External environment 27 2.1 Main trends in the Polish economy 28 2.2 Financial markets situation 29 2.3 Polish insurance sector compared with Europe 31 2.4 Regulations on the insurance and financial markets in Poland 32 2.5 External environment in the Baltic states and Ukraine 35 2.6 Macroeconomic factors which can affect the operations of the Polish insurance sector and PZU
Activity of PZU Group 39 3.1 Structure of PZU Capital Group 40 3.2 PZU, Link4 and TUW PZUW – activity on the Polish non-life insurance market 41 3.3 PZU Życie – activity in the life insurance market in Poland 48 3.4 PTE PZU – activities in the pension funds market 52 3.5 TFI PZU – activity on the investment fund market 53 3.6 Foreign activity 54 3.7 PZU Zdrowie – activity on the health care market 57 3.8 Alior Bank – banking activity 58 3.9 Other areas of activity 59
Consolidated financial results 83 6.1 Key factors affecting the achieved financial results 84 6.3 Claims and technical provisions 89 6.4 Acquisition expenses and administrative expenses 89 6.5 Structure of assets and liabilities 90 6.6 Share of the industry segments in the results 92
PZU on capital and debt market 115 8.1 Share and bond market 116 8.2 PZU’s share prices 116 8.3 Debt financing 119 8.4 Investor relations 120
Q3 2015 share in the life insurance market in Poland as per regular premium after on a yearly average employment as per FTE
No.1 in written premium on the life insurance market in Poland of clients satisfied with claims handling process 13.2%
No.1 in written premium on the non-life insurance market in Lithuania and Latvia
The ROE (attributable to the parent entity) amounted to 18% and was 4.6 p.p. lower than the year before. Thus, last year was another witness to higher costs and lower profits.
As a result of the poor situation on financial markets, the investment result dropped by over 34% year–on–year, which means nearly PLN 1 billion. At the same time, the profitability in insurance business decreased. This tendency requires a strong reaction from us.
The weaker performance of the Group in recent times does not, however, undermine the foundations of PZU’s strong and stable standing. In the insurance sector, PZU continues to be the leader in Poland in non-life (31.2%) and life insurance
(43.9%, regular premium policies). PZU Group continues to be a leader in Lithuania and Latvia, where its share of the domestic, non-life insurance market amounts to 31.1% and 25.1% respectively. Even though the health insurance sector has not yet contributed greatly to the Group’s revenues, it can take pride in its dynamic growth. This can be observed in the gross written premium from group health insurance, which rose by 46% year–on–year. We continue to consolidate and use the effects of synergy with Link 4, which can be a relevant source of innovation and growth for the Group, in a similar way to the companies acquired in the Baltic states. At this point, it is also worth remembering that the Group acquired a 25% share package in Alior Bank.
I am sure that when we join together in a common effort and use the strong foundations of the Group, best practice, and innovative solutions offered by the global market; we will reverse the negative trends. We will transform PZU into a strong leader who actively conquers new markets, new clients, and new areas of business. I am sure that our shareholders share my optimism and I would like to thank them for their trust, which motivates both the Management
Ladies and Gentlemen, 2015 was a year of external factors whose variability affected the operations of PZU Group. It was a good time for the Polish economy, but less so for the insurance business. Insurers had to take into consideration a number of factors, such as low interest rates, a difficult capital market situation, and regulatory changes in Poland and in the European Union.
However, all these factors did not threaten PZU’s position as a leader in the Polish insurance market. As a result of its latest acquisitions (the purchase of several RSA Group companies, including Lietuvos Draudimas and AAS Balta), the Group also strengthened its position in Central and Eastern Europe. Today, we can say with pride that PZU is among the largest and most dynamic financial institutions in the region.
2015 was a good time for the Polish economy, but less so for the insurance business.
In 2015, there was also ongoing work on the new Act on Insurance and Reinsurance Activity as part of the implementation of the Solvency II directive. We now know that the capital standing of PZU after implementation of the
EU directive will remain strong. The ratios estimated at the end of Q3 2015 are nearly three times higher than the capital requirements. This puts PZU at the forefront of European insurers.
Authority (PFSA). In one of its open letters, the Authority requested that insurance companies review their profitability.
As a result, we should expect that the market will be forced to increase premiums for general motor TPL insurance. However, the implementation of the PFSA guidance by insurers should translate into improved profitability in this segment in the future.
The good news, on the other hand, is that a new record was set in gross premiums collected. In 2015, PZU Group sold insurance worth almost PLN 18.4 billion, 8.7% more than in 2014. Life insurance and motor insurance, especially thirdparty liability motor insurance, contributed most to that success.
We are closing 2015 with the ambition to improve on the indicators which adversely affected the Group’s results.
In the months to come, we will be focusing on trends in both the global and local economy. The current forecasts suggest that high price fluctuations on the global financial markets will continue to occur, which may, in turn, have negative effects on our investment result. The condition of Polish currency will be a major domestic factor as it affects spare parts pricing in motor insurance. The final operating result of the Group will also depend upon the level of taxation on the assets of financial institutions, which was introduced in January 2016.
The operations of the Group are focused on the 3 areas: Insurance, Investments, and Health care, while its core values continue to be: Transparency, Efficiency, and
Group) is one of the largest financial institutions in Poland and in Central and Eastern Europe. The Group is led by Powszechny
Since 2014, following the acquisition of Link4, the Group has been operating under two brands: a more traditional one, the PZU brand, and Link4, which is targeted to clients opting for electronic sales channels. By dynamically expanding its product and offer portfolio, the Group maintains its position as the market leader in non-life insurance (33.0% market share)
Wzajemnych – TUW PZUW was established and from 2016 is planned to focus on insurance for medical centers and contribute to optimization of contribution for its members.
PZU is intensively developing the health insurance segment and additional health care services under the PZU Zdrowie brand to meet the needs of PZU clients in an improved and more comprehensive manner.
Concerning the investment activity, the Group purchased a considerable stake in the share capital of Alior Bank
PZU Group by around PLN 40 billion by the end of 2015.
In the face of the continuously changing environment, growing customer demands, and operations of the competition, PZU
Our Strategy of Innovation focuses on promoting cultural patterns that facilitate innovation, including openness to change, thinking outside the box, and creating a space for experiments, with a strong accent on a “try and test” method that allows for new operating methods, and – as a result
The Group’s role as a “market watchdog” sees its innovative projects establish top quality standards of relations with the clients.
Operating efficiency is a necessary condition to build a competitive market offer and fulfill the Group’s obligations towards shareholders, employees, suppliers, and other business partners. One of the key projects aimed to increase operating activity is the Everest platform – a system implemented from 2014 in non-life insurance. The high operating effectiveness combined with the scale of the
Insurance - PZU Group offers a broad range of insurance products. The gross written premium for 2015 reached the record value of PLN 18.4 billion. PZU and PZU Życie are the leaders of the insurance market in Poland; The Group is also the leader in the Baltic states and a major player in Ukraine
Investments – PZU is the biggest asset-management company on the Polish market. At the end of 2015, the assets of external clients managed by TFI PZU and PTE PZU amounted to PLN 25.3 billion. PZU is also the unquestioned market leader in employee pension programs, managing 509 EPP
The activity undertaken in scope of the area of Health segment takes advantage of PZU’s long experience in medical policies. The purpose of PZU health insurance and medical subscriptions is to provide services at private medical establishments with qualified staff and high quality
PZU Group’s activity is focused on the following 3 areas: INSURANCE INVESTMENTS HEALTH CARE
Brief overview of PZU Group diagnostic equipment. With current PZU’s offer, patients are allowed to take advantage of extensive medical care – from diagnostics, through treatment, to rehabilitation. The activities in this segment will successively raise the number of medical establishments open to the Group’s clients. By offering medical services to the patients, PZU simultaneously guarantees the high quality of said services.
Nearly 16 million clients in Poland benefit from PZU’s services and products, 12 million of which in group and individually continued life insurance. On average, a typical individual
Polish customer of PZU takes advantage of 1.5 of the Group’s products. The 2015 surveys showed that the satisfaction level among PZU clients who benefited from claims handling by PZU
The Group focuses on the innovative profile of the product offer. PZU was the first institution in Poland to create the
The Group was the first to introduce medicine insurance on the Polish market.
Protection of property and securing thirdparty property against damage Accident cover Savings
• Pillar III of the pension system (employment pension products- EPP, individual pension accounts – IKE and individual pension security accounts – IKZE))
PZU has been quoted on the Warsaw Stock Exchange since 2010. The value of PZU’s first public offer (IPO) PZU was almost PLN 8.1 billion. This was the biggest IPO in the history of the Polish capital market, the biggest offer in Central and Eastern Europe from the beginning of the economic transformation, and the biggest IPO in all of Europe since
The remaining shareholders are both Polish and foreign institutional investors (various investment and pension funds)
Group’s value building used in communication with the capital market is TSR (Total Shareholder Return). Thanks to the care for generation of high free cash flows, the Group pays high annual dividends, which compose a considerable TSR
PZU’s share price listings between the IPO on the Warsaw Stock Exchange (12.05.2010=100) and 31.12.2015 roku
PZU TSR – total shareholder return, including dividend paid by PZU
PLN 34.02 287 pts 86.2% of shareholder return comes from dividends (to date PLN 17.30 per share)
Poor’s. On 21 January 2016, Standard & Poor’s rating of PZU
was lowered from “A“ to “A-“ with negative rating outlook. The decision to lower the rating of PZU resulted from the lowering of Poland’s rating from “A-” to “BBB+” with “negative” outlook one week before and had no association with the situation of the company, the activity of which presents a very high capitalization and security level. According to the rating methodology, PZU’s rating can only be one grade above that of its country, therefore the maximum possible S&P rating for
We value our people – the Group is continuously providing opportunities for its staff to develop their skills and competences, creating good conditions to develop their personal interests,
We care for the environment – PZU takes responsibility for the environment in which it operates.
Main consolidated financial data of PZU Group for 2011–2015 (PLN million)
Revenue from commissions and fees 242.8 350.8 299.2 237.1 281.4 * restated data for the period 2011-2014.
Net profit at PLN 2,342.2 million, i.e. 21.1% lower than in 2014, mainly due to the lower income from investments and decreased insurance profitability.
