogrodowa 58, Warsaw)
Morehome.pl. The Armatura Group conducts its business outside the area of financial and insurance services. It is the leading manufacturer in the plumbing and heating sector in
On 1 June 2016, Morehome.pl suspended business activities for the period of 24 months.
We listen carefully, care and anticipate – that is why every day brings us closer to fulfilling needs and expectations of our clients.
Contents: 1. Summary of PZU Group Strategy 2020 2. Basic assumptions of the strategy 3. Core values of the strategy 4. Main strategic objectives 5. Development directions of PZU Group 6. Realization of key projects and initiatives in 2016 7. Selected measures of PZU Group Strategy 2020
Focus of the high pro�tability of insurance activity coupled with simultaneous growth in selected market segments
All goals included in the Strategy were quantified and are seasonally monitored by means of precisely specified measures that allow for on-going monitoring and correction of assumptions made. CHAPTER 4.7. SELECTED MEASURES OF
Capital and dividend policy of PZU Group for 2016-2020. In line with the presented assumptions, maximum 20% of profit could be set aside for organic development, and no more than 30% on financing strategic mergers and acquisitions. That means that every year the Management Board recommends that the General Shareholders’ Meeting (after obtaining an opinion from the Supervisory Board) allocates at least 50%
“Dividend policy is an important element of PZU Strategy 2020. The Management Board’s goal is for PZU to be a company that pays attractive dividends in the future. We will achieve that by investing in organic development and innovations, and by realizing our strategic goals in the area of mergers and acquisitions. Every year, we want to allocate at least 50% of profit for dividends. (..) We will develop Group in a way that ensures increasing dividends to all PZU SA
PZU will not issue shares as long as the policy is in place.
The PZU Group Strategy 2020 was created with the following assumptions concerning the condition of the Polish economy and insurance sector, including especially: • moderate pace of economic growth in Poland
(approximately 3.0-3.5% annually); • increased inflation as of 2017; • higher interest rates as of 2017; • changes in shopping preferences – growing importance in the direct channel (mobile devices) and price comparison engine market that are based on ad-hoc shopping decisionmaking; • introduction of regulative changes, including the following: ◦ improving structure of the unit-linked life insurance market,
◦ implementing the recommendation regarding a standard payment of compensation resulting from non-property claim under a MTPL insurance policy,
◦ introducing by early 2018 the MiFID II directive that recommends transparency in commissions paid in the sales of inter alia investment products; • stable perspectives in the development of property and motor insurance – decreased intensity of the price war in motor insurance and improved profitability in MTPL
segment; • stable growth in investment fund market – increased importance of low-cost (from the client’s perspective) and long-term investment products; • growing (double-digit) potential in health insurance and prepaid health packages.
Common operating philosophy: • We are Fair – our offer is clear and satisfies real expectations of our clients; we follow transparent rules in operating the organization.
The strategy of PZU Group is customer-focused. Our commitment to stay client-centric is clearly visible in the adopted strategic mission – „We are here to provide our clients with peace of mind and safety. Our clients can always rely on us”. We want to accompany our clients everywhere they go to stay ahead of their needs just the way they expect us to. In practice, it translates into transforming PZU from a product-centered organization into a company that focuses on the clients’ needs.
• Due to its market position, PZU acts as a „market watchdog” – our activities are beneficial for the entire market and the clients, we actively influence the market growth and establish standards in customer service.
They are planned to be realized both in the core insurance sector, and the complementary areas that exhibit high potential for growth, that is asset management and health care. At the same time, the Management Board declared that the realization of the assumption should result in boosting investment attractiveness of PZU not only for dividend investors, but also investors who search for growing companies, with a high potential to generate capital gains on market valuation of the share.
The most important goal of PZU Group when it comes to profitability is to achieve ROE (of a parent company) at least 18%. Reaching such a target is to a large extent correlated with the growth initiatives (below). The initiative to reduce fixed costs in insurance business in Poland (PZU and PZU
Życie) by PLN 400 million by the end of 2018 also contributes to realization of this goal.
In the insurance sector, PZU Group plans the largest growth in such market areas where PZU’s share was lower than the natural level of approximately 30%. In complementary business sectors covered by PZU Strategy 2020, the growth will be realized by organic development and acquisitions, which will help achieve gains and profits dynamics higher than the market average.
Innovation is an important part of the Strategy. On the one hand, innovation is our ambition as we aim to transform PZU
Creating innovation-driven culture in PZU Group will be realized especially by means of the following activities: • use of Big Data in quotation, sales, and service; • development of electronic distribution and service channels; • implementation of effective know-how and technologies inside PZU Group by regional innovation centers: LINK4,
Alior Bank and selected foreign companies; PZU Group Strategy 2020 (business size)
• providing innovative risk management solutions in largescale businesses (PZU Lab)
Implementation of the above projects will allow for building a comprehensive digital operational model in PZU Group that will boost flexibility in the entire organization to meet the changing needs of the clients and improve the company’s position in the young clients and premium clients segment.
Relationship Management) tools and using available client data, will result in customizing the Group’s offer to individual client needs. Using efficient analytical tools and Big Data will make it possible to manage the portfolio on the basis of actual risk profile of a given client and use advanced price management methods in property insurance. As the expectations continue to grow, PZU plans to implement selfservice processes and new forms of sale wherever required.
As of 2015 products and services that better fit the clients’ needs, as well as cross-selling GLOSSARY. In the long term, such activities should translate into an increased number of products held by the client. A so-called productization of a retail client in PZU
PZU shares, while maintaing at the same time a moderate level of risk.
The aim of the strategy of PZU Group is to strengthen its leadership position on the non-life insurance market in Poland, as well as the improvement of profitability (combined ratio) in this segment.
Almost 16 million clients in Poland have put their trust in PZU
The aim of PZU is to maintain its leading position in the market by improving price and profitability management by channels and strategies of two brands in Poland (PZU and
– development of CRM tools supporting all retail sales channels, including direct ones; • implementation of product innovations on the basis of new technological developments.
which have different positions and offers. The complementary offer of LINK4 supports the position of PZU Group in the multiagency channel and on comparison websites. The strategy in this area provides for a systematic exchange of market and organization know-how, including the creation of a joint competence center focusing on price management and an internal innovation center, where LINK4 will function as a low-cost environment for testing new solutions in PZU
Improvement of PZU Group’s position in the corporate client segment (non-life insurance) will be carried out by means of: • implementation of system solutions which enable optimal management of the portfolio of corporate clients, including profitability management in the segment and dynamic development of sales of non-motor products; • dynamic business growth in the Mid-Corpo segment, both in motor insurance and in non-motor insurance (mediumsized corporations operating in the Polish market); • development of cooperation with hospitals, local authorities and state-owned companies by means of creation of a dedicated insurance coverage offer (almost PLN 500 million in premiums of TUW PZUW in 2020); • implementation of advanced risk management consulting services (PZU Lab).
As far as the group and individually continued insurance segment is concerned, the aim is to maintain the volume of clients and its high profitability at the level of, at least, 20%, despite strong competition pressure. This objective will be implemented by, among other things: • active management of profitability within the portfolio of clients; • development of the offer in terms of products, processes and distribution, with particular emphasis on the SME
PZU Group’s asset management operations are carried out under the PZU Inwestycje (PZU Investment) brand. PZU
(CHAPTER 3.4 BANKING ACTIVITY) – will make it easier to achieve strategic goals of PZU in the scope of asset management. Incorporation of these entities into the structure of PZU Group in 2017 will translate into an increase in assets managed by PZU by about PLN 19 billion.
In the Strategy 2020, PZU Group also sees in the area of asset management a potential to increase savings of Poles. In July 2016, the government announced its Capital Accumulation
Poles, as well as the stability of the public finance system, and to develop local capital market and improve the development potential of the economy. The program includes the creation of universal, voluntary employee and individual capital schemes within the pillar III pension system, public real estate funds, new type of treasury bonds in the form of premium bonds and infrastructure bonds, as well as lowering tax on capital gains from long-term investments (longer than 12 months).
PZU Group’s strategy in the area of investment also defines the return on the investment of own funds. The achievement of this objective has been quantified as the average annual profitability (by 2020) over the risk-free-rate (RFR) (calculated as the difference between annual, accounting rate of return on deposits invested at the expense and risk of PZU and
• implementation of a new front-office system which allows for the automatic support of the full cycle (except accounting) of asset management.
The Strategy was created taking into account the following principles: • securing the payment of insurance liabilities; • investment prudence (in accordance with the prudent person principle defined in Solvency II Directive),
• long-term diversification of risk in the portfolio; • reduction of volatility of the investment result and ensuring stability of the dividend policy.
By 2020, PZU Zdrowie will become the leading integrated coordinated health care operator. This means that it will provide clients with a full range of services in the field of health care. The main objectives in this area of strategy are: • creation of a comprehensive offer of health insurance supplemented with medical subscriptions and services based on a fee-for-service model; • providing unique and client-friendly service based on a network of medical establishments, divided according to the parameters of quality and cost effectiveness, supplemented by its own network; • creation of modern tools of cooperation with a network of subcontractors (portal for the health care providers, development of the assistance system, a communication bus with establishments, and on-line calendars); • creation of a portal for the client offering self-service functions in an external and own network, and, at the next stage, enabling the purchase of medical services in a nationwide network of PZU Zdrowie by all people insured in PZU Group; • integration of a network of own establishments and strengthening its market position – promotion of PZU
The implementation of these assumptions will be carried out on the basis of: • development of the offer on the basis of key advantages of
PZU Group: a database of 16 million clients, a strong sales network and a high level of brand recognition; • continuation of the implementation of the acquisition plan –
purchase of medical establishments with stable profitability and generating synergy effects (assumptions concerning acquisition costs: PLN 330 million by 2020).
The growing scale of business will be reflected in a systematic improvement of profitability of PZU Zdrowie, and the planned increase in the revenues of PZU Zdrowie will allow it to come
• low level of consolidation, which provides an opportunity to adopt a strategic market position and build a scale which allows to obtain high rates of return in the long term.
In December 2016, PZU announced signing of an agreement with UniCredit concerning a potential purchase of 20% of shares of Bank Pekao (together with the Polish Development
“When the transaction is finalized, PZU will become the largest financial group in Central and Eastern Europe as the leader in insurance, banking and asset management. I am convinced that the existence of such a strong financial institution with the registered office in Warsaw will significantly affect the financial stability and prospects for responsible development of the Polish economy. Thanks to its strength and scale, this institution will have a unique opportunity to create value for our shareholders, clients and employees.” – Michał Krupiński,
The investment in share package of Bank Pekao constituted for PZU a more effective way of using the surplus capital in comparison with possible return on existing investment activity. The agreed purchase price in the amount of
PLN 123 per share was very attractive. The price to book ratio was about 1.3x on the basis of the book value of Bank Pekao
(on the date of the planned closing of the transaction). The purchase price was 2.4% lower compared with the price of the sale of 10% stake in Bank Pekao by UniCredit in July 2016 and 3.3% lower than the average price of Pekao shares on the
PZU wants to participate in the growth of the Polish banking sector, which is why a project had been developed which included on-going monitoring of possible objectives which could fit within the strategic plans of PZU Group.
In accordance with the agreement of 30 May 2015, PZU Group is a shareholder of Alior Bank, with a share of 29.45%. Alior
PZU Group is committed to increasing the value of Alior Bank and Bank Pekao. Both bankswill remain separate. There are no plans to combine these two entities because they represent two different business models. Alior Bank is a young, rapidly growing bank which is open to innovation and has ambitions to determine the new directions of development of the
Group will be able to become the leader of diversified financial services in Poland.
Number of clients (in millions) ~16 million ~ 5.4 million ~ 4.1 million
Source: own analysis based on financial the statements for the period from 1 January 2016 - 31 December 2016.
3. PZU retained its top position in life insurance with periodical premium after the third quarter of 2016 with a 45% market share (up from last year’s 43.9%). Following the third quarter of 2016, PZU Życie had a 33.7% share in the entire life insurance market (an increase by 4.5 p.p. year-on-year).
5. Continuation of implementation associated with the introduction of a new policy system (project Everest) which should improve PZU’s flexibility and competitiveness. In April 2016, another version of the system was implemented, which included making further products available (inter alia: general agreements, Cargo, D&O) and introducing changes to existing functionalities and products. Moreover, other external distribution channels were implemented, including the multiagents and bancassurance channel, the implementation of own corporate sales channel was completed, and the portal “moje.pzu. pl” with the online sales functionality was launched. Sales carried out via off-line channels was transferred in the last quarter of 2016 to the Everest platform (among others: motor and non-life leasing, central dealers, and financial insurance).
4.6 Realization of key projects and initiatives in 2016 in 2016, the Group achieved the following objectives in specific Business Fields:
Investments 1. TFI PZU ranked second in the market in terms of the value of managed net assets. At the end of 2016, the value of AuM TFI PZU amounted to PLN 22 billion, which constituted 8.6 % of the assets obtained by domestic investment funds.
2. Growth of the volume of the managed assets of external clients from PLN 6.8 billion at the end of 2015 to PLN 7.0 billion at the end of 2016. At the end of 2016, the share of assets of external TFI PZU clients in TFI market assets (with exception of non-public assets) was 4.8% (4.6% at the end of 2015).
3. TFI PZU was the leader in the segment of employee pension programs among domestic investment funds. At the end of 2016, TFI PZU managed assets with value of almost PLN 4.0 billion (EPP – Employee Pension Plan, GPE – Group pension Plans, PPO – Employee Saving Program, ZPI – Corporate Investment Program) – AuM growth by 17.2% compared with the end of 2015.
4. The value of net assets of OFE PZU Złota Jesień at the end of 2016 amounted to PLN 20.0 billion.
7. Preparation of a new investment strategy including strategic allocation of assets, organization and processes linked to the management of the investment portfolio of PZU Group.
3. Three medical entities (CM Cordis, Polmedic and Artimed NZOZ) were acquired by PZU Zdrowie.
4. The works on the implementation of the tool for the cooperation with medical establishments.
5. Implementation of tools for management of the network of medical establishments, both PZU Zdrowie’s own establishments and ones which cooperate with it, as well as tools for management of client traffic on the medical hotline.