Dividend payment from 2014 PZU profit at PLN 2,590.6 million, i.e. PLN 30.00 per share (pre-split).
Stock split in 1:10 relation, i.e. from PLN 1 to PLN 0.10 and increase of PZU shares composing share capital to 863,523,000 with no change to the share capital.
Link4: Gross written premium PLN 493.2 million (including contribution to the result of PZU Group at PLN 138.8 million in 2014 from the moment of acquisition).
Gross written premium (according to IFRS) at PLN 7,922.9 million. Increase by 1.5% in relation to 2014 in the conditions of declining single premium (by 8.0%). High sales of protection (both group and individual) and group health products offset by lower sales of investment products mainly in the bank channel.
Maintenance of the third place on the market in both members (the fund had 2,208.4 thousand members for a market share of 13.4%) and net asset value (NAV of PLN 18.5 billion, i.e. 13.2% market share).
Generation of the highest rate of return among all Pension Funds in 2015.
Maintenance of the position of leader on the Individual Pension Security Accounts (IKZE) market among the voluntary pension funds as far as the number of participants is concerned.
Cooperation with approximately 1580 health care centers (compared to 1,380 at the end of 2014).
A 46% increase in gross written premium in medical insurance compared to 2014.
Lithuania: From November 2014, PZU Group has been operating on the Lithuanian nonlife insurance market through Lietuvos Draudimas – the market leader. The acquisition of Lietuvos Draudimas was conditioned by the sale of PZU Lithuania – the disinvestment took place on 30 September 2015. In 2015, Lietuvos Draudimas recorded a growth of the gross written premium by 6.8% from the previous year and reached the level of EUR 127.2 million. PZU Lithuania Life collected premiums in the amount of EUR 10.3 million (4.4% share in the life insurance market).
Capital investment in Alior Bank – purchase of 25.19% shares of the bank and launch of consolidation on 18 December 2015.
Issue of Eurobonds for EUR 350 million with maturity date of July 2019.
Setting up own fleet of replacement cars used for claims handling purposes composed of 300 hybrid vehicles.
Average annual employment of approximately 16.8 thousand employees calculated as FTEs. (excluding Alior Bank employees).
Implementation of the Innovation Strategy – promotion of pro-innovation cultural models.
Extensive training and development program for employees - SmartUp, TalentUp, MBA.
Latvia #1 • 25.1% market share in non-life insurance at the end of Q3 of 2015
• PZU Życie – 43.9% market share in life insurance by regular premium * in accordance with the PFSA report for Q3 of 2015, which is market and market share including indirect premium PZU from Link4
In 2015, PZU Group received numerous awards and prizes. Some of them are listed below.
Products: for Link4 in category of: motor insurance for TFI PZU for management of the PZU Papierów Dłużnych POLONEZ fund for PTE PZU in category of best OFE
Investor Relations: First place for: annual online report; 2014 PZU annual report, award for 2014 Management’s activity report
Platinum for the “Kochasz? Powiedz STOP Wariatom Drogowym” (If you love, say no to Reckless Drivers) campaign
Best employer for Lietuvos Draudimas and AAS Balta in Lithuania and Latvia for TFI PZU best Polish treasury bond fund for PZU Papierów Dłużnych POLONEZ
June 30 June – GSM approved dividend payment of the total amount of PLN 2,590.6 million.
Stable growth of gross domestic product, lower unemployment rate, increase in real incomes of households and favorable condition of polish enterprises set up positive macroeconomic environment for PZU.
Contents: 1. Main trends in the Polish economy 2. Financial markets situation 3. Polish insurance sector 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 2016
Do you love someone? Join us in saying STOP to Reckless Drivers
Domestic demand continued to be the key factor contributing to the economic growth, even though it grew less rapidly than in 2014 (3.3% vs. 4.9%). Improved situation on the labor market, as well as relatively stable real remuneration growth accelerated the dynamics of household consumption to 3.1%, compared with 2.6% in 2014. Savings increased as well. The pace of households consumption growth was exceptionally stable in 2015. The public consumption growth slightly decreased and reached 3.5% versus 4.9% in 2014.
In 2015 export grew slightly faster than import. As a result, the impact of net export on GDP growth in 2015 was only slightly positive (0.4 p.p.), whereas in 2014 the net export decreased the real GDP growth by 1.5 percentage point.
(9.8% in December compared with 11.4% at the end of 2014.) In 2015, the average monthly employment in the enterprise sector grew by nearly 77 thousand people and its annual dynamics reached 1.4% year-on-year in December 2015 compared with 1.1% year-on-year at the end of 2014.
Under the circumstances of deflation, the pressure on salary increases remained limited. The average monthly salary in the enterprise sector grew in 2015 by 3.2%, the same as the year before. However, due to the dropping consumer price index (CPI), the real salary increase was the highest since 2008. Taking the price changes into account, the average monthly salary in the enterprise sector was 4.2% in 2015 in comparison with 3.2% the year before. Similarly to 2014, salary in the enterprise sector in 2015 grew faster than in the public sector. The average monthly real dynamics of the remuneration fund in this sector in 2015 was on average 5.6%
The improving financial situation of households and more favorable labor market contributed to a growing consumption and savings of households. The individual consumption dynamics accelerated in 2015 to 3.1% compared with 2.6%
Decrease in consumer prices resulted mainly from global processes – global prices of crude oil and other resources strongly dropped, food prices remained low, and so did the inflation level in the countries being Poland’s key trade partners. At the same time, no demand pressure on price growth was observed in Poland, while production price decrease and limited remuneration pressure continued. Net inflation (CPI excluding food and energy prices) amounted in 2015 to an annual average of only 0.3% compared with 0.6%
In such conditions, in March 2015 the Monetary Policy Council lowered interest rates by 50 bps, including the reference rate, which was decreased to 1.5%. The decision was justified with prolonged deflation and higher risk of inflation remaining significantly below the target in the medium term.
The Monetary Policy Council also indicated that the process of monetary policy easing had been completed. No changes in interest rates were introduced till the end of the year. As per the Monetary Policy Council assessed in December 2015, leaving the interest rates at the same level contributed to maintaining the sustainable growth and macroeconomic balance of the Polish economy.
European Central Bank announced its quantitative easing program and begun to buy treasury bonds of Eurozone states. Consequently, the German 10-year bond yields were decreasing in subsequent months to the lowest historical levels, and temporarily amounted to less than 0.1%. Simultaneously, German stock exchange indices were exceptionally high. Both shares and treasury bonds were more expensive also on the Polish market.
CPI in Poland in 2015 Real growth rate of salaries in Poland in 2015
USA contributed to a larger difference between the German and US 10-year treasury bond yields that reached the highest level in years.
In the stormy first half of 2015, the Polish 10-year treasury bond yields reached both the lowest and the highest level of the year. They first dropped from 2.54% to 2.00% at the end of January and then increased to 3.37% at the end of June.
China where the prices on the stock market collapsed in mid-
a possibility that the European Central Bank would extend and prolong the quantitative easing program which was due to finish by September 2016. Thirdly – it was expected that the
In Q3 2015, the Polish yield curve significantly dropped and flattened. Externally, low yields were maintained as a result of the ECB’s and Fed’s monetary policy, which proved more accommodative than expected. What is more, persistently low inflation in Poland and the expected outcome of Polish election suggested that accommodative monetary policy in Poland would be maintained.
That period proved unfavorable for the stock market. Share prices decreased not only in Poland, but also globally.
Decreases in WSE indexes escalated in the last months of 2015. WIG20, an index of the largest companies, reached nearly 1700 points for the first time since 2009. After the peak in May, WIG dropped by nearly 24%. Several factors contributed to that situation. The US central bank increased the federal funds rate by 25 bps in December. That had been the first increase since 2006. The European Central Bank eased its monetary policy in December; however, the scale of easing was narrower than expected by the market. At the same time, the concerns related to the situation on emerging markets grew stronger. Raw material prices were going down.
External risks and announcement of regulatory changes to affect e.g. the banking sector proved to be an additional burden for the Polish stock market, especially WIG20 index.
At the same time in 2015, WIG20 stock index dropped by nearly 20%, whereas WIG decreased by almost than 10%.
The currency market in 2015 was dominated by the trend of the strong appreciation of the US dollar to the euro, which was, however, less clear than in 2014. Still, the euro lost as much as 10.2% to the US dollar. The PLN to USD exchange rate also changed – the dollar cost 11.2% more than at the end of 2014. The PLN significantly weakened in relation to the
Swiss franc and dropped by 11.1%. Yet, the Polish currency remained stable against the euro.
In 2013, a statistical European spend EUR 1,882.71 on insurance (density index), while an average Pole spent EUR
361.8 (i.e. PLN 1,503.1), that is 5 times less. Almost 60% of the premiums of an average European and 54% of an average
This indicator for Poland is slightly above half of the European average. Central and Eastern European countries, such as
GLOSSARY (Directive 2009/138/EC of the European Parliament and the Council dated 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance), which bind insurance and reinsurance companies as of 1 January 2016. The new scheme concentrates on capital requirements and risk borne by insurance and reinsurance companies.
The Act on Insurance and Reinsurance dated 11 September 2015 – most of the provisions become effective as of 1
higher capital requirements will be applied that will reflect specific risk profile of a given insurance or reinsurance company; the second specifies quality requirements concerning management system and supervision process; the third concerns information obligations of insurance and reinsurance companies; • to reinforce right of the insured in the contracts on third party’s account – especially in group insurance (e.g. an obligation to provide the insured with information on contractual terms and conditions, providing the insured and her/his heirs with information related to the claims handling process); • to impose on insurance companies an obligation to analyze the needs, knowledge and experience level, as well as financial standing of the policyholder or the insured prior to concluding an investment policy. The clients are also entitled to withdraw from unit-linked insurance contracts for a longer period of time (besides the right to withdraw provided for in the Civil Code GLOSSARY) and at a lower cost (60 days following receipt of the information provided for in the Act, while the maximum early termination fee may not exceed 4% of premiums paid); • to change the manner of remunerating insurance agents and handling charges for unit-linked products and structured products. While setting the remuneration of the agent, an insurance company should follow the rule of even spreading in time of an insurance agent’s commission
Supervision Authority (PFSA) GLOSSARY (a supervisory body may e.g. prohibit or limit trading, distribution, or sale of selected investment policies).The PFSA may also issue recommendations within a scope necessary to implement guidelines and recommendations of European Insurance and Occupational Pensions Authority, as well as to prevent infringement of interests of the insured, policyholders, beneficiaries or entitled under insurance contracts; • to maintain an obligatory participation of insurers in the
Polish Chamber of Insurance (PIU) GLOSSARY; • to introduce a number of regulations concerning strictly operations of insurance and reinsurance companies on the
In 2015, the PFSA released recommendations concerning the following areas: flood risk management in the insurance sector, insurance distribution, motor insurance claims handling, reinsurance inwards/retrocession, IT management and IT
(e.g. she/he will hear clients’ complaints and applications, is entitled to impose fines of up to PLN 100 thousand on financial institutions which fail to observe deadlines for complaints handling, etc., may lead mediation proceedings, as well as initiate and organize education and information activities related to client rights protection). It needs to be added that it is mandatory for a financial market entity to participate in mediation proceedings.
Apart from the above-mentioned acts, PSFA requirements and works related to implementing the requirements of Solvency
II Directive, other regulations were also implemented in 2015, which had or will have an impact on the operations of PZU
The Act introduced several changes to the Polish anti-trust law aimed to strengthen the domestic system for the protection of competition and consumers. The main objectives of the amendments are the following: to improve the detection of competition limitation, the effectiveness of the detection and accountability of entrepreneurs entering illegal agreements, and strengthen the positions of the weaker players on the market. Changes were introduced as to the obligation to notify about the intention of concentration in instances of acquiring control of an entrepreneur or purchasing the property of another entrepreneur.
Competition and Consumer Protection and such a procedure will replace supervision of provisions included in a template contract which had been conducted by the Court of
Protection will be published on the Office’s website, whereas the existing nature of a register of prohibited (abusive) clauses will be maintained for a period specified in the Act.
Tax Act, and several other acts dated 29 August 2014, which has been in force as of 1 January 2015, amended e.g. the regulations concerning thin capitalization and limited the exemption of revenues acquired from investment-oriented life insurance – structured products. Tax does not apply to revenue from endowment insurance for which a technical rate is applied to establish the technical provision. The
The Act amending the Act on Crop and Livestock Insurance dated 26 June 2015 provides fruit and vegetable producers with insurance with premiums subsidized from the state budget if insurance companies apply tariff rates higher than 6% of the sum of insured crop. The new provisions take into account amended rules for granting public aid specified in the
EU guidelines on the state’s aid in agriculture and forestry sector and in rural regions in the years 2014–2020, which refer to the aid in financing insurance premiums. The newly introduced solution is meant to expand insurance protection of crop by a growing number of concluded insurance contracts.
Motor Insurers’ Bureau dated 25 September 2015 introduces a provision stating that a claim for compensation resulting from TPL insurance of owners of motor vehicles may be filed exclusively with the court competent for place of residence or register office of the party injured in the event that caused the damage in question, or the court competent for the place where such an event occurred. The aim of the amendment is to limit concentration of court proceedings related with seeking compensation resulting from TPL insurance of owners of motor vehicles.
International Tax Compliance and to Implement FATCA has been binding as of 1 December 2015. FATCA GLOSSARY is the American federal law which aims to oppose tax evasion
External environment by both natural and legal persons obliged to pay taxes in the United States. Both PZU Życie and PZU TFI implemented procedural and IT solutions that enable fulfillment of statutory obligations.
The Act amending Act on the Financial Market Supervision and several other acts dated 5 August 2015. The aim of the Act is to increase protection of consumers using financial services provided e.g. by consumer credit institutions which are not obliged to hold a PSFA GLOSSARY permit for such operations.
Income Tax Act, Personal Income Tax Act, and several other acts. The Act has been effective as of 1 January 2016 and implements the Polish legal system to the three directives of
(taxpayer is not exempt from tax on dividend or revenues from share in profit of related entities if the transaction does not reflect economic reality and its objective or one of key objectives was tax evasion or avoidance), with relation to transfer pricing (some taxpayers who enter transactions with related entities will be obliged to prepare substantially extended documentation on transfer pricing), with relation to interest tax (changes in this respect aim to efficiently tax profit on savings in a form of interests paid across borders).
The Act amending Accounting Act and several other acts dated 23 July 2015. New regulations introduce to the Polish legal system Directive 2013/34/EC of the European Parliament and the Council dated 26 June 2013 on annual financial statements, consolidated financial statements and related reports of some entity types. The Act has been effective as of 23 September 2015, except for Article 1 point 1 and Article 5 which came into force on 1 January 2016.
CZ 5/11, the Supreme Court pointed out that „a person injured by the insured (perpetrator) cannot be deemed a consumer as he/she does not conclude an agreement, and filing a claim against perpetrator and using the actio directa rule towards the insurer do not constitute a legal transaction within the meaning of Article 221 of the Civil Code”.
The projected legal regulations may have significant influence on insurance and reinsurance operations. Insurance
Member states will then have 2 years to implement the directive’s provisions into their legal systems. During that time, implementing acts provided for in the Directive will be drafted.
The new directive will substitute the previous Directive 2002/92/EC of the European Parliament and the Council dated 9 December 2002 on insurance mediation.
growth amounted to 2.0% (year-on-year). Persistently low prices of energy resources and existing economic sanctions on
Similarly to the previous years, individual consumption continued to be the cornerstone of economic growth. The labor market remained insensitive to economic slowdown in the country. Employment in transportation and trade enterprises, i.e. entities that most severely suffered from economic slowdown in Russia, stopped growing at the hitherto pace; yet, the growth rate continues to be positive.
Despite the ongoing Ukrainian crisis and mutual sanctions between Russia and the European Union, the Latvian economy recorded a medium GDP growth of 3.0% year-on-year. The main growth accelerator was domestic consumption. The business sector that contributed most to GDP growth included production, trade, public utility companies, and, to a lesser extent, providers of other business services. In the first nine months of 2015, exports increased by 2.0% year-on-year.
Even though conditions for export in the current international environment are rather unfavorable, the Latvian enterprises continue to show capacity to increase export volume.
The change in CPI amounted to -0.9% year-on-year. The drop in general price level was caused mainly by low energy and resources prices on global markets, as well as sanctions imposed on the Russian market.
In 2015, the above-mentioned factors caused an even greater crisis in the Ukrainian economy. According to the data of the
Industrial production dropped in 2015 by 13.4%, compared with the level of industrial production in the corresponding period of 2014. The inflation in December 2015 increased by 43.3% compared with December 2014, which resulted from the administratively regulated prices and the depreciation of the UAH. From January to November, a positive foreign trade balance (USD 249.5 million) was recorded, which resulted from a 31.2% drop in import (with a simultaneous 30.9% drop in export.) Turnover of retail and gastronomy companies in
2.6 Macroeconomic factors which can affect the operations of the Polish insurance sector and PZU Group’s activities in 2016
GDP growth in 2016 may turn out only slightly below the 2015 level, even though the end-of-year data let us hope for a better result.
It seems that macroeconomic background regarding sales of household-oriented insurance may be slightly better than in 2015, taking into account the increase in real income, improving situation on labor market and higher savings.
Conditions for corporate insurance sales, implied by the increased GDP and financial standing of companies, should be similar to those observable the year before.
and the Eurozone are at the moment observable both on the
US market and in Eurozone, including the German market, which is the most important from Poland’s perspective. We expect that the 2016 GDP growth in Eurozone will be at least similar to that of last year. However, in case that crisis hits emerging markets, a slowdown in Poland’s GDP growth is to be expected.
Increase in gross expenditure on fixed assets in % (year-on-year) 4.9 6.1 9.8 (1.1) (1.8)
Source: PZU Macroeconomic Analysis Office *Forecast as at 29 February 2016
The drop in oil prices at the turn of 2015 and 2016 caused a significant fall in fuel prices in Poland. As a result, provided that the consequences of PLN weakness are inflationary, sector taxes are introduced and food prices grow, the average annual inflation rate in 2016 may only slightly exceed zero.
The low fuel prices may produce a higher claims ratio for motor insurance. We estimate that the new Polish Monetary
Policy Council will keep interest rates of the National Bank of
PZU Ukraina Kiev PZU – 89.9678% PZU Życie – 0.0043% PZU Ukraina Życie – 10.0279%
PZU Ukraina Życie Kiev PZU – 53.4723% PZU Życie – 0.0053% PZU Ukraina – 46.5224%
PZU Warsaw * Grupa Armatura included the following entities: Armatura Kraków SA, Armatoora SA, Armatura Tower sp. z o.o.(joint venture), Aquaform SA, Aquaform Badprodukte GmbH, Aquaform Ukraine TOW, Aquaform Romania SRL, Morehome.pl sp. z o.o. ** Grupa Centrum Medyczne Medica includes the following entities: Centrum Medyczne Medica Sp. z o.o., Sanatorium Uzdrowiskowe „Krystynka” Sp. z o.o. i Rezo-Medica sp. z o.o. *** Grupa Alior Bank Medica includes the following entities: Alior Bank SA, Alior Services sp. z o.o. , Centrum Obrotu Wierzytelnościami sp. z o.o., Alior Leasing sp. z o.o., Meritum Services ICB SA , Money Makers SA , New Commerce Services sp. z o.o. The structure does not cover investment funds.
The companies provide mutual services both under market conditions and based on the internal cost allocation model
(in the scope of the Tax Capital Group) thanks to the expertise of selected companies and by taking advantage of the Tax
ACTIVITY CHAPTER 3.9 3.2 PZU, Link4 and TUW PZUW – activity on the Polish non-life insurance market
mainly as a consequence of average premium growth, had the greatest impact on the premium growth.
gross written premium of non-life insurance companies after Q3, 2015 technical result of non-life insurance companies after net result of non-life insurance companies
We ensure peace of mind and financial security to our clients
Guarantees ships and aircraftW e ad dr es s th e cl ie nt s’
Gross written premium of non-life insurance companies in Poland (millions of PLN)
Capital groups: Allianz – Allianz, Euler Hermes; Ergo Hestia – Ergo Hestia, MTU; Talanx – Warta, Europa, HDI; VIG – Compensa, Benefia, Inter-Risk Source: PFSA Quarterly Bulletin. Insurance market 3/2015
323.1 million of which concerns direct business), credit and guarantee insurance (drop by PLN 100.0 million, -15.0%,
PLN 96,0 million of which concerns direct business, as well as marine, aviation, and transport insurance (drop by
PLN 63.9 million, -22.0%, PLN 53.7 million of which concerns direct business).