6. Works have begun on providing medical hotline consultants with a way of communicating on-line in the scope of arranging medical benefits with a distributed network of medical establishments
1. 82% of PZU Group’s clients are satisfied with claims and benefits handling (satisfaction survey on a sample of 4.3 thousand clients conducted in the fourth quarter of 2016).
2. Work was conducted on the implementation of the Fraud Detection System for motor insurance.
Culture of cost effectiveness 1. The decrease in administrative costs of of insurance segments in Poland amounted at the end of 2016 to PLN 26 million, that is, -1.8% year-on-year.
Capital and investment policy, and integrated risk management system 1. The payment of the dividend in the amount of PLN 1.80 billion, i.e. PLN 2.08 per share. 2. Confirmation of the Capital and Dividend Policy of PZU Group for the years 2016–2020, in accordance with which the annual dividend payout ratio will amount to not less than 50% of net profit.
3. The S&P Global Ratings rating of PZU and PZU Życie remains at the level of A-, which is one note higher than the rating of the country.
4. Effective and adequate adaptation of risk management system and compliance to the changing organizational structure of PZU Group and legislative environment.
Surplus rate of return on its own portfolio above the RFR
and PTE PZU), we offer numerous investments, savings, and retirement plans; • banking – we treat our activity in the banking sector as an investment because, as the Group, we want to take part in the growth of the Polish banking sector and use investment profits to generate value for shareholders. Alior Bank was chosen because of its high operating efficiency and innovation; • health – Group offers health insurance and private health care packages by PZU Zdrowie activity. The company focuses on implementation of solutions aimed at e.g.
At the end of 2016, PZU Group distribution network included: • exclusive agents – PZU’s own agency network in Poland consisted of 8,758 exclusive agents, including natural persons performing agency activities. The agency channel conducts sales mainly in the mass client insurance segment, especially motor and non-life insurance, as well as individual insurance (life insurance). The Group’s agency network was composed of approximately 1,100 agents in the Baltic states (PZU Group operates on the non-life insurance market of Lithuania, Latvia and Estonia through, appropriately, Lietuvos Draudiamas, AAS Balta, and PZU
Estonia branch of Lietuvos Draudimas, and on the life insurance market through Lietuva GD) and almost 700 agents in Ukraine (where PZU operates on both the non-life and life insurance markets through, appropriately, PZU
• multiagencies – 3,232 multiagencies work with PZU Group on the Polish insurance market to make sales mainly to the mass client (this channel is used to sell all types of insurance, especially motor insurance and non-life insurance) as well as individual life insurance. The Group’s companies cooperate with 2 multiagencies in the Baltic states and 10 multiagencies in Ukraine.
PZU Group cooperated with 15 banks and 17 strategic partners in Poland in scope of protective insurance in 2016. The partners of PZU Group are the leaders in their fields and have customer bases with great potential. The cooperation in the scope of strategic partnerships concerned mainly the companies operating in telecommunications and energy, which were used to offer insurance of electronic equipment and assistance services.
In Baltic states, PZU cooperated with 3 banks and 14 strategic partners. It ao cooperated with 6 banks and 3 strategic partners in Ukraine.
In Poland, claims and benefits are handled in 6 competence centers, which operate nationwide. This is based mainly on electronic information and is not connected with the place of
In person at any branch in a garage belonging to the PZU Repair Network in the mobile office by post, e-mail or fax
In 2014, PZU became a BLS pioneer on the Polish insurance market. At present, the Company realizes it in the two following forms: individually and under an agreement. By the end of 2016, the BLS agreement drafted by PIU encompassed eight insurance companies, including PZU. Together, they represent nearly 70% of the motor TPL insurance market measured at gross written premium level. The agreement introduced in April 2015, which bases on lump-sum schemes, considerably simplified the settlement of paid claims between the insurers. PZU also maintained its earlier BLS solution for its clients who suffered damage at the hands of the people insured at insurance companies that didn’t join the agreement. PZU was also a BLS pioneer on the Ukrainian market. PZU Ukraine made the first such payout in December 2016. The BLS agreement drafted by the Ukrainian motor office now covers 17 insurance companies. Together, they represent nearly 80% of the TPL insurance market measured at gross written premium level. In Estonia, direct claims handling is regulated by the act on TPL insurance from early 2015. In Latvia, a client who wants to take advantage of direct claims handling must purchase an insurance supplement.
PZU created the largest network of companies on the Polish market that provide car rental, towing, and parking services.
From 2015, Lietuvos Drauidmas is the only insurer in Lithuania providing such services to both motor own damage and motor
PZU continues to develop its offer when it comes to the management of objects that are left after a damage that can be sold on the Pomoc Online platform. The clients receive an offer to sell the remains for the highest obtained purchase offer from credible entities, who are permanently working with the platform administrator (a similar solution is available for the clients of PZU Estonia).
In addition, PZU is implementing claim self-service, which is activated personally by the client with the link received via text message or email. In case of accident claims or benefits, the client accepts or rejects the proposed amount of the benefit.
In 2016, PZU introduced a number of simplified solutions to contact the clients, e.g. it resigned from traditional letters, popularized contact over the telephone and electronic means of communication, but first and foremost it made its correspondence simpler and more user-friendly.
Accident Victims]. These are mobile employees who meet with the victims in their houses in Poland and determine the actual life situation and the needs related to the accident they suffered from and for which PZU is liable. Assistance
Providers shall explain to accident victims their laws and tell them which documents they have to present. For people who have suffered serious damage, they shall organize broadly defined medical, social and vocational rehabilitation. They advise on how to adjust place of residence to meet the needs of a disabled person, as well as how to choose proper systems compensating for dysfunctions and disabilities. They assist in obtaining the benefits from governmental institutions (from
Another innovation which is being developed by PZU is the creation of a system for crops claims handling by using aerial and satellite photographs. It is significantly important in a situation in which a larger number of crops damages occur in a short period of time. With this solution PZU will shorten the process during which the clients are waiting for decision concerning the claim.
Everest Platform. This is the biggest IT project in the CEE
from before implementation), the Everest platform helps raise operating efficiency, which additionally expands the potential for presenting a competitive offer to the clients.
PZU worked with the Group’s companies worked with slightly over including
PZU Group worked with employed by PZU and PZU Życie exclusive agents, including natural persons performing agency activities.
PZU cooperated with 3 banks in the Baltic states and with 6 in Ukraine establishments, traditional bank departments people (calculated as FTEs), including working with PZU Group on the Polish insurance market 300 brokers in the Baltic states, where the broker channel is one of the main insurance distribution channels, and with approximately
PZU Group continues to work on more innovations and started the development of the PZU GO Self Service platform for the individual client at the end of 2016. The platform will provide online access to the products and services (purchase of insurance, medical services, and investment or savings products) offered by all of the Group’s companies and to their features in the future (filing claims, making doctor’s appointments, checking investment funds quotation or other entities, or paying premiums). Meanwhile, the Group will have aggregated information about its clients and will be able to distribute information and identify individual needs quicker.
In turn, last year, LINK4 introduced a solution promoting safe driving and eco driving for individual clients and mini fleets. Thanks to the established cooperation with a distributor of GPS navigation in mobile phones, the company adds a one-year license for the navigation system and its section, „Safe Driving with Link4”, to the purchased policy (during the promotional period).
At the end of 2016, Alior Bank had 286 branches, including 7 Private Banking centers and 11 Regional Business Centers.
Alior Bank also used distribution channels based on an innovative IT platform covering the following: online banking, mobile banking, and telephone service centers.
Banking Services branches providing full banking services in scope of the aforementioned service points, where the clients may use such banking products as: loan, credit card, overdraft, deposits, foreign currency accounts, bank account for individual customers and corporate customers.
Finances brand. The bank plans to strengthen its cooperation with Tesco by expanding the sales network with more locations in the partner’s stores and gradually growing the portfolio of products and services available for the supermarket’s clients.
Cooperation with T-Mobile resulted in an extensive increase in revenues and lending action in 2016. The credit sales grew by 94% y/y, and revenues – by 60% y/y. 9 times more credit cards were sold than in the previous year, which resulted in a volume growth by 530% y/y. The procedure of financing headphones encompassed over 112 thousand communication devices. In October, T-Mobile Usługi Bankowe launched a completely new mobile banking application. Developed in a strict compliance with the mobile first rule, it offers all functions of traditional e-banking.
Alior Bank has been focusing on innovations from its very begginig. The Innovation Lab team, which was established in 2015 and is responsible for developing the bank’s innovations, supports the search for and implementation of innovative solutions. The results of the group’s work include the Trusted
Advice mobile application, which was designed for the private banking client and provides top service convenience.
The success of Trusted Advice has motivated further activity aimed at using tablets to create a new form of customer service and optimize the working environment of bankers. The project’s transformation is planned to cover the whole sales network by June 2017.
International” contest in the category of „Best technology used in direct customer service”.
Dronn, or Virtual Consultant, is an artificial intelligence system supporting remote communication with clients. The “Virtual
In 2016, the average annual PZU Group employment calculated as FTEs amounted to 27.0 thousand, where 10.8 thousand people were employed by PZU and PZU Życie and 10.2 thousand by Alior Bank.
The restructuring of employment in PZU and PZU Życie is planned for the period between 24 March and 18 December 2017. The restructuring process will cover up to 1,944 people with estimations seeing 956 employees of PZU and PZU Życie from various professional groups subject to employment reduction.
The ultimate number of people covered by the employment restructuring process and the associated costs and savings will be known following PZU and PZU Życie’s conclusion of consultation with trade unions.
Board of Alior Banku decided to launch the restructuring process. The considered restructuring process may take until the end of 2017 and cover no more than 2,600 employees.
PZU’s salary policy aims to provide employees with remuneration appropriate to the performed job, competences, and skills and encourage the implementation of the Group’s long-term objectives. It also aims to prevent conflicts of interest and eliminate potentially negative influence of remuneration systems on risk management.
Employment in selected companies of PZU Group accoridng to age (in %)
Employment in selected companies of PZU Group according to the level of education (in %)
Higher Secondary Others criteria) and given organizational unit, combined with the
The following have been organized in PZU in 2016 to support employees in improving their skills, which are required at the given work post: • e-learning – employees and managerial staff have an access to a broad catalogue of e-learning training, which they can use without any limitations. The training was provided in various multimedia and engaging forms: e-learning, educational animation, e-books, simulations, and educational games. In total, the employees have access to over 100 different trainings; • Menedżer 2.0 [Manager 2.0] program which focused on the development of mid-level management (over 1,500 managers) in building managerial thinking, team engagement, business effectiveness of a team, as well as coaching skills indispensable at a managerial position. An interactive and gamified Inspiratorium Menedżer 2.0 [Inspiration Space
The platform uses state-of-the-art trends to combine elements and mechanisms known from games to support development of a habit to pursue self-education and knowledge acquisition, as well as social network mechanisms to create an interactive space for sharing knowledge, experience, ideas, and inspirations; in 2016, the main focus of the program was to build team effectiveness and using coaching skills in pursuing managerial tasks; • Lider 2.0 [Leader 2.0] program, the aim of which was to strengthen the competence of senior managers in the role of all-round leaders. In 2016, the main focus of the program was to boost innovation. It consisted of two parts: individual sessions and classroom trainings organized as group workshops; • „Challenges in management” program – a program dedicated for new managers. The objective of the trainings was to provide a basic set of managerial skills indispensable for successful fulfillment of managerial tasks; • PLUS training program (Professionalism – People – Skills
[Investment in the Future], were continued in 2016 to support the most active students and most popular academic projects.
“ When bosses will learn how to manage relationships and employee teams, understand the motivations of people, then not much will they need to give the development of the right gear.”
Organization, infrastructure and human resources a number of business presentations and trainings for students
Award and EB Stars competitions, and two independent surveys by HRM Group and Goldman Recruitment declared
PZU Group as the undisputed leader in employer brand management in Poland. Current projects can be followed on the Facebook, LinkedIn and Instagram career websites.
PZU is the most recognizable brand in Poland. The PZU brand’s result is 89% in spontaneous brand recognition surveys and 100% in assisted brand recognition surveys2.Although it is associated mainly with insurance, PZU Group covers multiple brands. They have different visual systems, target groups, and business models.
The dominating brand is the corporate brand of PZU, which underwent a visual transformation in 2012. The brand promotes PZU Group as well as most of its companies operating on the Polish market (PZU, PZU Życie, PTE PZU, TFI
PZU, PZU Pomoc, PZU Zdrowie, PZU Centrum Operacji) and some foreign companies – those in Ukraine and the branch in
The architecture of PZU Group also includes the brand group of the so-called PZU family. The family is composed of companies with names not referring to the dominating brand, including AAS Balta and TUW PZUW. However, their logos are visually similar to the corporate brand. These companies also apply similar visual identification systems.
The final architecture level is the group of independent brands. This category includes PZU Group’s brands with names and visualizations different from the corporate brand, such as Lietuvos Draudimas and LINK4. Both companies hold high brand recognition of 98% appropriately on the Lithuanian and
Consolidated financial results 2016 was a period of dynamic sales growth in PZU Group (gross written premium increased by 10.1% year-on-year), strengthening the leading position in the Polish insurance business, and maintaining high profitability in life insurance. As a result of strategic activities, the involvement in banking sector increased – Alior Bank’s contribution to the Group’s operating result in 2016 amounted to PLN 691 million, and administrative expenses for insurance business in Poland were limited.
3,031 million compared with PLN 2,944 million in the prior year (up by 3.0%). Net profit attributable to the shareholders of the parent company amounted to PLN 1,947 million, compared with PLN 2,343 million in 2015 (down by 16.9%).
The year on year comparable results and total assets were considerably influenced by the start of the consolidation of
Group in 2016 with the amount of PLN 691 million. The total assets of PZU Group rose by approximately PLN 20 billion and the minority shares increased by almost PLN 2 billion (as at 31 December 2016) mainly due to the consolidation of Alior
Within particular items of the operating result, PZU Group recorded: • growth of the gross written premium to PLN 20,219 million. The premium was higher by 10.1% than in the previous year, mainly in motor insurance in mass client and corporate client segments resulting from growth of the average premium and number of insurances and increase in group and individually continued insurance, specifically in Health. After accounting for the share of reinsurers and the change in provision for unearned premium, the net premium earned amounted to PLN 18,625 million, which was 7.1% higher than in 2015; • higher net investment result thanks to the revenue on investments generated by the banking activity – the launch of the consolidation of
Alior Bank and merger of Alior Bank with separated part of BPH.
PLN 3,587 million and was 106.3% higher than in 2015. With exception of banking activity, the level of net investment result was lower than in the corresponding period of the previous year, mainly due to decline in share prices of Azoty Group from the long-term shares portfolio and negative exchange differences of own debt securities offset by increase of assets denominated in EUR and by the improved result on quoted equity instruments, specifically the improved financial condition of WSE; • increase in interest-bearing costs to PLN 773 million, compared with PLN 117 million achieved in the previous year, mainly caused by the launch of the consolidation of
Alior Bank, the merger of Alior Bank with core activity of
26 million, compared with the previous year, was recorded in the insurance activity segments in Poland; Basic amounts from the consolidated profit and loss account
• higher negative balance of other net operating income and expenses amounting to PLN 740 million, mainly as a result of the launch of the consolidation of Alior Bank, merger with separated part BPH, and introduction of the tax on financial institutions – PZU Group was encumbered (both in its insurance and banking activity) with this tax in the amount of PLN 395 million in 2016.
(excluding premium between segments) compared with 2015, including in particular motor insurance, as a result of an increase in average premium and the number of insurance policies; • higher sales in the corporate client segment than in 2015 by PLN 371 million (excluding premium between segments), including mainly within motor insurance due to the increased average premium and number of insurance policies and in fire and non-life insurance as well as other
PLN 86 million, mainly due to the development of group protection insurance (an increase in average premium and the average number of additional insurances) and acquisition of the premium in group health insurance (new clients in ambulatory insurance); • in individual insurance segment, premium lower by
PLN 60 million compared with the previous year, mainly in individual unit-linked products in the bancassurance channel; • increase in written premium collected by foreign companies by PLN 31 million compared with 2015, including mainly the development of sales in the Baltic states segment offset by the disinvestment of PZU Lithuania in September 2015.
PLN 523 million to PZU Group’s result, which is PLN 280 million more than in the prior year. Fee and commission revenue comprised mainly: • fee and commission net revenue paid for the banking activity in the amount of PLN 330 million, including mostly: brokerage commissions, revenues and expenses related to handling bank accounts and payment and credit cards, remuneration for insurance policy sale intermediation; • OFE Złota Jesień asset management fees. These amounted to PLN 93 million (drop of 7.9% in comparison with the previous year resulting from PZU’s OPF net assets decline); • income and fees from investment funds and fund management companies of PLN 102 million, i.e.
PLN 13 million less than in the previous year, mainly in relation to the change in the number of the funds included in consolidation as compared with the corresponding period.
Total non-life insurance – Ukraine and Baltic states 1,305 1,288 632 388 338
O th er o pe ra tin g in co m e an d ex pe ns es
(increase of 106.3%). The higher result is mainly the effect of including the banking sector activity (i.a. interest income, including the one from loans, and trading income), due to the commencement of Alior Bank consolidation.
After taking into account interest expenses and excluding the contribution of Alior Bank and Azoty Group’s share package,
As at the end of 2016, the value of PZU Group’s investments portfolio2 excluding the contributions of Alior Bank amounted to PLN 50,407 million compared with PLN 52,248 million as at the end of 2015.
Investing activities of PZU Group are conducted in compliance with the statutory requirements, ensuring an appropriate degree of safety, liquidity and profitability; therefore, treasury debt instruments accounted for more than 60% of the 2 Investment portfolio consists of financial assets (along with investment products, excluding loan receivables from clients), investment property (including the part recognized under Assets held for sale), negative measurement of derivatives, and liabilities from sell-buy-back transactions.
In 2016, the total net amount of claims and benefits and increase in provisions of PZU Group amounted to PLN
12,732 million. In relation to the corresponding period of the previous year, the value of claims together with the change in provisions was higher by 7.4%. The following factors also contributed to the change in the net value of claims and benefits: • increase in the value of claims and benefits in the group of insurance for other material damage in the mass client segment, including mainly the subsidized crop and livestock insurances as an effect of the number of claims caused by force of nature (adverse effects of wintering), which occurred in H1 2016; • increase in the value of claims and benefits in motor TPL
Structure of the investment portfolio excluding the contributions of Alior Bank* (in %)
In te re st -b ea rin g fin an ci al as se ts
N et in ve st m en t re su lt an d in te re st e xp en se (
In 2016, acquisition costs grew by PLN 237 million compared with the same period of the previous year and reached PLN
The increase concerned mainly direct acquisition costs and was the result of higher sales in the mass and corporate client segment.
In 2016, the Group’s administrative expenses were at the level of PLN 2,843 million, which was 71.5% higher than the
Simultaneously, there was a recorded positive effect from the previous year in the insurance activity segments in Poland in relation to maintaining strict cost discipline – a drop in administrative expenses by PLN 26 million in reference to costs of property, marketing partially compensated with the change in presentation of remuneration for administrative activities in bancassurance contracts in the amount of approximately
In the Baltic states and Ukraine drop by PLN 34 million, mainly due to the disinvestment of PZU Lithuania in H2 2015.
In total, these assets amounted to PLN 107,038 million and were 18.4% higher than at the end of the prior year. They represented 85.4% of the Group’s total assets compared with 85.8% at the end of 2015. The increase in the value of investments applied mainly to banking activity and was associated with the merger of Alior Bank with the separated part of Bank BPH and the development of credit activity – the growth in loan receivables from clients by PLN 14,775 million and exposure to debt instruments greater by PLN 4,634 million
PZU Group’s receivables, including the receivables from insurance contracts and current income tax, amounted to
PLN 5,703 million, i.e. represented 4.5% of the assets. By comparison, at the end of 2015, they amounted to PLN 3,338 million (3.2% of the Group’s assets), and their growth resulted mainly from the unsettled transactions in financial instruments.
Non-current assets – in the form of intangible assets, goodwill and property, plant and equipment – were recognized in the statement of financial position at PLN 4,513 million. They comprised 3.6% of total assets. Their balance rose in 2016 by 6.8% from 2015, mostly in the material fixed asset categories associated with the acquisition of separated part of BPH.
As at 31 December 2016, PZU Group’s cash and cash equivalents amounted to PLN 2,973 million (2.4% of the assets). At the end of 2015, their value reached PLN 2,440 million, and the higher balance resulted from commercial strategy consisting in liquidity of portfolio denominated in euro for which it was decided to leave cash in the current bank account due to the fact that making deposits with negative
Balance of assets for sale amounting to PLN 1,189 million pertained to the part of the portfolio of investment property held for sale.
(13.3% growth). The growth of the consolidated equity pertained to minority shares, which, inter alia in relation to the issuance of shares by Alior Bank in H1 2016 and the merger with the separated part of bank BPH, amounted to PLN 4,117 million and increased by 87.6% from the end of 2015. The capital falling to the shareholders of the parent entity was maintained at a level similar to that of the previous year at
The biggest component of liabilities at the end of 2016 covered financial liabilities, the share of which rose from 42.4% in 2015 to 47.9% in 2016. Their balance amounted to
PLN 60,030 million and included: • liabilities of PLN 51,241 million towards the clients
(resulting mainly from deposits – growth associated with the development of banking activity); • investment contracts in the amount of PLN 396 million compared with PLN 546 million at the end of 2015. The
PLN 150 million decline in value from 2015 is related inter alia to the withdrawal of such products from the offer; • liabilities from issuance of own debt instruments for the total amount of PLN 3,680 million (in total
EUR 850 million); • subordinated liabilities of Alior Bank due to the loan and issued obligations with nominal value of PLN 1,027 million at the end of 2016. The PLN 268 million growth in liabilities from 2015 was associated with successive issues of bonds by Alior Bank in 2016; Other provisions
PLN 480 million and decreased by PLN 1,611 million compared with the previous year. This decline concerned mainly net financial flows on investment activity.
Conditional assets of PZU Group as at the end of 2016 amounted to PLN 40 million, a considerable amount of which constituted guarantees issued by Bank Millennium SA for
The value of conditional liabilities as at the end of 2016 amounted to PLN 16,364 million.
PZU Group was composed of PLN 12,979 million in conditional liabilities from renewable limits in checking and savings accounts and credit cards and PLN 1,514 million in granted sureties and guarantees.
For management purposes, PZU Group has been divided into the following industry segments: • corporate insurance (non-life) – this segment encompasses a wide range of non-life insurance, general liability and motor insurance, which are adapted to client needs and, with individually valued risks, offered by PZU, TUW PZUW
and LINK4 to large business entities; • mass insurance (non-life) – composed of non-life, accident,
TPL, and motor insurance products. PZU and LINK4 provide the insurance to individuals and entities from the SME
sector; • life insurance: group and individual continued – PZU Życie offers this insurance to groups of employees and other formal groups (e.g. trade unions).
may enroll in the insurance and individually continued insurance in which the policyholder acquired the right to individual continuation during the group phase. It includes the following types of insurance: protection, investment
(excluding, however, investment contracts), and health insurance; • individual life insurance – PZU Życie offers this insurance to individual clients. The insurance contract relates to a specific insured, subject to the assessment of the individual risk. This group comprises protection, investment (other than investment contracts) and health insurance products.
PZU Życie. Additionally, the investments segment includes income earned on other excess funds in PZU Group
◦ group of insurance against fire and damage to property and TPL resulting from acquisition of several individually significant agreements (including TUW PZUW being joined by several major entities in the coal and energy sectors); • 21.9% increase in insurance net claims and benefits in comparison with the corresponding period of 2015, which, considering a 11.1% increase of the net premium earned, means that the loss ratio increased by 5.7 p.p. to the level of 64.7%. The growth was recorded mainly in the group of insurance of various financial risks and general liability
(submission of several major claims). Despite of a higher claims value, this effect was partially compensated with improved claims ratio in the MTPL group; • 5.0% decline in the investment income allocated to the segment at transfer prices to PLN 115 million, which was dictated by the lower level of market interest rates partially balanced with appreciation of the exchange rate of EUR
In 2016, the insurance result in the mass client insurance segment amounted to PLN 659 million, i.e. 0.2% higher than in the prior year. The individual components of the insurance result were as follows: • 15.4% growth of the net earned premium to
Cl ai m s, b en ef its a nd ch an ge in t ec hn ic al pr ov is io ns
insurance resulting mainly from the increased insurance portfolio; • investment income allocated to the mass insurance segment at transfer prices amounted to PLN 517 million, i.e. dropped year on year by 0.2%, which was dictated mainly by the lower level of market interest rates partially balanced with appreciation of the exchange rate of EUR
towards PLN; • in 2016, acquisition expenses in the mass insurance segment grew by PLN 168 million (12.1%) from the same period of the previous year and reached PLN 1,551 million.
The change in acquisition costs was determined by the higher level of direct acquisition costs (including the effect of the rising insurance portfolio). Simultaneously, bank insurance recorded a drop of direct acquisition costs, which resulted from the changes in bancassurance agreement settlements with banks – from 1 April, in accordance with the requirements of the Act on Insurance Activity, the rules of remuneration for insurers concerning group agreements were changed; • administrative expenses in this segment reached
The insurance result in the segment of group and individually continued insurance amounted to PLN 1,785 million and was 13.3% higher than in the previous year. The individual components of the insurance result were as follows: • growth of the gross written insurance premium by
pension insurance) resulting from the upturn on the stock market – the WIG index rose by 11.4% compared with the 9.6% drop in the corresponding period of the previous year. The income allocated according to the transfer prices slightly declined; • slight year-on-year changes in claims and benefits and the changes to other net technical provisions, which closed in 2016 with the amount of PLN 4,686 million (year-on-year drop by 0.7% or PLN 32 million). The change resulted mainly from the following: ◦ higher growth of provisions in the EPP pension insurance portfolio resulting from considerably improved 2016 investment results at stable written premium and lower paid transfers,
◦ increase in the value of health care services as the result of dynamic development of the health care products portfolio,
The factors that determine decreasing of this reporting segment are: ◦ as the result of the level of adjudged benefits for permanent health impairment, the assumptions concerning future payments in this area used in the
In su ra nc e re su lt calculation of provisions were verified and updated, allowing for release in 2016 provisions of PLN 216 million, mainly in continued insurance,
PLN 28 million); • PLN 8 million (1.4%) higher administrative expenses in 2016 in comparison with the corresponding period of 2015 resulted mainly from the change in the agency agreement in the bancassurance channel and, in effect, the adjustment of the presentation of remuneration for agency activities comprising of the participation in administrating protection insurance agreements (PLN 28 million earlier included in the acquisition costs). The abovementioned negative factor has been balanced out through limiting the expenses due to the application of cost discipline inter alia in the scope of property and sales support costs.
After excluding the one-off effect related to the conversion of long-term contracts into type P renewable contracts, the segment’s 2016 insurance result amounted to
PLN 1 529 million, a year on year growth of 1.9%. The main causes of improvement include rising insurance portfolio, lower claims ratio of the protection portfolio, and cost discipline.
Insurance result of the group and individually continued insurance (PLN million)
◦ lower average deposits to the accounts of unit-linked insurances offered through Millennium Bank,
• value of net insurance claims and benefits with change of other net technical provisions amounted to PLN 1,043 million, i.e. they dropped 4.4% in comparison with the corresponding period of 2015. This resulted mainly from the declined value of mathematical provisions in successive tranches of the individual structured product offered in
(by PLN 16 million, i.e. 13.0%) resulted mainly from the modification of the remuneration system in the agency network (more even distribution over time applied to the costs of concluding the agreements), lower year-on-year sales of the new protection products agreements in this channel, and, to a lesser extent, lower sales of unit-linked insurance in the bancassurance channel; • administrative expenses in this segment reached PLN
59 million, which means a drop in comparison with the previous year by PLN 1 million or 1.7%, mainly as a result of improved effectiveness of the agency network in terms of handling the individual products and, in addition limiting the expenses due to the application of cost discipline, inter alia in the scope of the costs of property and sales support.