Excluding the dividend from PZU Życie, the net profit of the non-life insurance market dropped by PLN 0.76 billion
(PLN -446.9 million) as a result of the ongoing pricing competition.
The drop of the technical result in MTPL insurance resulted mainly from the lower earned premium (PLN -319.2 million, i.e. -5.8%) and higher claims and benefits (+PLN 88.8 million, i.e. +2.0%), while the drop of the result in the motor own damage group stemmed mainly from the higher amount of benefits and claims (+PLN 289.2 million, i.e. +11.4%) and costs of insurance activity (+PLN 45.5 million, i.e. +4.7%).
At the same time, there was a drop in profitability in the group of insurance for damage caused by forces of nature
State Treasury and local authorities composed 49.8% of the aforementioned investment portfolio.
PZU had a strong market position in motor insurance (with a share of 35.6%1). The share was 38.4%1 for motor own damage insurance and 33.8%1 for MTPL.
PZU offers a wide range of non-life insurance products in all insurance groups. At the end of 2015, PZU’s offer included over 200 insurance products. Motor insurance is the largest group of products offered by PZU, both in terms of the number of insurance contracts and gross written premium.
In the mass-client insurance: • PZU Auto Ochrona Prawna (PAOP, PZU Car Legal
Protection), under which PZU organizes or covers the costs of protection of the insured party and immediate family’s legal interests. PAOP guarantees legal consulting, legal representation, coverage of court costs in cases associated with vehicle possession, including vehicle traffic and use.
1 PZU share calculated with consideration of inward reinsurance of PZU towards Link4,
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance Market 3/2015, Insurance Market 3/2014 *including Link4, which contributed to the Group’s result from the moment of acquisition, i.e. 15 September 2014
(Comfort and Super); • PZU Dom (PZU Home) home insurance was made more attractive by introducing additional Legal Protection insurance. Thanks to the new solution, clients received actual legal assistance for themselves and their relatives in the instances when the tenant refuses to pay the rent, the home improvement crew fails to meet the contract, the seller fails to deliver the goods ordered online, and many others. Just like the Auto product, the insurance comes in two options: Komfort and Super (Comfort and Super); In the Corporate Client Division, 2015 was the first year to witness the operation of a new approach to sales and management, which is associated with the strategic project of transforming the corporate sales model. The implementation of the new solution is planned to translate into development of corporate business in the key areas.
– guarantee of payment for shares purchased as a result of a squeeze-out – this offer is mainly for entities with a strong financial and market position. The first such guarantee covers
PZU Group cooperated with 8 banks and 6 strategic partners in the scope of protective property insurance in 2015. The partners of PZU Group are the leaders in their fields and have customer bases with great potential to expand the offer with successive bancassurance and strategic partnership products: • 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; • the sales of protective non-life insurance in the scope of the bancassurance channel covered mainly the insurance of buildings, structures, residences, and insurance dedicated for payment cards.
PLN 8,858.0 million, which was 7.2% more than in the previous year. At the same time, its structure slightly changed: • value of MTPL insurance was PLN 2,824.4 million, which was 6.6% higher than in the previous year. It composed 31.9% of the entire portfolio, i.e. their share dropped by 0.2 p.p. from 2014. The higher sales resulted mainly from conclusion of new inward reinsurance agreements with PZU
• share of gross premiums from non-motor insurance in total premium increased to 43.6% (as compared with 43.5% in 2014). The written premium value rose by 7.5% year-onyear to PLN 3,865.9 million.
PLN 5 135.2 million, which was 16.0% more than in the previous year.
Furthermore, the comparability of year-on-year results is influenced by the recognition of the IBNR provision for compensation from pain and suffering for damages occurred before 2008.
In the scope of PZU Group’s development strategy aimed at strengthening PZU’s position in Poland and at international expansion, PZU signed the agreement for the acquisition of
Link4 shares on 17 April 2014. This transaction was finalized on 15 September 2014, and the transaction was ultimately settled on 11 March 2015. As the purchaser, PZU paid the total price of EUR 91.8 million.
In 2015, there were many changes made to the Link4 product offer, which were intended to adapt the offer to the changing market demands and trends. Link4 focuses on innovative solutions. Some of the 2015 initiatives are listed below: • introduction of solutions promoting safe driving and ecodriving for individual clients and mini fleets. The company established cooperation with a provider of GPS
navigation system in mobile phones and (during the promotional period) added a one-year license for a navigation system and section „Safe Driving with Link4”)
to the purchased policy. The purpose of the project is to create the future potential for lowering policy prices because of safe driving; • a new online insurance payment product was developed and will be tested in the first quarter of 2016. The company will realize this project with the innovative internet platform supporting online sales. For this purpose, the company created a new brand, Link4Pay; • company also introduces graphic general insurance conditions for easier understanding. The document is available for download at www.link4.pl.
PLN 95.8 million, which composes 19.4% of the entire insurance portfolio.
On 30 November 2015, PFSA approved PZU’s establishment of a Mutual Insurance Company under the name of Polski
Zakład Ubezpieczeń Wzajemnych (TUW PZUW). The hospitals cooperating under the TUW model will be 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. As a founding member of
3.3 PZU Życie – activity in the life insurance market in Poland
Źródło: KNF (www.knf.gov.pl). Biuletyn Kwartalny. Rynek ubezpieczeń 3/2015, Rynek ubezpieczeń 3/2014, Rynek ubezpieczeń 3/2013, Rynek ubezpieczeń 3/2012, Rynek ubezpieczeń 3/2011.
(polisolokaty) thereby generating greater interest in other investment products, i.e. the investment funds offered by TFI
Simultaneously, the share of the bancassurance channel in the gross written premium of life insurance companies is reducing quarter to quarter starting from 2013. In Q3 2015 it amounted to 38.1%2 and decreased compared to the corresponding period in 2014.
The gradual increase in the attractiveness of employee pension programs (EPP) on the life insurance market is noticeable. Much like in previous years, the most common form of EPP were insurance programs. In 2014, they represented 66%3 of all Employee Pension Programs. At the end of 2014, the value of assets gathered in all employee pension programs (irrespectively of the form) amounted to
PLN 2,123.7 million. The weaker result is the effect of lower profitability in all groups, especially life insurance (Group I) –
(Group III) – drop in technical result by 2 PIU data(www.piu.org.pl), bancassurance market after Q3 2015 3 Employee Pension Programs in 2014, Polish Financial Supervision Authority, June 2015
Life insurance market – gross written premium vs. technical result (PLN millions)
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance Market 3/2014, PZU Życie data
During this period, life insurance companies generated the net result of PLN 2,366.3 million, which constituted a year-on-year drop of 10.8% (PLN 285.8 million). This drop results mainly from the investment results of insurers, which were lower than in the corresponding period of 2014.
During three quarters of 2015, it obtained 43.9% of such premiums of all insurance companies.
PZU Życie’s technical result constituted the majority of the result achieved by all life insurance companies. This is the evidence to the high profitability of the products offered. PZU Życie’s technical result margin was almost four times higher than the margin achieved by all the other companies offering life insurance together (21.6% compared with 5.5%).
Capital groups:Talanx - Warta, Europa, Open Life; VIG - Compensa Życie, Polisa Życie, Skandia Życie, Benefia (merged with Compensa Życie on 30 September 2014); Aviva - Aviva TUnŻ, BZ WBK-Aviva TUnŻ Source: PFSA Quarterly Bulletin. Insurance market 3/2015
Cel na Przyszłość”. This product is meant for clients who either have or are planning to establish an investment objective for a long period, over which they would like to gather a specific amount. The investment objectives may include extra funds for future retirement, building a house, educating children, paying off a mortgage early, etc.; • introduction of a new version of additional insurance with the Pharmacy Card to group protection insurance and gross written premium of life insurance market after Q3, 2015 growth in life insurance market with regular premium after Q3, 2015 technical result of life insurance market net result of life insurance market 20,8 PLN billion 2.1 PLN billion 2.4 PLN billion individual continued insurance. The product change is related with the expansion of the previous non-cash model with the cash option of the Pharmacy Card, which allows the benefits to be realized at all pharmacies; • introduction of modified group life insurance Pogodna
Furthermore, there were numerous changes made to the health care product offer, including new technological solutions, some of which are presented below: • expansion of the offer with additional „Cztery Pory Roku”
examination and subsequent consultation of the results with a physician. This is a 24-hour service; • expanding the network of health care centers for medical insurance clients to 1,580 in 500 cities.
subscriptions, which were very popular among structured insurance clients. 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 greatest profit was paid to the clients of 25 subscriptions and constituted 33.33%).
Investment Program unit-linked single premium product, which was offered through Bank Millennium SA, were a success and were sustained especially in the first half of last year.
Życie collected gross written premiums of PLN 8,064.0 million, which was 1.4% less than in the previous year. The vast majority of the Company’s premium was from regular premium products. It represented 89.9% of the gross written premiums (as opposed to 86.3% in the previous year). It primarily included the written premium from group insurance and individually continued insurance, which had approximately 12 million customers in Poland.
volume of assets of life insurance companies at the end of Q3, 2015 share of PZU Życie in the life insurance market after
Q3, 2015 by regular premium share of PZU Życie in technical result after Q3, 2015 average claims handling period in PZU Życie 105.8 PLN billion 3.4 days
Protection] rulings in the scope of unit-linked products; • implementation of the Solvency II requirements based on risk evaluation from January 2016 may change the operating model of selected areas of the insurance companies on the market (e.g. the tariff policy).
At the end of 2015, the net assets of open pension funds were at the level of PLN 140.5 billion and dropped by 5.7% with respect to the end of the previous year.
OFE PZU Złota Jesień (Open Pension Fund, OPF), which is managed by PTE PZU SA (PTE PZU), is one of the largest players on the pension funds market in Poland. At the end of 2015, 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: • the Fund had 2,208.4 thousand members, i.e. 13.4% of all participants of open pension funds; • net assets were at the level of PLN 18.5 billion, or, in other words, they represented 13.2% of the total value of assets of the open pension funds operating in Poland.