The revenue of the investments segment constitutes of investment activity conducted with the use of PZU Group’s own funds defined as the surplus of investments over technical provisions in the PZU Group insurance companies seated in Poland (PZU, LINK4, and PZU Życie) increased by the surplus of investment income exceeding the risk-free rate from investments matching the value of technical and insurance provisions in the insurance products of PZU, Link4, and PZU Życie, i.e. the surplus of investment income of PZU,
LINK4, and PZU Życie over income allocated to insurance segments at transfer prices.
The operating profit of the investments segment (external operations only) amounted to PLN -570 million and was lower than in 2015 mainly due to result of Azoty Group’s share package, which was lower by PLN 479 million, and the continued low level of interest rates.
Alior Bank. On 18 December 2015, Alior Bank was subjected to consolidation, while the banking segment constituting a part of PZU Group’s results was separated on 1 January 2016. The comparison with 2015 presented below only aims to discuss tendencies, as the result of the bank has been contributing to the result of PZU Group since the beginning of
The main factors generating growth of Alior Bank total assets were produced by assets, receivables from clients
– growth by PLN 2.7 billion (resulting mainly from the raise of
In su ra nc e re su lt capital based on issuance of series I shares and accumulation of produced profits).
(NIM) was maintained in 2016 at the high level of 4.1% and, compared with the interest margin recorded in 2015, was lower by 50 bps. The reduced margin resulted mainly from the consolidation of the results of the separated part of Bank BPH
(the consolidation covered the interest result of the separated part of Bank BPH for only the period between 4 November 2016 and 31 December 2016) and the changes in asset structure based on growth of assets available for sale in the bank’s total assets from 10.6% at the end of 2015 to 15.3%
The result from impairment losses (included in the net investment result) in 2016 amounted to PLN -800 million.
higher, due mainly to the consolidation of the results of the separated part of Bank BPH and recognition of the restructuring provision of PLN 268 million in costs.
The cost to income ratio (C/I) amounted to 49.1% and was 2 p.p. lower than in the corresponding period of the previous year (in both excluding one-off’s events).
In 2016, the operating profit in the pension insurance segment amounted to PLN 74 million, i.e. it dropped by 8.7% compared with 2015. This was a result of: • fee and commission revenue, which exceeded PLN 110 million, i.e. dropped by 6.8% from the previous year. This change was the result of: ◦ decrease of PLN 7 million in the management fee resulting from a decline in PZU OPF average net assets,
PLN 41 million, i.e. were 2.6% higher than in the previous year. This change mainly resulted from: ◦ higher payments deposited in the Guarantee Fund by
PLN 3 million due to the new distribution form (online account),
• the operating income grew by PLN 3 million due to the collection of the motivational fee (PLN 2 million), revaluation of the provision for return of fees from premiums overpaid by ZUS (almost PLN 1 million), and release of provisions for sending the annual fund information for 2015 (PLN 1 million); • other operating costs dropped by over PLN 2 million due to the revaluation of the provision for the return of fees from premiums overpaid by ZUS.
PZU Group generated a positive result on insurance in the amount of PLN 72 million in the Baltic states in 2016 compared with PLN 44 million in the previous year. This result was determined by the following factors: • drop in gross written premium. It amounted to PLN 1,183 million compared with PLN 1,193 million in the previous year, and the 2015 premium collected by PZU Lithuania reached PLN 231 million. Excluding the contribution of
PZU Lithuania, the non-life insurance premium grew yearon -year by PLN 146 million (i.e. 14.8%). This dynamic premium growth was made possible by the higher motor insurance rates in the region, increased property insurance premium especially in Lithuania where the company activated sales, and considerable growth of the written health insurance premium in Latvia. The life insurance premium rose by PLN 8 million (i.e. 19.5%); • higher investment income. In 2016, the result amounted to
PLN 23 million, up by 4.5% from the previous year; • increase in net claims and benefits. They amounted to
PLN 149 million. The non-life insurance claims ratio reached the level of 62.0%, up by 0.4 p.p. from the previous year.
It was, inter alia, due to the increase in large losses and higher rate of losses (resulting mainly from unfavorable weather conditions in winter of 2016). In life insurance, the value of benefits amounted to PLN 41 million, 40.1%
higher than in the previous year due to higher provisions on client risk; • drop in acquisition costs. The segments expenses for this purpose amounted to PLN 251 million. The acquisition cost ratio from the net earned premium dropped by 0.1 p.p. to 22.7%. Following the elimination of the contribution of PZU
year. Meanwhile, the drop was related mainly to the lower benefit payments in the life insurance company, which amounted to PLN 21 million, a drop of 48.9% from 2015.
PLN 24 million. For comparison purposes – in 2015, the administrative expenses of the segment amounted to
The administrative expenses ratio from the net earned premium rose by 1.6 p.p. to 22.0%.
The change in the segment’s result was determined by: • increase in the gross written premium. The premium amounted to PLN 210 million and increased by PLN 41 million (i.e. 24.3%) in comparison with the previous year. The growth of the non-life insurance premium
(i.e. 19.4%); • lower revenue from investing activities. This segment earned PLN 23 million in this respect, 43.9% less than in 2015, which was caused by the positive currency rate differences in the portfolio of investments denominated in
USD that were recognized in investment revenues in the previous year; • decrease in net claims and benefits. They amounted to
The consolidated statements present the investment contracts are in accordance with the requirements of IAS 39.
The results of investment contracts segment are presented as per the Polish Accounting Standards, which means that the following items were included: gross written premiums, paid benefits, and change in technical provisions, among others.
O pe ra tin g re su lt 15 In co m e
The following had impact on the results of investment contracts segment in 2016: • gross written premium from investment contracts dropped by PLN 55 million (-39.0%) from the corresponding period of 2015 to PLN 86 million. The main reasons for the changes in the gross written premium included the removal of the short-term life and endowment products from the offer starting with June 2016; • improved investment income. It amounted to PLN 18 million, i.e. was 12.5% higher than in the corresponding period of 2015, mainly due to improved interest rates in IKZE and funds in the unit-linked products in the bancassurance channel balanced with a lower level of investments in short-term life and endowment products; simultaneously, the declined unit-linked product assets had negative impact on the reduction of the management fee also covered in this reported item; • PLN 47 million lower value of net insurance claims and benefits and change of other net technical provisions resulting from the considerable drop in payments from gross written premium in short-term life and endowment products in own channel resulting from withdrawal of the product from the offer with June of 2016 (no significant effect on the result – corresponding effect in revenue).
lower than in the prior year; • lower acquisition costs. These amounted to PLN 4 million, i.e. they were 60.0% lower than in the prior year. This resulted from the lack of new sales and declined asset value in unit-linked products of the bancassurance channel (some of the bank’s remuneration is determined by the level of assets), and, additionally, from the lower engagement of the own network in sales of short-term investment endowments as well as, beginning in June, the withdrawal of the products of this type from the offer; • no changes in administrative expenses. Similarly to 2015, they closed at PLN 9 million.
In 2016, the return on equity of the dominating entity (PZU)
was 15.0%. ROE was 3.0 p.p. lower than in the previous year.
Claims ratio gross (gross claims and benefits with change in status of gross provisions/gross written premium) x 100%
Insurance activity costs for insurance segments ratio (Costs of insurance activity/premium earned net of reinsurance ) x 100%
Acquisition costs ratio for insurance segments (Acquisition costs/premium earned net of reinsurance) x 100%
Key profitability ratios of PZU Group 2016 2015 2014 2013 2012
Return on Equity (ROE) – falling to the dominating entity (annualized net profit / average equity) x 100%
Return on Assets (ROA) (annualized net profit / average assets) x 100% 2.1% 2.7% 4.6% 5.6% 6.0%
Return on Sales (net revenue / gross written premium) x100% 12.0% 12.8% 17.6% 20.0% 20.0%
Risk management aims to: • increase the value of PZU Group through active and conscious management in the amount of exposure to risk; • prevent acceptance of risk at a level which could threaten the financial stability of PZU Group.
Supervisory Boards exercise supervisions over risk management systems in particular regulated entities. In its subsidiaries, including Alior Bank, PZU designates its representatives to join the supervisory boards.
The organizational structure of the risk management system is consistent within PZU Group and in individual insurance companies within PZU Group and includes four competence levels.
The first three are as follows: • Supervisory Board, which oversees the risk management process and assesses its adequacy and effectiveness as part of its decision-making powers defined in the company’s By-laws and the Supervisory Board rules and regulations, as well as through the appointed Audit
Fourth level of competence relates to operational actions and is divided between the three lines of defense: • first line of defense – ongoing risk management at the business unit and organizational unit level and decisionmaking as part of the risk management process; • second line of defense – risk management by specialized units responsible for risk identification, monitoring and reporting, as well as controlling limits; • third line of defense – comprises internal audit, which conducts independent audits of the elements of the risk management system, as well as control activities embedded in the activity.
The risk appetite determines the maximum level of acceptable risk when setting individual partial risk limits and restrictions which, when exceeded, result in taking actions necessary to limit further risk growth.
Two levels are distinguished in the risk management process: • PZU Group level – ensures that PZU Group implements its business objectives in a safe way which is adequate to the degree of risk involved. This level engages the monitoring of limits and risks specific to PZU Group, such as: catastrophe risk, financial risk, counterparty risk, or concentration risk. PZU Group provides support in implementation of the integrated risk management system which encompasses introducing coherent mechanisms, standards, and operational organization of an effective internal control system (with special focus on compliance function), risk management system (especially in the reinsurance field), and security management system at
The process of risk identification starts with the idea of creating an insurance product and it lasts until the liabilities relating to it expire. Underwriting risk identification is carried out, inter alia by means of: • analysis of general insurance terms in respect of the accepted risk and compliance with generally applicable provisions of law; • analysis of general/specific insurance terms or other agreement templates in respect of the underwriting risk accepted under such agreements; • recognition of potential risks related to a given product, performed in order to measure and monitor them in the future; • analysis of the influence of introducing new insurance products on capital requirements and the Company’s risk margin calculated according to the standard formula; • verification and validation of changes to products; • assessment of underwriting risk viewed in the framework of similar existing products; • monitoring of existing products; • analysis of the policy relating to underwriting, tariffs, provisions, and reinsurance, as well as the claims and benefits handling process.
(underwriting) is the assessment of future claims and the reduction of anti-selection. Underwriting risk assessment covers also actions related to reinsurance of the largest and the highest risks.
Underwriting risk measurement is based in particular on: • analysis of selected ratios; • scenario method – analysis of impairment arising from an assumed change in risk factors; • factor method – a simplified version of the scenario method, reduced to one scenario per risk factor; • statistical data; • exposure and sensitivity measures; • expertise of company’s staff.
Monitoring and controlling the underwriting risk involve regular analyses of the risk level and determination of the utilization level of the agreed risk tolerance thresholds and limits specified in the Risk management strategy in PZU Group.
Board. The frequency of individual reports and the scope of information is tailored to meet the information needs at different decision-making levels.
Administration activities in the underwriting risk management process are carried out, in particular by: • specifying the level of tolerance to underwriting risk and monitoring thereof; • business decisions and sales plans; • calculating and monitoring the adequacy of technical provisions; • tariff strategy, as well as monitoring existing estimates and assessing the adequacy of the premium; • process of assessment, measurement and acceptance of underwriting risk; • use of underwriting risk mitigation tools, including, in particular, reinsurance and prevention.
Furthermore, in order to reduce the underwriting risk associated with the ongoing activities the following actions, in particular, are undertaken: • definition of the scopes of liability in the general/specific terms of insurance or other agreement templates in the financial insurance sector; • definition of the exclusions of liability in the general/specific terms of insurance or other agreement templates in the financial insurance sector; • definition of the scopes of liability and exclusions in the general terms of insurance; • reinsurance activities; • adequate tariff policy; • application of appropriate methodology of provisions calculation; • appropriate underwriting procedure; • appropriate claims handling procedure; • sales decisions and plans; • prevention.
Market risk in PZU Group originates from three key sources: • matching of assets and liabilities (ALM portfolio); • strategic allocation of assets, i.e. determining an optimum medium-term structure of assets (AA portfolios).
The process of identifying market risk related to insurance liabilities starts simultaneously with the process of creating an insurance product and involves identifying the relationship between the amount of cash flows associated with this product and the market risk factors. Identified market risks are assessed in terms of materiality, i.e. based on whether the materialization of a risk would be related to a loss that could affect the financial standing.
The risk measurement is performed: • for the measures of exposure and sensitivity of instruments; • when using a partial internal model.
Reporting consists of communicating the level of market risk and the effects of monitoring and control to the different decision-making levels. The frequency of individual reports and the scope of information is tailored to meet the information needs at different decision-making levels.
Management actions regarding market risk include, in particular: • concluding transactions to mitigate market risk, such as selling a financial instrument, closing out a transaction on a derivative, and purchasing a hedging derivative; • diversifying the portfolio of assets, in particular with respect to market risk categories, maturities of instruments, concentration of exposure in one entity, geographical concentration; • setting market risk restrictions and limits.
The setting of limits is the main management tool for maintaining risk positions within acceptable risk levels. The structure of limits for the individual market risk categories and the organizational units is defined by dedicated Committees in line with the risk tolerance determined by the Management
Identification of the credit and concentration risk takes place at the stage of making a decision to invest in a new type of financial instrument or the credit exposure to a new entity.
Identification is based on an analysis of whether a given investment is related to credit or concentration risk, on which its level and volatility depends. The actual and potential sources of credit and concentration risk are identified.
Concentration risk for a single entity is calculated in accordance with the standard formula.
Monitoring and controlling of the credit and concentration risk involve analyzing the current risk level, assessing creditworthiness, and determining the level of utilization of the limits set.
Reporting consists of communicating the level of credit and concentration risk and the effects of monitoring and control to different decision-making levels. The frequency of individual reports and the scope of information is tailored to meet the information needs at different decision-making levels.
and Alior Bank’s internal databases. Credit products are issued pursuant to applicable operating procedures that indicate appropriate activities to be performed as part of the credit process, as well as entities in charge and tools to be used.
Identification of operational risk is carried out, in particular, by means of: • collecting and analyzing information on operational risk incidents; • operational risk self-assessment; • scenario analyses.
Assessment and measurement of operational risk is carried out by means of: • identifying the results of operational risk incidents; • estimating the results of potential operational risk incidents which may occur in the course of business activity.
Management actions in response to identified and assessed operational risk involve in particular: • reducing risk by taking actions aimed at minimizing the risk, i.a. by strengthening the internal control system; • risk transfer – in particular by means of concluding an insurance agreement; • avoiding risk by not engaging in or withdrawing from particular business activity when excessive operational risk is detected and its restriction would be too costly to make the venture profitable; • risk acceptance – approval of consequences of a possible materialization of operational risk if its level does not exceed the tolerance level for operational risk.
The business continuity plans in the PZU Group companies are kept up to date and regularly tested.
Group; • monitoring of the compliance risk management process comprising in particular: performance of compliance risk analyses, review of the implementation of guidelines concerning compliance risk management provided by external entities; • providing consultation, interpretation, and guidelines in the scope of application of adopted standards of conduct and compliance risk management; • planning and realization of training, as well as conducting internal communication in scope of compliance assurance; • preparing reports and information in scope of compliance risk.
Compliance Bureau; • performing mitigating activities; • constant compliance risk monitoring.
PZU Group entities, as well as it monitors compliance risk at the PZU Group level.
The compliance units are responsible for delivering complete information on compliance risk at the Group’s companies.
PZU Group; • analysis of implementation of recommendations given to the companies with regards to realizing the compliance function; • supporting compliance units at PZU Group companies at compliance risk assessment process; • reporting to the Management Board and Supervisory Board of PZU.
Due to a wide scope of PZU Group’s operations, reputation loss risk is also influenced by the risk of court proceedings of variable value which pertain mostly to insurance companies within the Group.
Under compliance risk mitigation on a system and current level, among others the following mitigating activities have been implemented: • current realization of effective compliance function as one of the key functions in the management system at the PZU
Table on page 121 presents the results of the analysis of the net financial result and PZU Group’s revaluation reserve sensitivity to changes in interest rate risk, exchange risk, and equity instruments price risk. The analysis does not take into account the effect of changing interest changes for insurance or investment contracts presented as liabilities and Alior Bank receivables from customers.
Financial assets exposed to exchange risk include deposit transactions and debt instruments used to hedge payments from technical provisions denominated in foreign currencies, exposures to equity instruments listed on stock exchanges other than WSE, investment fund units and certificates, exposures to derivatives denominated in foreign currencies and financial assets of consolidated foreign insurance companies.
Table on page 121 shows a sensitivity analysis of the net result and equity to changes in the assumptions used to calculate the capitalized annuities. The analysis does not take into account the impact of changes in valuation of the deposits taken into consideration in calculation of the reserve on the net financial result and equity.
Change in assumptions used to calculate the provisions for capitalized annuities net of reinsurance in non-life insurance (PLN million)
In order to measure currency risk, Alior Bank applies a Value at Risk model which means a potential loss of value on the foreign exchange currency positions held, simultaneously maintaining the assumed confidence level and position holding period. To determine VaR, Alior Bank applies a variance and covariance method, maintaining a 99% confidence level. The value is determined daily for given areas responsible for risk taking and managing, separately and jointly. As at 31 December 2016, maximum loss on currency portfolio held by the Bank (managed under a business accounting book), determined on the basis of VaR in a 10-day horizon, could amount to PLN 280 thousand (PLN 106 thousand as at 31 December 2015), at the 99% confidence level assumed.
Reinsurance cover in PZU Group secures insurance activity, reducing the consequences of the occurrence of catastrophic events which could adversely affect the financial standing of insurance companies. This objective was realized through mandatory reinsurance contracts supplemented with facultative reinsurance.
Reinsurance share from PZU Życie obligatory contracts as per S&P rating
In addition, PZU obtains gross written premium from inward reinsurance from activity on the domestic and foreign market, mainly through optional reinsurance.
AAS Balta, LINK4, and TUW PZUW have reinsurance cover that matches their business profile and financial position. Every significant insurance portfolio is secured by a treaty contract.
The reinsurance cover is provided mainly by PZU, which transfers a portion of the accepted risk outside the Group.
On 3 October 2016, the Supervisory Board of PZU adopted a resolution regarding the confirmation of the Capital Structure and Dividend Policy of PZU Group for the years 2016–2020.
Council dated 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), as amended, the Act on Insurance and Reinsurance dated 11 September 2015, and the expiry of “The Capital Structure and Dividend Policy of PZU Group for the years 2013–2015”
The capital management policy bases on the following rules: • PZU Group’s capital management (including surplus capital)
at the level of PZU as a dominant entity; • maintaining target solvency ratios at the level of 200% for
amounted to 252.6% 1. Ratios as high as these place PZU
In Alior Bank, solvency ratio and Tier 1 ratio have been calculated on the basis of the Regulation (EU) No 575/2013 of the European Parliament and of the Council dated 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR Regulation), as well as particular risks identified upon internal capital adequacy assessment process
In January of 2016, the Polish capital market was shaken up by the unprecedented decision of the S&P Global Ratings to lower Poland’s rating and assign a negative outlook. CHAPTER
II of the pension system (open pension funds) and successive scenarios concerning the banking system’s burden resulting from the revaluation of frank credits, which had a negative impact on the major Warsaw index WIG20 heavy weighted in banks.
(profitability between 2.6%–3.3%) suddenly dropped and moved profitability up to 3.6% (quarter-on-quarter growth of 71 bps). During the same time, WIG20 saw the quarter-onquarter growth of 13.9% to 1,947.92 points. The improving situation on the stock markets was supported by speculations on a potentially greater than expected stimulation of American economy (the so-called reflation, which assumes the existence of a fiscal impulse in the US which leads to acceleration of economic growth and increase of inflation, as well as simultaneous raise of interest rates by the Fed and growth in the profitability of US Treasury bonds) resulting from Donald
In 2016, MSCI Poland presented high fluctuation when compared with the MSCI of Emerging Markets. The reasons included the weighing of the financial companies in this portfolio (47.6% at the end of 2016; including PZU weight of 9.9%), which experienced major pressure from e.g. statutory regulations. At the end of 2016, the MSCI of Emerging
any influence on share capital). Following the split, the share price decreased 10 times and the number of shares increased 10 times. The main objective of the split was to make the PZU
In 2016, the most important Polish index, WIG20, fluctuated in the range of 1674-1999 points, closing the final session of the year at a level close to the year’s maximum, i.e. 1,947 points (up by 4.8% year-on-year). The broad WIG market index closed 2016 by recording 51,754 points, up by 11.4%
PZU’s share in the trading of the whole exchange reached 8.9% (4th place).
In 2016, the maximum PZU share price (calculated at session end) amounted to PLN 36.30. The price reached its bottom soon after the dividend (PLN 2.08 per share) from 2015 profit was cut off from the share price on 30 September 2016. The price per share at the end of this session was PLN 24.38, a historical low since PZU’s debut on the exchange.
Consequentially, the volatility of PZU share prices in all of 2016
The long-term correlation of WIG and MSCI of emerging markets (between May 2010 and the end of 2016) reached 88.9%. This factor was at 92.0% in 2015 and dropped to almost zero in 2016. Finally, by the end of 2016, the inflow of capital on the Polish exchange once again moved WIG20 closer to the MSCI of Emerging Markets once again.
On 30 November 2015, PZU split its shares, the operation consisted in decreasing the nominal value of shares from PLN
(for comparison, its value at the end of 2015 was negative: -23.8%). The dividend rate (calculated in relation to the share price at the end of 2016, i.e. PLN 33.21) was 6.26%
In 2016, PZU’s shares retained high liquidity. The average spread of the year reached only 9 bps (the average for the top 20 companies with the biggest trading value was 18 bps).
The average number of transactions involving PZU shares per session was 4,169 (a 25.3% increase year-on-year). The highest trading volume, i.e. 11.5 million units, was recorded on 24 August 2016 (with 1.1% growth of the share price at the end of the session), i.e. on the day of announcement of the PZU Group Strategy for the years 2016–2020. For comparison purposes, the highest trading value in 2015
PLN 716.7 million (+2,6%) at a high trading volume of 10.5 million shares.
Min/max PZU share prices following the session end in the years 2010-2016 * Share prices from 12 May 2010 (PZU’s IPO on WSE). Source: Reuters 1,500 pts 1,700 pts 1,900 pts 2,100 pts 2,300 pts 2,500 pts 2,700 pts 2,900 pts 3,100 pts
The last day which entitled to receive the right to a dividend (in accordance with a settlement cycle T + 2)
As at the end of 2016, the capitalization of WSE companies rose by 7.8% year-on-year to PLN 557 billion (including 19 new entities that had their IPOs lunched in 2016). The P/E
Value of the volume (PLN million) 16,754.98 20,144.56 18,400.72 19,970.38 18,152.22
Average value of the volume per session (PLN million) 66.8 80.3 73.9 80.9 73.2
Average number of transactions per session 4,169 3,329 2,495 2,369 1,660
Average trading volume per session (item) 2,225,086.9 1,872,704.5 1,635,531.0 1,882,186.2 2,119,549.9
is composed of two assimilated series (under one ISIN code: XS1082661551) with nominal value of EUR 500 million and
EUR 350 million issued on 3 July 2014 and 16 October 2015, respectively.
The liabilities arising from the bonds were secured by a guarantee granted by PZU. The bonds bear interest at a fixed interest rate of 1.375% per year and the coupon is paid once a year. The redemption date falls on 3 July 2019.
PZU Group’s debt ratio as at 31 December 2016 amounted to 28.1%3.
3 PZU Group’s leverage ratio – quotient of the debt from long-term financial liabilities (excl. loan commitments) and the sum of: debt from long-term financial liabilities and PZU Group’s equity less: the value of intangible assets, deferred acquisition costs and deferred tax assets, which have been presented in consolidated financial statements of PZU Group.
Moreover, as at 14 March 2017 PZU Supervisory Board approved the request of the PZU Management Board to the
P/E Price per share / profit per share 14.73 12.54 14.14 11.77 11.60
EPS (PLN) Net profits (losses) of owners / number of shares * calculation based on PZU Group’s data (according to IFRS)
In 2016, the assessment of Bank Pekao had a negative effect on WIG Banks. At the last session of 2016, the price of the
in the Bank’s capital) rose by 2.3% (i.e. PLN 147.0 million) at the end of 2016.
Analyses of Alior Bank share prices in 2016 should recognize the issue of shares (for the purposes of purchasing the basic activity of Bank BPH). From the technical point of view, the transaction had a direct impact on the quotation of shares on
WSE, i.e. the „Theoretical Value of Pre-Emptive Right6” in the amount of PLN 12.4 per share was cut from the shares of Alior
5 Total return index (during its calculation both the prices of shares included in the index and the income from dividend and pre-emptive right is taken into account)
Board undertakes various investor relations activities aimed at improving transparency of the company. Therefore, PZU consistently applies „Principles for PZU to Conduct its Information Policy for Capital Market
Aviva Otwarty Fundusz Emerytalny Aviva BZ WBK (5.1% of the share capital) CHAPTER 10.6 PZU SHARE CAPITAL AND
According to the surveys conducted at the end of 2016, the shareholding structure of PZU remained stable. The foreign investors’ share increased by 1.2 p.p. to 33.1%. The change in this group resulted mainly from the North American capital, the share of which rose by 2.1 p.p. year-on-year to 12.0%.
WSE data7 concerning trading on the whole market, which shows that their share (in the stock market) at the end of 2016 was 53% (+2 p.p. year-on-year), while the share of 7 Source: prezentacja.pdf
(to 66.9%) and the rising activity of the investors from Great
The share of Polish institutional investors remained at a level similar to that of 2015, i.e. at 26.7% (up by 0.1 p.p. year-onyear ). This included both OPF and TFI raising their share by a few bps. As at the end of 2016, their share amounted to 19.1% and 5.3%, respectively.
0,0 p.p. y/y * Polish State Treasury – 34.2% share in capitalchange 2016 vs 2015
shareholding in 2016, i.e. 1 p.p. less than in 2015. The low involvement of this group reflects the structural trends of the
Polish capital market. In 2016, the share of individual investors in the trading of shares on WSE reached only 13% (much like in the years 2014–2015); for comparison purposes, the 2010 (the year of PZU’s IPO GLOSSARY) share of this group in trading was roughly 20%.
The share of individual investors located outside of Poland remained the same level as in 2015, at 1.1%.
H1 2016 and Q3 2016) was presented and discussed by the
raportroczny2015.pzu.pl. The report was awarded the highest distinction for the best annual online report in a prestigious competition held by the Polish Institute of Accounting and
In 2016, PZU organized 163 meetings with nearly 288 institutional investors and over 132 meetings and teleconferences with analysts issuing recommendations concerning PZU shares.
In 2016, PZU took part in the „10 na 10 – komunikuj się
came third; • Third place for the President of the Management Board
Investor Relations - Piotr Wiśniewski) in the top investor relations in Poland ranking in the Extel 2016 survey; The Extel survey included 16 thousand people from investment environment from 75 countries. 5.5 thousand individuals and over 1.5 thousand companies were subject to the survey in the field of investors relations conducted by representatives of brokerage houses and investment analysts. All data used for drafting the ranking were subject to an external audit which ensures their credibility and correctness.
P/E ratio (Price to Earnings) for PZU’s shares at the end of 2016gggggggggggggg14.7
Number of sell-side recommendations for PZU’s shares at the end of 2016 9 BUY
S&P Financial strength and Credit rating for PZU and PZU Życie at since 2014 the rating is one notch above foreign currency sovereign rating on PolandPLN 42.4
Share of foreign investors in PZU’s shareholder base at the end of 2016 non deal roadshows in London and New York/Boston
amounted to PLN 36.00 and was lower by 16.3% compared with the price median at the beginning of the year. The maximum target price was PLN 42.4 and was 14.8% lower than the maximum target price from January 2016 and, simultaneously, higher by 27.8% than the price of PZU shares at the final session of 2016.