The main challenges for the pension funds market in 2016 are: • reform of the pension system in Poland and the outflow of funds from OPFs; • so-called transfer window, which is the period between 1 April and 31 July 2016 open to filing of declarations concerning the continuation of premium payment to ZUS or payment to OPFs and ZUS; • economic 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.
At the end of 2015, the funds managed by domestic investment funds rose by almost +20.6%. At the end of 2015, the assets for the entire investment fund market amounted to
PZU SA (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, including Individual Pension Account (IKE),
At the end of 2015, TFI PZU had 25 funds and sub-funds in its portfolio, of which 19 were also offered to clients from outside
As of the end of December 2015, TFI PZU gathered net assets valued at PLN 28,303.3 million, 10.8% more than at the end of 2014. This makes TFI PZU one of the biggest Investment
According to the Bank of Lithuania, the value of gross written premium gathered by non-life insurance companies amounted to EUR 409.1 million and was 6.0% higher than in the previous year.
in comparison with the three quarters of last year, the written premium rose by over 14%.
In 2015, 15 insurance companies were operating on domestic non-life insurance market and the 4 biggest ones held the approximate share of 65.3%.
The 2015 structure of non-life insurance was dominated by motor insurance, which accounted for 60.7%, whereby the share of motor own damage insurance held 35.3% and property insurance held 26.3% of the market share.
Draudimas, which from May 2015 is the owner of PZU Estonia.
The acquisition of Lietuvos Draudimas was conditioned by the sale of PZU Lithuania – the disinvestment took place on
growth from the previous year. The greatest sales growth was recorded endowment insurance, which rose by 22.5% from 2014, and unit-linked insurance (growth by 7.9%).
The share of PZU Lithuania Life in the life insurance market was 4.4% (up from 4.1% in 2014).
(in May 2015). At the end of the third quarter of 2015, the share of both entities in the non-life insurance market in three quarters was 25.1% and the 2015 total gross written premium of both entities was EUR 67.1million.
Estonian non-life insurance market was 13.8%. The acquired written premium was EUR 38.6 million.
This growth resulted mainly from the raise of insurance sums, which resulted from the devaluation of the local currency and rising inflation, as well as the statutory raise of compulsory insurance rates. Motor insurance, which hold a 28.2% share in the non-life insurance market, recorded increase in premium of 21.8%, including the growth of the Green Card product by 76.4%.
Life insurance companies collected UAH 1.5 billion gross written premiums in three quarters of 2015, slightly up (by 0.2%) from three quarters of the previous year.
On one hand, the Ukrainian insurance market is fragmented, as it was composed of 368 insurance companies as at
On the other hand, the TOP 100 non-life insurance companies generated 96.3% of the entire market’s gross written premium and the TOP 20 life insurance companies generated 98.9% of the written premium.
In 2015, much like in the previous year, the Ukrainian insurance market experienced difficult conditions associated with the state’s weakened economy, the armed conflict in the east, devaluation processes, decline of the bank system liquidity, and low client activeness. The market continued to present a high level of acquisition expenses, problems with preservation of current liquidity of some insurance companies and reduced confidence among natural persons. The aforementioned events resulted in client reorientation towards companies with western capital share, a process started in 2014 – if the previous key factor in choosing an insurer was the price, the current one is credibility and solvency.
In 2015, the total gross value of PZU Group’s gross written premiums in non-life insurance in the Ukraine amounted to UAH 798.9 million, i.e. it was 58.5% higher than in the previous year. This increase arose from both the growth in the premium obtained through external entities (banks and travel agencies) and through its own distribution channels. Motor insurance, Green Card insurance, tourism insurance, and corporate property insurance played a particularly important role in the growth in written premiums.
On the life insurance market, PZU Ukraine Life held fourth place after three quarters of 2015, with a market share of 8.6% (1.3 p.p. growth in comparison with the previous year).
It should also be noted that the written premium in the functional currency for both companies was lower than last year under the conditions of strong currency depreciation. In 2015, the premium of PZU Group in Ukraine was
Ukrainian companies in a way which cannot be predicted with credibility at this time.
PZU Zdrowie was set up from the transformation of Ipsilon Bis
– 60.46% shares), one of the most innovative private hospitals specializing in orthopedics in Poland.
◦ On 29 July 2015, PZU FIZ AN BIS 2, an investment fund managed by PZU TFI, acquired 29,278 Gamma shares constituting 54.95% of share capital.
◦ On 25 November 2015, a resolution was passed to raise the Gamma share capital by issuing 7,423 shares with nominal value of PLN 50 per share. All shares were acquired by PZU FIZ AN BIS 2 and the capital raise was registered on 2 December 2015. Resulting from the issue, the share of PZU Group in the CM Gamma share capital and shareholder votes rose to 60.46%.
– operates on the Warsaw market of medical services in range of ambulatory health care (both basic and specialized); • Medicus w Opolu (100% shares, from 22 September 2015)
– provides both basic and specialized ambulatory health care services; • CM Cordis (100% shares, from 1 February 2016) – provides specialized services for patients in Poznań.
The total cost of purchase of the aforementioned companies was PLN 27.6 million in 2015 and the goodwill recognized in the consolidated financial statements amounted to
Purchase of Alior Bank shares and recognition in the consolidated financial statements of PZU Group
According to the preliminary share purchase agreement covering the sale of Alior Bank SA (“Alior Bank”) shares from
On 6 October, PFSA did not submit an objection and thus all of the conditions precedent were fulfilled.
PLN 646.6 million – 12 October 2015; • II tranche 7,244,900 shares (9.96%) for total amount of
PLN 646.6 million – 18 December 2015; • III tranche 3,828,673 shares (5.27%) for total amount of
Between January and December 2015, the banking sector generated a net profit of PLN 11.5 billion (a drop by 27.6%
and household receivables (+6.7% year-on-year). Despite low interest rates, the deposits in the non-financial sector increased at the end of December 2015 by 9.9% year-on-year to the amount of PLN 938.8 billion.
(an increase by 0.5 p.p. compared to the end of September 2014).
Alior Bank is a universal bank that is recognizable for its state-of-the-art solutions and a wide product offer. In 2015,
The above financial result was reached regardless of a number factors that adversely affected operations of the bank, including: incurring costs related with the bankruptcy of
Craftsmanship and Agriculture) in Wołomin, making a payment towards the Borrowers’ Support Fund, higher fees payable to the Bank Guarantee Fund, higher interchange fee on card transactions, or operating in the environment where very low interest rates prevailed.
Bank took place four months after the legal merger, which evidences to the level of competence and experience of Alior
Health. Resulting from the division, which saw the separation of the organized segment of the enterprise, Health was moved to PZU Zdrowie on 2 November 2015.
PZU Pomoc holds 30% of the shares in GSU Pomoc Górniczy
Company was established in 2014 and is a 100% subsidiary of PZU. Its main operating field is collection of funds through issuance of bonds or other debt instruments and providing financing for the companies within PZU Group.
On 16 October 2015, PZU Finance AB issued five-year eurobonds in the amount of EUR 350 million. These bonds were assimilated and together with eurobonds at value of
Armatura Tower (joint-venture). The Armatura Group conducts its business outside the area of financial and insurance services. It is a leading manufacturer in the plumbing and heating sector in Poland. The entities composing Armatura
New values For genuine masterful experts NEW STRATEGY MEANS NEW VALUES: We are Effective We are Fair We are Innovative
This approach will enable us to pursue our new strategy with masterful execution.
Business strategy 4.1 Key development directions of PZU Group in the years 2016–2020.
Dynamically changing business and legal environment forces the Group to strike a balance between pursuing previously determined strategic operations and searching for innovative solutions by means of thorough data analysis and skillful experimentation.
Development directions of PZU Group in the years 2016-2020: • Staying client-centric – We are here to ensure our Clients’
– maintaining the market leadership by using the comprehensive offer that fits the needs of relevant client segments and the strategy of two brands (PZU and Link4); ◦ Corporate Client Area: - (in non-life insurance) strengthening the position of a market leader, especially in Mid-Corpo client segment, and achieving the status of a business partner with strong expertise that provides not only insurance products, but also guidelines and support to the clients at every stage of risk management process; - (in life insurance) maintaining the position of market leader along with high profitability, irrespective of strong competition pressure; • Foreign operations: ◦ Dynamic increase in contribution of GWP from foreign countries; ◦ Focus on profitability and achieving high return on investments.
• Development of auxiliary insurance offer by introducing the following: ◦ customer asset management; ◦ medical insurance; The insurance sector undergoes numerous changes and transformations, which result in the insurers focusing on client’s needs. The important direction of changes consists in creating products whose terms of conditions are simple and transparent and that the clients can easily compare.
In the next few years, PZU Group will operate in the environment where low interest rate will prevail. The forecasts concerning inflation in both Poland and the
The new regulations change the way of establishing the capital solvency requirement for insurance companies.
According to the new regulations, these requirements will be established separately for insurance (actuarial), market and operating risk. By tightening regulative requirements, the Directive considerably changes the insurance market.
Its implementation affects both premium calculation and changes to the internal processes of insurance companies, mainly in the scope of risk management. According to the new regulations, insurers are obliged to report the new extended information scopes to superior institutions and make them public. Resulting from the implemented changes, certain companies will face the need for capital injection or limitation of their operating scope.
The tax on assets of financial institutions came into effect in Poland as of 1 February 2016. For insurers, the tax rate is 0.44% of the collected assets. This tax will cover many insurance companies operating in Poland, but the biggest part of its generated revenue will come from the tax on PZU Group’s assets. It is estimated that the tax may amount to approx. PLN 270 - 280 million (applies only to insurance companies, annualized data). REGULATIONS ON
The changes to the Act on Insurance Activity also came into effect in early 2016. The implemented changes are mainly oriented towards formation of relations with clients.
• Expansion of PZU Zdrowie – further development of health insurance offer along with accompanying health care services
In recent years, financial products, especially life insurances, became so complicated that clients tend to search for simpler and more transparent solutions, the so-called products without fine print. The products whose structure will be clear and understandable, regardless of the level of clients’ economic knowledge. Product transparency means e.g. a shift from comprehensive solutions combining elements of insurance and investment.