On average, analyst recommendations in 2016 were higher by 19.7% than the PZU market assessment. This difference started to quickly diminish in the second half of the year. In
October of 2016, the ratings of PZU shares exceeded the minimum recommended target price, which was associated, among others, with the positive reception of the PZU dividend policy for the years 2016–2020. The further dynamic growth of share prices raised the average analyst assessment only by 4.0% above the market assessment of PZU shares on
PZU on capital and debt market 8.7 PZU Group’s capital and dividend policy
European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and
According to the Policy, PZU Group is aiming towards: • effective capital management through optimization of capital use from the perspective of the Group; • maximizing the rate of return for the shareholders of the parent company, especially alongside with ensuring a steady safety level and maintaining capital funds for strategic development through acquisitions; • ensuring enough funds to cover the Group’s liabilities towards its clients.
Maintaining own funds of PZU Group, excluding subordinated debt, at the level of no less than 250% of PZU Group solvency margin
Maintaining PZU Group's leverage ratio at a level no higher than 35%.
Securing funds for development and acquisitions in the years to come.
adopted the resolution on the distribution of the net profit for the year ended 31 December 2015, in which it decided to allocate to the dividend payment the amount of PLN
1,796,127,840.00, i.e. PLN 2.08 per share. 30 September 2016 was chosen as the date according to which the list of shareholders entitled to the payment was established.
• maintaining target solvency ratios at the level of 200% for
Solvency II); • maintaining PZU Group’s leverage ratio at a level no higher than 35%; • providing funds for development and acquisitions in the upcoming years; • no share issues by PZU in the period of the Policy being in effect.
The capital management policy of PZU Group and PZU is based on the following rules: • PZU Group aims to effectively manage the capital and maximize the rate of return for the shareholders of the parent company, especially alongside with ensuring a steady safety level and maintaining capital funds for strategic development through acquisitions; • the dividend amount proposed by the Management Board of the dominating entity paid out by PZU for the given financial year is established based on the consolidated financial result of PZU Group assigned to the dominating entity, where: ◦ no more than 20% will raise the profits detained for purposes of organic development, innovation, and realization of growth initiatives (supplementary capital); ◦ no more than 50% is subject to payout in scope of annual dividend; * dividend from surplus capitalspaid in 2013 (PLN 2.00 per share) ** By the date of preparing this Management Report of PZU Group, the Management Board had not adopted a resolution concerning distribution of profit for 2016.
Earnings per share (EPS) Dividend per share (DPS) Dividend payout ratio from the consolidated result (%)
* dividend from surplus capital was paid in 2013 (PLN 2.00 per share)
„A-”. The rating outlook remained negative. The rating was confirmed after PZU Group’s release of information on 8
December 2016 on agreeing to the purchase of 20% of the shares of Bank Pekao.
On 20 June 2014, S&P awarded a rating of „A-” for unsecured debt to the Eurobonds issued by PZU Finance
AB. In October 2015, PZU bonds valued at EUR 350 million were issued. These bonds were assimilated and, together with the Eurobonds at value of PLN 500 million issued by
Eurobonds issued by PZU Finance AB was lowered to the level of „BBB+”. It continues to be a so-called investment rating.
Życie results from an analysis of the financial information, competitive position, management and corporate strategy as well as the financial situation of the country. It also includes outlook, i.e. an assessment of the future position of the
„A-” with negative outlook, simultaneously removing it from the „watched” list on which is was placed on 18 December 2015.
Consolidated net profit of PZU Group (in PLN million)* 2,417 2,343 2,968 3,295 3,254
Standalone income of PZU (in PLN million) 1,593 2,249 2,637 5,106 2,581
Dividend paid per year (in PLN million) n/a**** 1,796 2,591 4,663 2,565
Dividend per share per year (in PLN) n/a**** 2.08 3.00 5.40** 2.97
Dividend payout ratio from the consolidated result for the year** n/a**** 76.7% 87.3% 89.1%** 78.8%
Dividend rate in the year (%) *** 6.3% 8.8% 7.0% 11.1% 5.1%
Financial strength rating A- /Negative/ 22 December 2016 A- /Watch Neg/
Country Rating and outlook Date of update Rating and outlook Date of update
EUR 350 mln to 07/03/2019 BBB+ 21 January 2016 A- /Stable/ 12 October 2015
Contents: 1. We address the needs 2. We hold our people in high esteem 3. We support the community 4. We care about the natural environment 5. Selected initiatives of social responsibility of business in other companies of PZU Group
The long-term sustainable approach to business is confirmed by PZU’s presence in the RESPECT Index of socially responsible companies (Warsaw Stock Exchange index).
These values compose the common operating philosophy and serve as the foundation of PZU Group’s 2020 strategy
Sustainable development and social responsibility in business are at the same time the way to build the best value offer for the clients of PZU Group, as well as the most accurate answer to the needs of other stakeholders. The CSR GLOSSARY activities undertaken in support of business objectives build the brand’s reputation, its image, and social capital.
„We see all human beings as important and we want to create a better future for everyone”
For over 200 years, PZU Group has done its best to meet expectations and keep its customer services at the highest level. We respect all principles included in the Code of Good
In order to ensure safety and guarantee top quality cooperation to our clients and other stakeholders, PZU is constantly analyzing data from all available communication channels and other information sources. The conclusions drawn from such analyses allow us to continually improve our business processes and relations with our clients. The tools used by PZU to analyze the clients’ needs and expectations include the following: • client satisfaction surveys – PZU and PZU Życie hold regular and advanced surveys concerning customer satisfaction and loyalty. PZU Group conducts satisfaction surveys during every process and in every sales channel. That helps us to gain even better understanding of the market. The surveys were carried out among over 40 thousand participants and their results allowed not only to better determine the clients’ needs but also indicate organizational strengths and identify the areas for improvement and change. The 2016 surveys showed that the satisfaction level among PZU
clients who benefited from the claims handling process managed by PZU Group or received payment of benefits within the last 12 months was 8 p.p. higher than at the competitors. The Net Promoter Score (NPS) GLOSSARY
LINK4 clients, NPS amounted to 6% and was by 4 p.p.
manners of communicating with them, marketing materials, or social activity; In PZU, the client’s opinion serves as an important element in building the offer and service standards; • social media and clients’ complaints – PZU communicates with all stakeholders e.g. via expert blogs or social media, such as Facebook, Twitter, Linkedin or Instagram. Such platforms enable better communication with a diversified audience and thus allow for better identification of the areas for improvement. On the other hand, using modern communication channels strengthens the image of PZU
as a customer-friendly and contemporary company, which welcomes comments and encourages discussion with its stakeholders. “We want to be where our clients are”; • audits of the quality of communication with clients – PZU
audits the language of communication with the clients together with the Department of Plain Polish Language at the University of Wrocław. It checks whether the communication is effective, friendly, and understandable, and also whether the language used is the same as the one the client writes in. In this case, it is important to study communication in the social media, which is gaining popularity as a communication channel; • data mining models – advanced analytics supported by the practical business know-how of experts allowed for the development of models which effectively find information in data warehouses. Data mining models directly support all marketing and sales processes.
Most PZU branches are located in towns up to 15 thousand inhabitants and significantly contribute to the development of the towns and their communities. Striving for high accessibility of its products and services, PZU – as the first insurer in
PZU allows for a better and more comfortable service for the deaf and hard of hearing.
PZU pays particular attention to protecting the information of its clients. It follows personal data protection regulations and all legal requirements concerning the legality of the processed personal details, database registration, and security of the IT systems used to process personal information.
PZU Group has internal procedures regulating the security of information, including the personal data of clients. In its relations with its agents, associates, and other cooperators,
PZU requires that the top standards for protection of the interests of its clients are implemented, specifically when it comes to the legality of the data processing.
The Everest platform – the next step toward perfect relations with the clients
“ You have to create an attractive environment where the people are interested in the history they are creating” Carlos Goshn. CEO Renault/Nissan
– 16 dailies, 48 weeklies and biweeklies, 79 monthlies, and 11 quarterlies
Over fans have the Alior Bank fan card, which acts as ID, replaces traditional paper tickets, and also serves as a pre-paid card tons of paper annually
Corporate social responsibility by several dozen people and the project supports their organization by providing tools and communication. The initiatives are carried out in the following 4 areas: • involvement – initiatives building satisfaction and involvement of the employees (team building), e.g. soccer tournament, theater review (the Contact Center groups prepared plays for children with admission based on materials and toys for foster homes), Different Dress Code
satisfaction surveys for feedback, cohesive communication management outside of the Contact Center; • working conditions – initiative aimed to improve the comfort of work at the Contact Center, including changes to the arrangement, creation of diverse space by its users, and modification of performance-based reward systems allowing for raising remuneration based on the achieved results with consideration of the specific nature of a given helpline.
According to the good practices, all PZU’s employees have equal opportunities. This rule applies to the relations in all processes – from recruitment, through evaluation of results, promotions, professional development, to attendance in training courses. Our employees have equal opportunities and potential – their gender, age, proficiency, religious beliefs, political opinions, ethnic origin, sexual orientation, and form of employment are insignificant.
A committed employee of PZU is a person who thinks about the aims of their actions, their consequences for the company and its clients, and also the ways to cooperate with others in order to build an even more successful business. To turn
PZU into a friendlier workplace, the employees and their superiors have come up with a list of activities to potentially help out the process. One of the most popular initiatives was the establishment of the Sport Team. Today, the Association includes 11 active Sport Team units: running, cycling, skiing, squash, volleyball, CrossFit, soccer, sailing, basketball, table tennis, and triathlon, with plans for two more: dancing and
PZU / TFI PZU / PZU Pomoc / PZU Zdrowie) in the following cities: Warsaw, Łódź, Poznań, Opole, Wrocław, Katowice,
Kraków, Rzeszów. The PZU Sport Team is regularly among the leaders in amateur tournaments and open events, as well as those organized for employees of different corporations. The biggest accomplishments of 2016 included: • first and second place in the 38th Warsaw Marathon in the category of “Insurance workers – women” and the eleventh place in the category of “Insurance workers – men”,
PZU Group encourages its employees to perform active volunteer work and support their local communities and organizations. Their activity helps build permanent and longlasting relations, which have a positive effect on all of Group’s structures.
In 2016, the volunteering employees helped realize 66 projects for the benefit of over 8 thousand people. Most campaigns were dedicated to children, specifically those suffering from incurable diseases, the residents of educational care facilities, and those from poor families. PZU’s employees also remember about animals and have provided support to over six hundred of them, mainly cats and dogs, by buying them food and fittings, fixing their cages and yards, but mainly by spending time with them.
The members of PZU’s Management Board are also involved in volunteering. They offered sweets, books, and toys to the children of the Rehabilitation Ward of the Masovian Center of
[Volunteering is the Joy of Life].The main prize in the contest was a PLN 5 thousand grant for the realization of original projects. In 2016, the volunteering employees helped to carry out 40 projects for the benefit of local non-governmental organizations and the ones they support.
Come up with a wildly good idea – who you want to help and howc *
Gather a group of 3 PZU employees - choose your star, i.e. the leader
Ratunkowe (TOPR)].They have been attended by almost 1,500 people so far. PZU also promotes the Avalanche ABC, a project of TOPR and TPN [the Tatra National Park], which teaches conscious planning of trips and avalanche control. PZU Group has also signed a new prevention agreement with GOPR, which will be in effect until 2019. It will see the insurer donate money for the purchase of 7 quads and 700 hiking backpacks for GOPR in 2017 for all rescue groups in southern Poland.
• Bezpieczne wakacje [Safe vacation] – PZU not only educates but also actually helps parents make sure that their children are safe. During summer holidays, the biggest nationwide survey concerning the knowledge about safety among parents and children was conducted in the largest coastal towns. The survey was used to draw up a report, which confirmed that parents need our support in educating their children. Concerned about the safety of children, PZU
PLN 158,100 sports events participating in the Podziel się kilometrem (Share your kilometers) initiative 13 charity organizations received funds 13 thanks to our initiative
The campaign was open to everyone and there were special devices prepared for children.
in 2016. The website will connect donors with the patients seeking funds for additional therapy and rehabilitation and will supplement public funding for oncologic therapy.
Onco-Olympic Games. This is the only athletic event in the world for young competitors suffering from tumors. For such children and youth, participation in the games means that they can return to their normal lives after the long treatment process. Over the time of the games, 300 child patients from oncology wards in Poland and selected ones in Lithuania,
Olympic medals in track and field, swimming, archery, soccer, badminton, and table tennis. The event was initiated and organized by Fundacja Spełnionych Marzeń [the Foundation of
In 2016, PZU acted as a sponsor and patron of national and local cultural events and focused on initiatives associated with the Polish national and cultural heritage. Group supports the
Muzeów [Night of Museums], preparing special PZU zones offering non-standard promotion of art and culture. In 2016,
Gallery at the National Museum in Warsaw. As the patron of the Museum, PZU wants to improve the security of both its priceless collections and visitors. PZU Group was also the patron of the celebrations commemorating the anniversary of the Warsaw Uprising and, since 2015, it has also served as the patron of the Warsaw Uprising Museum, thus contributing to preserving the memory of this special event in the Polish history.
For more information about selected programs and projects, visit PZU’s website PZU.
(CHAPTER 3. PZU GROUP’S OPERATIONS), its direct impact on the natural environment is limited. PZU’s initiatives take two forms: of responsible internal resource management and of building environmental sensitivity and awareness among stakeholders - employees, clients, business partners, suppliers, and representatives of local communities. For example, PZU
This product, which is an economic stimulator, supports pro-ecological activity of enterprises, the operations of which expose them to costs resulting from the need to return the environment to its initial condition.
– electronic data carriers and limiting the use of paper in business are important aspects of this activity. In recent years, equipment such as new printers which automatically print on two sides and the use of irrelevant office materials for office printing have allowed us to reduce paper consumption. Abandonment of paper press - 116 dailies, 48 weeklies and biweeklies, 79 monthlies, and 11 quarterlies – has helped reduce the annual paper consumption by 13 tons. In order to reduce power consumption, we install energy-saving lighting and heating systems. We also focus on responsible waste management and strive to achieve the full recycling level; • choice of the back office headquarters with attention to ecological aspects – the Konstruktorska Business Center building, which houses PZU’s back office, is powered entirely by energy from renewable sources and offers over 30 locations for charging electric cars. The building was designed with special attention devoted to environment protection – it has the BREEAM certificate GLOSSARY.