The strong demographic trends will lead to quick changes in the age structure of the society and, simultaneously, to the purchasing behavior of the Group’s clients. The number of people aged 60 and up, mostly still professionally active, with broad and diverse needs for all kinds of insurance
(including medical insurance) and saving products (asset management) will quickly rise, especially throughout the realization of the main directions of the Group’s development horizon. Simultaneously, there will be more
• Greater potential to adapt to the client’s needs by using Big
2. Link4’s share in the non-life insurance market rose from 1.6% at the end of the third quarter of 2014 to 1.9% at the end of the third quarter of 2015.
4. PZU Group is still the leader of the Lithuanian and Latvian markets. In 2015, the share in the Lithuanian non-life insurance market was 31.1% and the share in the Latvian market following three quarters of 2015 was 25.1%. In both cases, the market share grew from the previous year. PZU’s 2015 share in Estonian market was 13.8%. Both Ukrainian companies improved their market share and positions from the previous year. After three quarters of 2015, the non-life company is in 7th place with market share of 2.7% while the life company is in 4th place with market share of 8.6%, retaining a positive financial result despite the difficult business conditions.
5. The sale of PZU Lithuania was concluded on 30 September 2015. The company was purchased by the Norwegian Gjensidige Forsikring ASA. The final sale price was EUR 66 million.
6. On 3 November 2015, PFSA approved PZU’s establishment of TUW – Polski Zakład Ubezpieczeń Wzajemnych. The new entity will provide hospitals with effective insurance coverage based on active risk management.
2. Growth of managed assets of external clients from PLN 6.0 billion at the end of 2014 to PLN 6.8 billion at the end of 2015. At the end of 2015, the share of assets of external TFI PZU clients in TFI market assets (with exception of non-public assets) was 5.1% (4.7 at the end of 2014).
3. TFI PZU retained the top position in the segment of employee pension programs among all domestic investment fund institutions as it managed assets with value of PLN 3.2 billion (PPE – Employee Pension Plan, PPO – Employee Saving Program, ZPI – Corporate Investment Program) – AuM growth from 6.2% at the end of 2014.
4. The revenue of TFI PZU for 2015 amounted to PLN 172.6 million, a growth of almost 18.1% year-on-year.
Health 1. PZU Zdrowie was established and received all medical assets (directly or indirectly). 2. PZU Zdrowie purchased shares in the following medical companies: Nasze Zdrowie
4. There is ongoing work on the target sales support operating system.
A socially responsible organization 1. In 2015, the key way to promote active lifestyleand health prevention among Poles was PZU Group’s involvement in running initiatives. PZU served as the strategic partner of numerous sports events, including the PZU Warsaw Marathon.
2. In scope of activation of local communities, PZU Group organized PZU Trasy Zdrowia – green areas specifically designed for physical exercise – in several municipalities throughout Poland.
3. As a patron of culture, PZU was involved in the preservation of Polish cultural heritage, supporting the Royal Castle in Warsaw, Royal Łazienki Museum, National Museum in Kraków, National Museum in Warsaw, and Grand Theatre—National Opera.
3. There was ongoing work aimed to implement the advanced fraud detection system. The first implementation of the tool for motor insurance is planned for April 2016.
Effective capital and investment policy and integrated risk management system 1. 18,318,473 shares of Alior Bank, which compose 25.19% of the share capital, have been acquired. The total value of the transaction is PLN 1.63 billion. Two of the total projected 3 share tranches were cleared in 2015. The final one was cleared in March 2016.
2. Cooperation has been established with the National Center for Research and Development, which will see PZU Group take part in the setting up of venture capital funds for the sector of new technologies.
3. PZU Finance AB (a 100% subsidiary of PZU) issued eurobonds for the amount of EUR 350 million. The bonds bear interest at a fixed interest rate of 1.375% per year and the interest will be paid once a year. The redemption of the bonds will take place on 3 July 2019.
4. All of the Group’s insurance companies were adjusted to fulfill the requirements of the Solvency II directive.
5. In accordance with the GSM decision, the dividend of PLN 2.59 billion, i.e. PLN 30.0 per share, was paid on 21 October 2015.
6. A split of PZU stocks in relation of 1:10 took place on 30 November 2015. The shareholders retained their share in PZU ownership and rights held before the split.
Choose your bundle of benefits Lanuch of PZU’s internet base of employee benefits. Decide what you want to do with your money from the Company’s social benefits fund.
We want the clients to be sure that their decision to choose PZU was the right one.
At the end of 2015, PZU Group distribution network included: • exclusive agents – PZU own agency network consisted of 9,079 exclusive agents, including individuals performing agency activities. The agency channel conducts sales of mainly mass client insurance, especially motor and non-life insurance, as well as individual insurance (life insurance); • multiagencies – 3,161 multiagencies work with PZU Group 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; • insurance brokers –- PZU, in particular the Corporate
PZU Group are the leaders in their fields and have customer bases with great potential. The cooperation in 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; • direct – PZU sells products to individual customers by telephone and over the Internet.
Claims and benefits handling process is conducted at 8 Regional Claims Centers located throughout the country and at the central unit – the Operational Center for Claims and Benefits. Since the process is based mainly on electronic information and the service is performed at a location which is not connected with the place of residence of the insured or the place of the event, the company has implemented the model of an equal workload of individual claims handling units that is automated within the SLS system. The process of handling certain types of claims has been centralized; this results in a higher specialization level and boosts customer satisfaction. The centralization has been introduced i.a. in the following fields: personal claims handling, claims concerning theft of vehicles belonging to individuals, claims handling under the direct claims handling service. GLOSSARY
• This Video Chat brought us the opportunity to service the deaf and hearing impaired.
• Video tips come in many forms, for example: comments from specialists, infographics, manuals.
• We use this not only on the pzu.pl site, but also in e-mail communications.
• The team conducts daily monitoring of the internet and of social media, engages in discussion forums, respond to customers’ posts on Facebook, Twitter and other social channels replies to private questions of Customers through a dedicated application Help Center.
• The centralization of these functions enables the implementation of uniform service standards and tools for the control of the process to answer Customers.
Chamber of Insurance) GLOSSARY – encompassed eight insurance companies, including PZU, which together represent nearly 70% of the motor TPL insurance measured at gross written premium level. Direct claims handling (BLS) under the agreement was implemented in April 2015. Introducing the BLS agreement helped to simplify the settlement of paid claims and claims handling costs between the insurers based on lump-sum schemes. PZU maintained also its earlier BLS
Under cooperation contracts concluded with the largest network of companies on the Polish market, PZU Group provides car rental, towing, and parking services. PZU actively offers its help in organization of the above services to all customers.
PZU was also the first to introduce its own fleet of replacement cars to the insurance market. The offer covers 300 hybrid Toyota Auris cars, which guarantee comfort and safe and ecological use. This provides a high replacement car availability standard according to market rates, which is dedicated for all PZU clients.
In 2015, PZU continued cooperation with garages in the field of post-accident vehicle repairs. The cooperation with PZU
PZU continues to develop its offer when it comes to the management of objects that are left after a damage by providing the clients with an option to sell them on the Pomoc
Providers 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.
issue status, as well as see which activities have already been realized. Additionally, the client can freely change notification settings concerning his or her claim/issue so that the system sends a status update to a designated email address or phone number.
Score), a recommendation index being the difference between the proportion of promoters and critics participating in the survey for claims handling sector amounted to 20%, while 46% of consumers surveyed indicated that they were active promoters of PZU.
Everest Platform is a state-of-the-art tool that facilitates sales of non-life insurance, assessment of insurance risk, and management of policies and settlements, which is being implemented by PZU since 2014. By using the platform, the
In 2014, according to the assumed schedule, PZU introduced motor, household, and some property products into the new system. In 2015, remaining non-life products and first corporate insurances were introduced. For the most part of 2015, external sales channels (multiagents, dealers) were prepared to work with the new system. Pre-implementation and information meetings for future users of the Everest platform, as well as training to prepare staff for working with the system, were held in all external sales channels. Pilot programs were initiated to test if the conditions for smooth and timely implementation have been met. At the same time, in April and June 2015, surveys were held to check the satisfaction level of the users and learn their opinion on the new system.
Financial Supervision Authority (KNF) requirements implementation is highly advanced and will allow to satisfy the requirements as planned until the end of 2016; • IT systems were adjusted to report in accordance with requirement of Solvency II directive GLOSSARY; • in the field of management reporting, the Baltic companies were subject to periodical reporting and the management information system was extended to cover PZU Group subsidiaries; • using agile methodology of software development was continued and extended.
In 2015, the average annual employment in PZU Group amounted to 16.8 thousand employees calculated as FTEs
and PZU Życie) were women. At the end of 2015, they represented nearly 62% of the total number of employees.
On the 8 of April 2015, the Management Boards of PZU
and PZU Życie declared their intention to conduct collective redundancies in accordance with the Act on the specific principles of terminating labor relationships for reasons not attributable to employees dated on the 13 of March 2003. The restructuring took place in Q2 2015. It covered 267 people in
The people who were dismissed or who did not accept the changes in the terms and conditions of employment (the same as during all stages of employment restructuring, namely in 2010–2014) were offered more favorable conditions of leaving than those provided for by law in similar situations.
The amount of additional redundancy payment depended on the length of service with PZU Group and the salary of each employee.
The main premises of PZU Group’s remuneration policy include: • awarding and retaining best talents by offering a competitive remuneration scheme, as well as trainings and career development options; • planning replacements at positions within PZU Group by development of career paths and programs for workers and managerial staff; • recruiting the best employees (including young talents)
The remuneration scheme includes the nature and scope of the company’s operations, its functioning sectors, as well as market practices.
The PZU Group remuneration system is based on an annual employee assessment which constitutes a part of modern motivational system and awarding the best personnel. The annual competence assessment system and the quarterly target determination and settlement system covers the following: • „Płacimy za wyniki” (We pay for results) – a new performance management system – a quarterly assessment of target achievement (adjusting targets to managerial level and business specifics), whereas achievement level of quarterly targets translates into the bonus amount; • „Ocena DNA PZU” (PZU DNA appraisal) – a competence assessment model for employees and leaders; • „Roczna ocena pracownika” (Annual performance review) –
The solutions applied within the remuneration policy allowed to develop a relation between effectiveness and competence level and pay rises, development choices and promotions.