The categories evaluated for the certificate include air quality, energy and water consumption, low waste levels, use of eco-friendly materials, and providing good working conditions; • employee education – key initiatives in this area include: campaigns regarding use of consumables, recycling, e.g.
PZU Group’s other insurance companies (specifically those in the Baltic states and LINK4). The positions of AB Lietuvos
Draudimas and AAS BALTA – the leaders of the insurance markets in Lithuania and Latvia respectively – also entail obligations, just like the role of PZU in Poland. But a responsible action is mainly the way of thinking introducing the standards of corporate responsibility into everyday
The mission of AB Lietuvos Draudimas is to be a “trusted expert and leader who sets new trends on the non-life insurance market and regularly creates and provides innovative solutions for all Lithuanian residents and enterprises”. The company is a socially responsible enterprise and employer. Its CSR GLOSSARY activity in 2015 covered the following key projects: “Stwórzmy bezpieczny świat“ [Let’s create a safe world] (improving traffic safety), “Wsparcie społeczności lokalnych” [Support for local communities]
(initiatives strengthening the sense of identification with local communities, employee volunteering), “Razem tworzymy historię” [Linking history] (support for national pride projects, promotion of modern heritage, financial education, social integration of youth). By supporting and taking part in various campaigns, the company is trying bring together as many people as it can and organize them around a common objective to solve problems, protect the community, and stimulate changes contributing to the creation of both a safer future and balanced society.
In 2016, Lietuvos Draudimas took part in the following social campaigns: • „Zero agresji” [Zero road range] – campaign motivating reduction of road rage. 85 special road signs were installed in 25 Lithuanian cities by the end of 2015.
As the leader of the insurance market and a responsible employer, AAS BALTA wants to actively participate in the life of the Latvian community. In 2016, the company’s volunteering employees supported six social projects on a national scale.
Corporate Vehicle Fleet”. The “Safety in beaches” project included an educational campaign concerning the rules of safety near water and on all public beaches in Riga, whereas information signs promoting safe behavior were placed throughout the commune. The company has been supporting the “Honor families 3+” program for the past three years. This is a national support program for Latvian families with three or more children. The company also cooperates with the state blood donation center, takes part in numerous charity and sponsored campaigns, and supports animal shelters and tree planting campaigns.
LINK4 engages in various social activities. It actively supports the operations of the Bartek Kruczkowski
Krwiodawstwa i Krwiolecznictwa [Center for Blood Donation and Haemotherapy]. The charity campaigns have also been initiated by the employees. They organized the pre-holiday fair, took part in Szlachetna Paczka [Noble Gift], and collected money for an animal shelter last year. The employees also collected money for their colleagues who had found themselves in a difficult life situation.
In 2016, LINK4 also provided support for the interesting grassroots project “Serce Twojego samochodu” [The Heart of Your Car]. The initiative was started by four graduates of the class with additional medical rescue program from the
LXXV Jan III Sobieski High School in Warsaw, who decided to intervene and make first-aid kits mandatory in cars. They organized a campaign and handed out first aid kits to drivers to make them aware that this small box can actually save a lot of lives.
From its very start Alior Bank has been customer-oriented through its consulting services based on advantages and adaptation of products to customer expectations. This approach lets Alior Bank play a leading role in the Polish bank sector in the scope of maintaining and promoting high service standards, which has been confirmed by numerous awards and distinctions.
The employee benefits offered in 2016 by Alior Bank focused on the following three aspects: support for the families of the employees, promotion of active sports, and inspiring the professional development of women.
To support the athletic initiatives of its employees, the Bank has 11 sports divisions. Each of them associates a group of employees around the idea of active competition in a given sport and its promotion among a wider audience.
The 2016 initiatives also included continuation of the professional development program for women. Its main objective is to build organizational culture where women can take full advantage of their potential by sharing their experiences and transferring knowledge.
Alior Bank was the patron of the 2nd edition of the “Stolica
festival in Szczebrzeszyn, which took place at the turn of July and August 2016. The event, which promoted classic and contemporary Polish literature as an essential element of the social and national identity, reached the rank of one of the most important literary festivals in Poland. Its second edition was attended by 12 thousand people. Alior Bank was also the patron of the concert performed by Zbigniew Wodecki and the
In 2016, Alior Bank became the benefactor of the holiday illumination on Warsaw’s Nowy Świat. The bank handled the special appearance of the representative street for the second time. Thanks to the illumination, the residents of Warsaw and tourists were able to stroll along Nowy Świat and look at the unique holiday decorations until early February.
[Santa’s Advertising Block] – a charity campaign organized by the Polsat Foundation. The holiday spot of the bank promoting a new form of credit was aired in the advertising block, the profits from which went to the children that the Foundation supports. “Mikołajkowy Blok Reklamowy” was watched in 2016 by over 6 million viewers. PLN 1,2 million was collected and it will all go to the treatment and rehabilitation of sick children.
The competition was organized in cooperation with the best cultural institutions in Warsaw: the Syrena Theatre, the
Association. In 2016, over 50 thousand fans were holders of the Bank’s Fan Card, which serves as an identification card and replaces traditional paper tickets. It also serves as a prepaid payment card. This is a key element associated with the multimedia platform “Łączy nas piłka” [Soccer unites us]. Alior
We understand that our duty as a leader is to set the highest standards for the entire industry.
3. Application of Corporate Governance Principles to supervised institutions 4. Control system applied during preparation of the financial statements 5. Entity authorized to audit financial statements 6. Share capital and shareholders of PZU, stock held by members of its authorities 7. By-laws of PZU
On 13 October 2015, a new set of corporate governance rules under the name of “Good Practices of Companies quoted on
(“PIU”), an organization associating insurance companies operating in the Polish market is another document determining the manner of business operations and of developing relations with stakeholders. The document is available on the website: Further, the relations with stakeholders are based on our internal PZU Code of Good Practices. The document is available on the website: On 22 July 2014, Polish Financial Supervision Authority issued
In 2016, PZU followed the recommendations and regulations expressed in the Good Practices of Companies
• mutual real-time communication which allows shareholders to speak at the general shareholders’ meeting, while physically being in a different location than the place where the meeting is held,
At the moment, the PZU shareholders can watch a broadcast of the general shareholders’ meeting. The company, however, has not made a decision to introduce a so-called e-GSM.
PZU believes that there is a number of technical and legal factors which may obstruct the proper course of general shareholders’ meeting. The legal concerns refer to the possibility of identification of shareholders and checking relevant documents of GSM participants. The risk related to technical problems, such as the Internet connection or a potential external interference with IT systems, may disturb the operations of the general shareholders’ meeting and raise doubts as to the effectiveness of resolutions adopted in the course of such a meeting. If such risks materialize, this may impact proper application of the relevant principle as a whole.
Moreover, the following rules do not apply to PZU: • Rule I.Z.1.10 that refers to presenting on PZU’s corporate website financial forecasts – provided that the company has decided to publish them – published at least over the last 5 years, along with the information on the degree of their materialization, because as at these financial statements PZU SA was not publishing financial forecasts and estimations; • Rule III.Z.6 that refers to non-distinguishing of an internal auditing function in a company’s organization, because such a function was distinguished in PZU’s organization; • Recommendation IV.R.3 that refers to a situation where securities issued by a company are traded in several different countries (or on several markets) and in different legal systems, because PZU’s securities are traded exclusively on the Polish market.
Information on the PZU’ s application of recommendations and rules included in Good Practices of Companies quoted on WSE
Detailed information about the application of the Principles by PZU can be found on PZU’s website. That includes the principles whose application is partial, that is: • rule specified in § 8 section. 4. the Principles, facilitating the participation of all shareholders in the General Shareholders’
Meeting, e.g. by ensuring the active electronic participation in meetings; it should be emphasized that the current shareholders of PZU can follow the broadcast of the meeting, but the Company decided not to introduce the so-called e-GSM; in the assessment of PZU, there are many technical and legal factors that could affect the proper conduct of the General Shareholders’ Meeting. The legal concerns are related to the possibility of identifying shareholders and inspecting the ID cards of the GSM’s participants; the risk of technical problems, e.g. with the
Internet connection or a potential intrusion into information systems, can disrupt the work of the General Shareholders’
PZU complies with the principles specified in § 14 of the
Principles fully, which means that PZU’s Management Board is the only one entitled to and responsible for management of the operations of the company; furthermore, in accordance with the provisions of the labor law, the activities related to the labor law are performed by the governing body; in view of the above, PZU adopted a solution according to which the decision about appointment and dismissal of the person heading the internal audit unit is made, taking into account the opinion of the Audit
Committee of the Supervisory Board; the same applies to the appointment and dismissal of the person heading the compliance unit; the Management Board consults the Audit
The General Shareholders’ Meeting of PZU refrained from fulfilling the following principles: • rule specified in § 10.2 in the following wording: “Introduction of personal entitlements or other special entitlements for shareholders of a supervised institution should be justified and serve realization of the objectives
Corporate governance of this supervised institution. Having such entitlements by shareholders should be reflected in a basic act regulating operation of the institution.”
decision-making authority shall assess whether the agreed remuneration policy is beneficial to the development and safety of the supervised institution.”
Moreover, the following rules do not apply to PZU: • rule specified in § 11.3 in the following wording: “In the event that the decision concerning a transaction with a related party was made by the General Shareholders’
The elements which facilitate completing the process are the accounting principles (policy), the chart of accounts with a commentary and other detailed internal regulations approved by the Management Board of PZU specifying the key rules of recording business events in PZU and dedicated reporting systems.
Finance Division in the PZU and PZU Życie Head Offices, which is shared, i.e. organized based on a personal union. PZU
Independent Member and at least one must be qualified in accounting or auditing, as understood by the Act on Statutory
Auditors and Their Self-Governing Body, Auditing Firms and on Public Oversight. The Audit Committee is an advisory and consultative body to the Supervisory Board and is appointed to improve the effectiveness of the supervision of the correctness of financial reporting, effectiveness of internal control, including internal audit and risk management, exercised by the
• review of interim separate financial statements of PZU and of interim consolidated financial statements of PZU Group.
10.6 Share capital and shareholders of PZU, stock held by members of its authorities
Treasury’s share in the total number of votes and share capital of PZU. As per the above notice, that share amounted to 34.19% as at 31 March 2016.
As per the current report no. 17/2017, at the PZU SA Ordinary
Shareholders’ Meeting that was opened on 18 January 2017 and continued on 8 February 2017, the following shareholders held the majority share packages: State Treasury that held 295 217 300 of shares, which constituted 34.19% of PZU
share capital and translated into 295 217 300 votes at General
Shares or rights to shares held by persons managing or supervising
Report for 2015 (i.e. 15 March 2016) did any of the members of the Management Board or the Supervisory Board or the
The competencies of the General Shareholders’ Meeting, in addition to those specified in the Commercial Companies
• disposal of the enterprise or its organized part or its lease or establishment of a limited property right; • redemption of shares or issue of bonds; • creating reserve capitals and making the decision whether to use them and, if so, how; • division of the Company, its combination with another company, its liquidation or dissolution; • appointing and dismissing members of the Supervisory
The General Shareholders’ Meetings are held in Warsaw and convened by placing an appropriate announcement on PZU’s website in accordance with the method for providing current information specified in the Act on Public Offering, Conditions
Organized Trading, and Public Companies of 19 July 2005, i.e. in the form of current reports. Such announcement should be made no later than 26 days before the date of the
General Shareholders’ Meeting. From the date of convening the General Shareholders’ Meeting the announcement with materials presented to shareholders at the General
Shareholders’ Meeting. The rights of the shareholders and the method of exercising thereof at the General Shareholders’
GLOSSARY and the By-laws. Only persons who were shareholders of the issuer 16 days before the date of the
Meeting and exercise the right to vote personally or through a proxy. The power of attorney to participate in the General
In accordance with the Code of Commercial Companies, detailed procedures concerning participation in the General
Shareholders’ Meeting and exercising the voting rights are always presented in an announcement of the General
At least one member of the Supervisory Board must be qualified in accounting or auditing, as understood by the Act on Statutory Auditors GLOSSARY and Their Self-Governing
Company when the criteria are no longer met. In addition, the By-laws give the State Treasury the right to appoint and dismiss one member of the Supervisory Board by way of a written statement submitted to the Management Board. The right will expire once the State Treasury ceases to be the
On 1 July 2016, Jerzy Paluchniak resigned from his membership in the PZU Supervisory Board as at 1 July 2016.
PZU, and therefore the composition of the Board was as follows: • Paweł Kaczmarek – Chairman of the Supervisory Board; • Marcin Gargas – Deputy Chairman of the Supervisory
started on 1 July 2015 and will end after the lapse of three financial years. 2016 was the first financial year of the company. The mandates of members of the Supervisory Board expire not later than on the date of the General Shareholders’
On 8 February 2017, Eligiusz Krześniak resigned from his membership in the Supervisory Board with immediate effect.
Name and surname Term of office of the member of the Supervisory Board of PZU
Paweł Kaczmarek Deputy Chairman of the Board from 8 July 2015 to 18 January 2016
Marcin Gargas Deputy Chairman of the Board since 19 January 2016
Therefore, from 9 February 2017 to the date of signing the separate financial statements, the composition of the
Paweł Górecki Chairman of the Board since 14 March 2017 Member of the Board since 8 February 2017
Łukasz Świerżewski Deputy Chairman of the Board since 14 March 2017 Member of the Board since 8 February 2017
As at 14 March 2017 Paweł Kaczmarek and Maciej Zaborowski resigned from the functions performed at the presidium of the Supervisory Board of PZU and, from the same day, Paweł
He graduated from the Faculty of Law and Economy at the University of Wrocław and from
Specializes in handling legal matters for corporations and applying administrative, fiscal, and court and administrative proceedings.