Organization, infrastructure and human resources not only save time spent on application posting and selecting job applications, but also improves security of stored data. The changed functionality helps also to build a positive image of
recruitment module for the candidates is an option to receive an update on their recruitment project status via emails with invitations to an interview, notifications on delays in the recruitment process, or a thank you note for the participation in the process.
The following have been organized in 2015 to support employees in improving their skills, which are required at the given work post: • PLUS training program (Professionalism – People – Skills
– Trainings) – trainings are selected for the employee on the basis of his DNA appraisal (PZU competence model)
Every program contains several training modules which develop competences in all fields, such as client, result, responsibility, development, cooperation; • Menedżer 2.0 (Manager 2.0), program which focuses 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 indispensible at a managerial position.
(Inspiration Space Manager 2.0) platform is a continuation and extension of stationary trainings. 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; • Lider 2.0 program, the aim of which is to strengthen key managers in the role of all-round leaders. More than 300 managers participate in it; • coaching for the top management with the aim to support individual development; • other forms of trainings – postgraduate studies and specialized forms of professional development, language courses; • „Świadoma siebie” (A self-conscious me) – development program for women within „Kobiety PZU” (PZU Women)
In addition, three projects were continued as a part of the development of the new organizational culture: • Otwarte PZU [Open PZU] – a program designed to build employees’ awareness in the area of openness. The aim of the project is to build innovative attitudes. The program objective is to promote: direct and simple communication, feedback providing strategies, team cooperation, partner relations and research of innovative solutions; • TalentUp a talent-building program addressed to specialists which aims to prepare the employees to work more important roles within the organization; • SmartUP – a General MBA development program addressed to managers and directors who exhibit high potential.
An internal coaching project was initiated. The project is addressed to mid-level managers and project leaders and is conducted by employees having appropriate preparation in various business fields.
Projekt Roku (Student Project of the Year) and Inwestycja w Przyszłość (Investment in the Future), were continued to support the most active students and most popular academic projects.
PZU experts shared their knowledge and experience at a number of business presentations and trainings for students
Days at PZU), and all image activities were supported by active and creative PZU Group Ambassadors and Advisors.
EBKreator. The awarded campaign is based, among others, on the new Instagram profile @pzukariera which is the third social media channel to openly communicate as an employer, alongside with Facebook and LinkedIn.
Claims Handling (BLS) service. The aim of the campaign was to present benefits from holding motor insurance with
campaign. A campaign addressed to clients who have TPL insurance in PZU.
The lottery included the following sponsored awards: 12 passenger cars and 360 bicycles. Additionally, as a part of a special offer, holders of
PZU campaign, „Niestraszki w pakiecie” (Fear-nots in a pack), was initiated in December. The campaign features 5 Fear-nots – funny, yet smart characters with an educational mission, i.e. to teach children the rules of security. CHAPTER 9 CORPORATE SOCIAL RESPONSIBILITY
In 2015, PZU continued to introduce unified visual standards for exclusive agents’ offices, both when it comes to signage and fit-out of the premises. A process of external branding of multiagents was commenced. Nearly 250 multiagency offices were branded in 2015.
Ongoing and long-term actions to support sales of life and non-life insurance were conducted, dedicated to PZU and PZU
actions, i.e. 4 campaigns consisting in covering shop windows in departments and agents’ offices.
In 2015, PZU Group achieved gross profit at a level of
PLN 2,943.7 million compared with PLN 3,691.7 million in the previous year (decrease of 20.3%). Net profit attributable to the shareholders of the parent company amounted to
The main reasons for the change were the following: • lower result of the mass client insurance segment by
PLN 122.0 million due to OPF reform; • drop in net investment result mainly due to lower valuation of interest-bearing financial assets resulting from the yield increase of the Polish treasury bonds.
• loss due to the change in fair value of shares purchased within tranche I between the purchase date and the date of control commencement of over Alior Bank, i.e. 18
• the effect of the conversion of long-term insurance contracts into annual renewable contracts in type P group cover at the amount of PLN 75.4 million, i.e. PLN 5.5 million more than in 2014.
2015 saw significant changes, which impacted comparability of the results and the assets and liabilities: • purchase of Baltic state companies in 2014 (subject to consolidation for the full period in 2015); • sale of PZU Lithuania in September 2015; • commencement of the consolidation of Alior Bank.
• lower net investment result, in particular due to the decline in the valuation of debt instruments. Net result on investing activities amounted to PLN 1,739.3 million and was 34.3%
Co m m is si on an d fe e in co m e
PLN 34.4 million compared to the previous year, mainly investment products in bancassurance channel.
lower than in the previous year. Fee and commission revenue comprised mainly: • OFE Złota Jesień asset management fee. It amounted to PLN 99.8 million (a drop of 11.0% compared with 2014 as a result of statutory transfer of a portion of the assets of OPFs to the Social Insurance Institution (ZUS)
corresponding to 51.5% of the units on the account of every member of OFE PZU); • income and fees from investment funds and fund management companies of PLN 115.4 million, i.e. PLN 47.5 million more than in the previous year, mainly as a result of the increase in sales of fund units through the external channel; • commissions from pension insurance handling fees. This amounted to PLN 5.2 million, namely 26.2% of their previous year’s value. The drop associated with the statutory decrease in the rates from 3.5% to 1.75% and the insured making a choice as to the further transfer of their premiums at the new level of 2.92% to OPF
Furthermore, the comparison of the revenue balance from commissions and fees with 2014 was affected by a one-off event in the previous year, which saw revenue from liquidation and withdrawal of funds from the additional part of the Guarantee Fund in the amount of PLN 132.3 million, associated with statutory changes in OPF.
PLN 1,739.3 million compared with PLN 2,646.9 million in 2014 (decrease of 34.3%). The following factors had the greatest impact on the decline in the result: • lower valuation of interest-bearing financial assets as a result of rising yields of Polish treasury bonds in the middle and at the end of the yield curve in 2015, compared to the declines along the entire curve in 2014; • weaker performance of derivatives purchased mainly for trading purposes aiming at appropriate investment portfolio risk management.
• loss due to the change in fair value of shares purchased within tranche I between the purchase date and the date of control commencement of over Alior Bank, i.e. 18 December 2015, amounting to PLN 175.8 million.
Non-life insurance – Poland (externally written premium) 9,074 8,367 8,269 8,451 8,242
Total non-life insurance – Ukraine and Baltic states 1,288 632 388 338 285
Lithuania life insurance* 43 37 32 x x * Consolidated starting 1 January 2013.
A drop in interest expense was mainly caused by a lower use of sell-buy-back transactions.
Change of the net investment result (PLN million)* investments portfolio, both as at 31 December 2015 and
In 2015, the total net amount of claims and benefits and increase in provisions of PZU Group amounted to
In relation to 2014, the value of claims together with the change of provisions was 2.7% higher. The following factors also contributed to the increase in the net value of claims and benefits: • growth of the group protection insurance portfolio, including health insurance with increased claims ratio –
On the other hand, the following contributed to the decrease in the net value of claims and benefits: • lowering of the technical and insurance provision level due to PZU Życie’s decision made as part of the annual process of establishing the rules for possible indexation of the sum insured by the clients in continued insurance concerning the modification of said rules from the start of 2016.
PLN 2,376.3 million and increased by 10.7% compared with 2014. The main reasons for the increase were the following: • higher direct acquisition costs in the mass client segment
In 2015, the Group’s administrative expenses were at the level of PLN 1,657.9 million, which was 8.5% higher than in the previous year. The following factors had an impact on their level: • inclusion of the administrative expenses incurred by the newly acquired insurance companies in the results of PZU
Investment properties Equity instruments – unquoted Equity instruments – quoted Monetary market instruments Non-treasury debt securities Treasury debt securities * The line Others of “Net investment result” is presented including foreign exchange differences, also on own debt instruments, which were beforehand presented under the line “Borrowing costs”, as well as including the change in valuation of investment contracts at fair value, which were beforehand presented under the line “Change in valuation of investment contracts”, which was deleted beginning from the current period.
In te re st -b ea rin g fin an ci al a ss et s
As at 31 December 2015, the total assets of PZU Group amounted to PLN 105,429.0 million and were 56.0% higher than at the end of 2014. The growth resulted mainly from the consolidation of Alior Bank.
The increase in the value of investments was mainly caused by the consolidation of Alior Bank, specifically resulting from the credits granted to the clients for the amount of
January 2015 in the amount of PLN 1,468.0 million; • decrease in share of investment properties due to the transfer of part of the portfolio from achievement of the projected investment horizon to assets for sale.
PLN 720.6 million; • identification of new intangibles in the amount of
As at 31 December 2015, PZU Group’s cash and cash equivalents amounted to PLN 2,439.9 million (2.3% of the assets). A year earlier, they amounted to PLN 324.0 million.
The sixfold increase growth of the asset category resulted mainly from the commencement of the consolidation of Alior
PLN 1,113.4 million, specifically due to the following: • higher unearned premium provisions resulting from conclusion of several large agreements with protection period over one year and gradual implementation of price rises in motor insurance; • rise of provisions for claims and benefits resulting from a claim of a considerable unit value (damage covered by the XL and proportional facultative reinsurance program; damage reinsured in over 90%); • growth in technical provisions in individual unit-linked products, especially within the bancassurance channel –
At the end of 2015, equity amounted to PLN 15,178.9 million and grew from the end of 2014 (15.3% growth). The growth of consolidated equity concerned minority shares, which reached the value of PLN 2,255.2 million mainly due to the consolidation of Alior Bank. The capital falling to the shareholders of the dominating entity dropped by
PLN 242.6 million from the previous year, which is the result of the lower net result for 2015, partially offset by retained earnings from 2014.
The biggest component of liabilities at the end of 2015 covered financial liabilities, the share of which rose from 13.9% to 42.2% from the previous year. Their balance amounted to PLN 44,487.8 million and included: • liabilities of PLN 33,655.7 million towards the clients
• liabilities from issuance of own debt instruments for the total amount of PLN 3,536.5 million (in total
PLN 708.9 million (book value of PLN 758.6 million at the end of 2015).
Alior Bank and the outstanding amount from the purchase of tranche III of Alior Bank shares.