Graduate from the Faculty of International Relations at the University of Warsaw. Doctor of economics. Obtained degree of doctor from the Collegium of Business Administration at the
Department of Corporate Communication and said department’s coordinator of the Strategic
Alojzy Zbigniew Nowak – Secretary of the Supervisory Board since 14 March 2017
Management (Member), Journal of Interdisciplinary Economics (Editor in Chief), Yearbook on
Polish European Studies, Mazovia Regional Studies, Gazeta Bankowa and a reviewer in PWE
Cambridge, Postgraduate School of Management, Grenoble, University of Zululand, RSA. He is a long-term Committee Member of “Teraz Polska” Award. Authored over 300 publications published in Poland and abroad. He gained his professional experience working as the Head of
International Business Relations Section at Management Faculty of the University of Warsaw, the Head of National Economy Unit at Management Faculty of the University of Warsaw, the
Director of European Center at the University of Warsaw, the Deputy Dean in charge of foreign cooperation at Management Faculty of the University of Warsaw, the Dean at Management
Faculty of the University of Warsaw and the Deputy Rector in charge of scientific research and cooperation at the University of Warsaw. Except University of Warsaw he gives lectures in
President of this company. From 21 January 2016, he has served as the president of the management board in Agencja Rozwoju Przemysłu S.A. He has nine years of experience in managing commercial law companies. The main domain of his activity was financing the investment projects, advising in strategic planning, restructuring processes, and audit and internal controlling. He is a licensed trainer and advisor specializing in strategic and organizational planning and project management. He is also experienced in defining and managing advisory projects in public administration and business. As a lecturer, he cooperates on a regular basis with the University of Warsaw, Collegium Civitas and Lazarski University, and many others. He is entitled to act as a member of the supervisory boards of companies whose shares are held by the State Treasury. He is experienced in supervising municipal heating companies. He published articles on public management in such periodicals as “Rzeczy
Wspólne”, “W sieci”, “Wprost”. He developed his personal accomplishments through pro publico bono activities by leading a think tank of the Republican Foundation as a co-author and expert, concerning especially the role the State Treasury companies play in realizing the objectives of the state, managing public sector in the context of focusing on development goals, and supporting national economic expansion through cooperation carried out within public sector. His main professional competencies are: ability to manage a commercial law company concerning the organizational, legal and financial aspects, experience in corporate supervision, skill in conducting processes of reorganization, restructuring, cost optimization and internal control, capacity of guiding horizontal controlling and auditing processes, qualification to define and supervise projects – especially the ones financed with EU funds, possession of the expertise in the field of energy and heating industry, and knowledge about the models of realizing the objectives of the state by the state-owned companies.
Agata Górnicka – Member of the Supervisory Board since 8 February 2017
Academy in Warsaw. Gained professional experience at Telewizja Polska S.A. in the years 2006–
2012, as Project Coordinator at the Bank Zachodni WBK Foundation in the years 2012-2013, as the Assistant to the Chairman of the Management Board at Bank Zachodni WBK S.A. in the years 2013–2014, and later as the Manager of the Office of Management and Supervisory Boards at
Bogusław Banaszak – Member of the Supervisory Board since 8 February 2017
(from 2005). Over the years 1977-2014, he was employed as an academic at the Faculty of
Polish Public Law. Over the years 1995-2005, he was a professor at the Wrocław Academy of Management and Marketing. From May 2006 to May 2010, he served as Chair of the
Legislative Council to the Prime Minister. Member of said Board since April of 2016. Member of the European Commission for Democracy through Law (so-called Venice Commission) since
April of 2016. From April of 2013, served as nominal member of the Group of Independent
(boards) of numerous domestic and foreign science magazines and member of several domestic and foreign scientific councils. Furthermore, correspondent member of the Spanish Royal
Academy of Moral and Political Sciences (from 2010) and the European Academy of Sciences,
Electoral Studies at the University of Łódź and the Nicolaus Copernicus University (2008 -2016),
(2001), the Knight’s Cross of the Order of Polonia Restituta (2008), the Order of Merit of the
Federal Republic of Germany Ribbon (2008), the Grand Cross of Merit of the Republic of Austria
(2000), the Grand Badge of Merit of the Republic of Austria (2007), the Austrian Cross 1st Class of Honor for Science and Art, and the 1st Class Badge of Righteousness of the World Jurist
Jerzy Paluchniak – Member of the Supervisory Board since 7 January 2016
Since November 2003, he has worked as a Certified Internal Auditor (CIA). In December 2005, he achieved the title of Statutory Auditor (No. 10649) and successfully passed all ACCA exams.
Besides his work as key chartered auditor in financial report audits, worked in management of projects concerning process reviews and audits, implementation of internal audit functions, and investigative projects. Obtained title of Certified Coach at KPMG. He provided job-related training in audit, accounting and personal and interpersonal competencies for the clients and employees of KPMG. Moreover, in his work at the KPMG office located in Wrocław, he was in charge of the activities concerning social responsibility of business. In the years 2016 – 2017 served as Internal
Paweł Kaczmarek – Member of the Supervisory Board since 30 June 2015
State Treasury and state legal persons, evaluation and analysis for ownership supervision and good practices in companies with shares held by the State Treasury, specifically those considered as companies important to state economy, and monitoring implemented strategic investment projects and assumed development paths of government programs and strategies.
Lawyer. Graduate from the Faculty of Law and Administration at the University of Warsaw. He completed also post-graduate studies in Intellectual Property Law at the Faculty of Law and
Administration of the University of Warsaw and post-graduate studies in Law of Evidence at the
Faculty of Law and Administration of the Cardinal Stefan Wyszyński University. Also completed legal training in the Warsaw Bar Chamber, concluded with a passed bar exam. He is also a graduate of Center for American Law Studies (shared initiative of the Florida State University and the Faculty of Law and Administration of the University of Warsaw), Leadership Academy for Poland, XVI School for Civic Leaders founded by Zbigniew Pełczyński of Oxford University in Great Britain, and the Academy of Young Diplomats (European Academy of Diplomacy), specialization: Foreign Service. He gained professional experience in several prominent law firms in Warsaw as well as the Embassy of the Republic of Poland in Rome, the Ministry of Justice, and the Sejm of Poland. He was also a member of several supervisory boards. Professional mediator of the Mediation Center to the Supreme Bar Council in Warsaw entered in the register of mediators of the District Court in Warsaw and legal internship lecturer at the Bar Chamber in Warsaw. Currently operates his own legal practice and is a Managing Partner of the Kopeć
Fundacja Odpowiedzialność Obywatelska. Laureate of the prestigious Risings Stars – Lawyers
Supervisory Board; • concluding, terminating and amending the agreements with members of the Management Board and setting the terms and conditions of remuneration and the amount of remuneration; • appointing, suspending and dismissing the CEO, members of the Management Board or the entire Management Board, as well as making decision to stop the suspension; • agreeing to transfer the entire or portion of the insurance portfolio; • accepting motions of the Management Board concerning acquisition, assumption or disposal of shares in companies, as well as the Company’s participation in other entities –
PZU Życie; • selection of the entity authorized to audit the financial statements which will audit the annual financial statements of the Company; • wording of the consolidated amended By-laws; • approval of the long-term plans for the development of the Company and annual financial plans drafted by the
Supervisory Board specifying its organization and the manner of performing activities. The regulations of the Supervisory
Supervisory Board and the committee is specified in a resolution of the Supervisory Board.
Chairman of the Supervisory Board has the casting vote. The resolutions of the Supervisory Board may be adopted using means of direct distant communication and in a written form.
Board and for resolutions with respect to appointing, suspending and dismissing the Chairman of the Management
Management Board as well and taking decision to stop such suspension which are adopted in a secret ballot. Moreover, a secret ballot may be chosen on request of a member of the
Supervisory Board; however, they cannot cast votes. In specific cases, the Supervisory Board of PZU may also invite members of the management board or a supervisory board of a different company in PZU Group. Moreover, members of the
The By-laws provide for appointing an Audit Committee by the Supervisory Board. The Committee is composed of three members, including at least one independent member qualified in accounting or auditing. Detailed tasks and terms and conditions of appointing members of the Audit Committee and its functioning have been specified in a resolution of the
Dariusz Filar was indicated by the Supervisory Board as an independent member, having accounting and audit qualifications as defined in Article 86.4 of the Act on Statutory
Audit Committee: • Marcin Chludziński – Chairman of the Committee; • Paweł Kaczmarek – Member of the Committee; • Jerzy Paluchniak – Member of the Committee.
Mr Jerzy Paluchniak was indicated by the Supervisory Board as a member with qualifications in accounting or auditing as understood by the Act on Statutory Auditors GLOSSARY art. 86 par. 4 and 5 since 19 January 2016. Furthermore, Mr Marcin
Statutory Auditors art. 86 par. 4 and 5 since 19 January till 18
Committee should consist of 4 people, while simultaneously establishing the following composition of the Committee: • Radosław Potrzeszcz – Chairman of the Committee;; • Marcin Gargas – Member of the Committee; • Paweł Kaczmarek – Member of the Committee; • Piotr Paszko – Member of the Committee.
On 18 March 2016, the PZU Supervisory Board changed the composition of the Promotion and Compensation Committee into the following: • Radosław Potrzeszcz – Chairman of the Committee;; • Marcin Gargas – Member of the Committee; • Paweł Kaczmarek – Member of the Committee; • Eligiusz Krześniak – Member of the Committee.
As at 31 December 2016, the composition of the Promotion and Compensation Committee did not change.
April 2013, it is an advisory and consultative body to the
As at 31 December 2016 the composition of the Committee did not change.
Committee should consist of 6 people, while simultaneously establishing the following composition of the Committee: • Alojzy Nowak – Chairman of the Committee; • Bogusław Banaszak – Member of the Committee; • Marcin Chludziński – Member of the Committee; • Agata Górnicka – Member of the Committee; • Łukasz Świerżewski – Member of the Committee; • Maciej Zaborowski – Member of the Committee.
Since 1 January 2016, composition of the Management Board was as follows: • Dariusz Krzewina – acting as Chairman of the Management
On 19 January 2016, Rafał Grodzki and Tomasz Tarkowski resigned from theirs membership in the Management Board as of 19 January 2016, and the PZU Supervisory Board appointed
Robert Pietryszyna as Members of the Management Board as of 19 January 2016, and Paweł Surówka as a Member of the
Management Board has been as follows: • Michał Krupiński – Chairman of the Management Board; • Przemysław Dąbrowski – Member of the Management
Board; • Roger Hodgkiss – Member of the Management Board; • Beata Kozłowska-Chyła – Member of the Management
Board; • Dariusz Krzewina – Member of the Management Board; • Robert Pietryszyn – Member of the Management Board; • Paweł Surówka – Member of the Management Board.
On 18 March 2016, Przemysław Dąbrowski resigned from his membership in the Management Board as of 18 March 2016. On 19 March 2016, Paweł Surówka resigned from his membership in the Management Board as of 19 March 2016.
• Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Sebastian Klimek – Member of the Management Board; • Beata Kozłowska-Chyła – Member of the Management
Management Board has been as follows: • Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Andrzej Jaworski – Member of the Management Board; • Sebastian Klimek – Member of the Management Board; • Beata Kozłowska-Chyła – Member of the Management
On 23 June 2016, Dariusz Krzewina resigned from his membership in the Management Board, and therefore the composition of the Management Board was as follows: • Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Andrzej Jaworski – Member of the Management Board; • Sebastian Klimek – Member of the Management Board; • Beata Kozłowska-Chyła – Member of the Management
On 30 August 2016, Sebastian Klimek resigned from his membership in the Management Board, and therefore the composition of the Management Board was as follows: • Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Andrzej Jaworski – Member of the Management Board; • Beata Kozłowska-Chyła – Member of the Management
As of 17 October 2016 Beata Kozłowska-Chyła resigned from her membership in the Management Board. On 14
The current term of the Management Board of PZU started on 1 July 2015 and will last until the end of three consecutive financial years. The mandates of members of the Management
Meeting or the Supervisory Board. The Company may be represented by two members of the Management Board acting jointly or one member of the Management Board acting with a commercial proxy. The Management Board adopts its regulations which are approved by the Supervisory Board. The regulations of the Management Board were adopted by the
Resolutions of the Management Board are adopted only in the presence of the Chairman or a person designated to administer the work of the Management Board during their absence.
Graduated from Warsaw School of Economics. He was awarded a diploma with distinction after the completion of expert studies in Economics at Catholic University in Louvain. Completed an
Harvard University. In 2012, was awarded the title of Young Global Leader by the Davos World
Economic Forum. He is fluent in the following languages: English, French, German and Spanish.
loans and guarantees, IDA loans and guarantees, IFC, investment guarantees and strategy and policies of the World Bank. Between 2006 and 2008 he was the Undersecretary of State in the Ministry of State Treasury, where he was responsible i.a. for ownership supervision. He supervised the program of energy sector consolidation.
Management Board of Link4 Towarzystwo Ubezpieczeń S.A., and since 2012 has been the CEO.
Until appointment to the Management board of PZU, he served as the Director of the Planning and Controlling Office. He prepared the PZU Capital Group’s strategy for the years 2016-20 and the capital and dividend policy. He is also on the Management Board of TFI PZU (and formerly on the Management Board of PZU Asset Management) and supervises finances, risk, operations, and IT. As coordinator of the work of the TFI PZU Management Board, he is also responsible for the corporate segment. He has many years of experience in insurance and financial institutions.
Graduate of the Warsaw School of Economics. He graduated from MBA studies at the University of Illinois and from the Warsaw-Illinois Executive MBA program. Member of the Association of
Andrzej Jaworski – Member of the Management Board of PZU since 14 May 2016 /
Graduated in humanities from the Institute of Ethnology and Anthropology of Culture at the
(The Baltic University). Furthermore, in 1999, Mr Andrzej Jaworski passed the State Exam for
Office of the Pomorskie Voivodeship’s Marshal. In 2003–2006 served as Vice President and subsequently President of the Management Board of Przedsiębiorstwo Gospodarki Maszynami
Polish scout troop in Vilnius. For many years, he founded and was active in numerous social organizations and worked for the benefit of the Pomorskie self-government.
Maciej Rapkiewicz – Member of the Management Board of PZU since 22 March 2016/
Graduated law at the Faculty of Law and Administration of the Łódź University, completed postgraduate studies in business insurance at the Academy of Economics in Kraków, MBA
Finance & Insurance at the Łódź University of Technology / Illinois State University, and doctoral studies at the Faculty of Economics of the Institute of Finances, Banking, and Insurance at the Łódź University. In 1998–2009, he was associated with PZU Group as Member of the
Management Board (in 2006–2009) and subsequently as Vice President of the Management