Total net cash flows as at the end of 2015 amounted to
Consolidated financial results dated 7 October 2013 concluded between PZU and Bank
The value of conditional liabilities as at the end of 2015 amounted to PLN 10,082.0 million.
PLN 8,941.7 million. This amount included PLN 7,371.8 million of conditional liabilities connected to financing and
Moreover, the balance of conditional liabilities include also claims, toward which no provisions have been recognized, including insurance-related claims.
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 and Link4 to large business entities.
TPL, and motor insurance products. PZU and Link4 provide the insurance to individuals and entities from the SME
Individuals who have a legal relationship with the policyholder (for instance an employer or a trade union)
Additionally, the Investment segment includes income earned on other excess funds in PZU Group; • pension insurance - activity conducted by PTE PZU.
insurance group resulting in finalization of several large tenders conducted by medical entities in the December 2014 (with no effect on the premium earned in 2014) and the motor own damage insurance group for rail vehicles and guarantees. Decrease in the written premium was partially offset by the increase in sales of motor own damage insurance as a result of a higher number of insurance policies and in the group of insurance against fire and damage to property resulting from the acquiring several strategic clients and entering contracts for the period longer than one year.
6.1 % compared with 2014, resulting from higher level of deferred acquisition costs partially offset by the increase in commission from inward reinsurance and indirect acquisition costs; • an increase in administrative expenses to the level of
In 2015, the operating profit in the mass client insurance segment amounted to PLN 651.6 million (a 13.9% decrease compared with the prior year).
The commencement of Link4 consolidation in September 2014 entailed the growth of particular items in the 2015 operating result in comparison with the corresponding period of the previous year.
PLN 6,791.3 million with simultaneous growth of the gross written premium by 14.6% (excluding the premium from the Group’s subsidiaries, +11.4% y/y). Sales growth was recorded mainly in the motor insurance group as result of higher sales of motor insurance offered by PZU and acquisition of Link4 as of 15 September 2014. Higher premium was recorded also in the group of insurance of financial losses (due to long-term cooperation with a new
The decline in results from the previous year stemmed mainly from the higher claims and benefits level in motor insurance, which was determined mainly by the high 7.
Consolidated financial results dynamics of claims reported and paid of motor own damage insurance. The adverse events were partially offset by a lower level of claims in property and agricultural insurance (especially regarding claims of mass character); Furthermore, the comparability of the results is influenced by the recognition of the rise of claims provision for compensation from pain and suffering for damage occurred in previous years in the 2014 result.
Group’s subsidiaries companies) and indirect acquisition costs (including the costs of sales-assisting activity aimed to improve the effectiveness of the sales network).
Furthermore, there was a growth of direct acquisition costs, which resulted from the change to the sales channel mix
The operating profit of the group and individually continued insurance amounted to PLN 1,574.7 million and was 10.6%
(+2.3%) was primarily due to: ◦ development of group protection insurance (growth of the average premium and number of insured parties, including high level of new sales); ◦ acquisition of the premium in group health insurance
PLN 601.7 million, i.e. dropped by 15.6%, which resulted from the decline of the revenue allocated according to transfer pricing as the effect of lower market interest rates and from the decrease in revenue from unit-linked products as the effect of lower treasury bond prices compared to the rises in the previous year; • 5.6% higher net insurance claims and benefits. In 2015, they closed at PLN 4,750.1 million. The change resulted mainly from the following: ◦ increased mortality ratio in protection insurance compared with the previous year, confirmed by the
CSO (Central Statistical Office) survey on the entire population and additional growth of the agreement portfolio itself; ◦ higher endowment payments in short-term endowment products and structured products in the bancassurance channel - maturity dates reached for the subsequent product tranches; no effect on the result – offset by the change to the technical insurance provisions.
• PLN 31.6 million drop in other net technical provisions compared to the PLN 70.3 million provision growth of the previous year. The main cause was the lower growth of provisions in individually continued products – higher mortality ratio (a client’s death entails the need for benefit payment, but simultaneously releases the technical and insurance provision) and higher share among people entering the portfolio following the modification allowing for the creation of lower initial technical and insurance
provisions. Furthermore, PZU Życie’s modified these rules from the start of 2016 in the scope of the annual process of establishing the rules for possible indexation of the sum insured by the clients in continued insurance. This had a positive impact on the level of technical provisions in this portfolio. There was also a greater decline of provisions in short-term life and endowment products and structured products in the bancassurance channel compared with the previous year – endowment of the subsequent product tranches in the face of the lack of sales of new contracts.
group cover also affected the level of these provisions. As a result, provisions of PLN 75.4 million were released, i.e.
These costs amounted to PLN 356.3 million. Factors determining the level of direct and indirect acquisition costs included high sales of riders to continued protection insurance (agent remuneration, costs of distributing the offers to the clients and associated indirect costs) and increased sales activity in the scope of health products.
PLN 577.2 million was determined mainly by strategic expenses in distribution and operating support. 2015 saw the continuation of several strategic products aimed to build an innovative distribution channel and for other purposes; • the PLN 47.0 million year-on-year decline in other revenues and expenses was caused by a prevention fund charge (no such cost was recorded in the previous year, eliminated at the level of the consolidated result) and higher costs related to PZU Życie financing the premium
(higher promotional sales of additional insurance policies to individually continued insurance).
Operating profit of the group and individually continued insurance (PLN million)
In 2015, the operating result of the individual life insurance segment amounted to PLN 205.6 million, i.e. it was 26.3%
higher than in the prior year. The main factors affecting the level of the segment’s operating result were: • gross written premium drop of PLN 34.4 million (-2.7%)
from 2014 resulted from the following: ◦ lower sales of unit-linked products in cooperation with banks; ◦ lack of sales in structured and deposit product in cooperation with banks in 2015; ◦ withdrawal of the Plan na Życie savings product with a protection component and regular premium.
PLN 76.3 million to PLN 250.4 million in the individual insurance segment, mainly in unit-linked products in the bank channel, resulting mainly from the sentiment on the
Polish capital market in 2015, which was inferior to that of the previous year. The income allocated according to transfer prices slightly declined; 6.
In 2015, they amounted to PLN 850.2 million. This growth resulted from the higher value of surrenders in unit-linked products sold in own channels (PZU’s discontinuation of charging for advanced surrender in the scope of the Plan na Życie product) and the bank channel (year-on-year portfolio growth). The situation on the capital markets was also important in both cases. The next factor included higher endowment payments in structured products in the bancassurance channel (maturity dates reached for the subsequent product tranches) and in term protection products. In the case of investment products, the negative impact of the aforementioned factors on the operating result (with the exception of the lack of charges for advance surrenders) was offset by the appropriate change to the technical provisions; • the increase in other net technical provisions was lower than in the previous year by PLN 370.3 million. This change was associated mainly with the dropping provision of unit-linked products sold via bancassurance – there was a culmination of three negative effects on the state of provisions, i.e. increased benefit payments, decreased written premium, and negative investment activity result. Additional factors reducing the level of provisions concerned annuity products and included the introduction of uncollected benefit verification and also rise of payments for endowment while simultaneously lacking the sales of structured products in the bancassurance channel in the year. A similar effect was observed in the Plan na Życie savings product with a protection element and regular premium (discontinued sales and withdrawal from charges for advance surrender leading to increased surrenders value); • acquisition costs lower by 2.9% The drop in the costs to
Income from the investment segment investment activity conducted with PZU Group’s own funds defined as the surplus of investments over technical provisions in the insurance companies within PZU Group with their registered offices in
PZU Życie in insurance products, i.e. the surplus of investment income of PZU, Link4 and PZU Życie over the income allocated to insurance segments according to transfer prices.
In 2015, the operating profit of the pension insurance segment amounted to PLN 81.5 million, i.e. it dropped by 60.0% compared with 2014. This was the result of: • fee and commission revenue, which amounted to
(ZUS) to OPF were lower by PLN 3.3 million as a result of statutory changes. Furthermore, the costs of obligatory additional payments to the Guarantee Fund in the Central
The following changes with considerable impact on data comparability occurred in the Baltic states structure over the years 2014-2015: • PZU Lithuania was a part of the segment until 30 September 2015; • in 2014, the segment was expanded to include: AAS
Balta (June 2014), Lietuvos Draudimas (November 2014), Estonian branch operating under the Codan brand
PLN 686.9 million and were 120.0% higher than in 2014, with the value of claims and benefits of the companies acquired in the previous year amounting to
PLN 546.7 million. In life insurance, the value of claims amounted to PLN 29.3 million, 13.6% up from the previous year.
O pe ra tin g re su lts 14 In co m e
In 2015, the Ukraine segment earned an operating profit of UAH 12.3 million, compared with UAH 8.9 million in the previous year.
UAH 239.7 million in this respect, which is 53.9% more than in 2014. The following factors had a positive impact on its level: an increase in the liquid assets base and foreign exchange profits, in particular, in life insurance offered mainly in foreign currencies; • increase in claims and benefits. They amounted to
UAH 425.6 million, i.e. 18.9% higher than in the previous year. The reasons for the increase included the 2.3 p.p. rise of the claims ratio, mainly in property and health products; • increase in acquisition costs. They amounted to
UAH 122.8 million. For comparison purposes, in 2014, the administrative expenses of the segment amounted to
written premiums, paid benefits and change in technical provisions. The above categories are eliminated for the purpose of the consolidated results.
PLN 16.1 million, i.e. 63.1% lower than in the corresponding period of 2014, mainly in the short-term endowment products in own and bancassurance channels, as well as unit-linked in bancassurance channel as the effect of a decline in investments level; • lower value of net insurance claims and benefits resulting from the considerable drop in endowment payments from short-term endowment products in the bancassurance channel (last year saw the maturity of high-value tranches; considerably lower sales in subsequent periods; no effect on the result – corresponding effect in changes to technical provisions). These amounted to PLN 694.5 million, i.e. they were 50.1% lower than in the prior year; • lower negative balance of the change in the balance of other technical provisions. This amounted to
PLN 558.5 million compared with PLN 1,015.5 million in the prior year. This difference arose mainly from the changes in the portfolio of short-term investment endowments sold through the bancassurance channel, i.e. lower level of endowment combined with the withdrawal of such products from the offer; • lower acquisition costs. These amounted to
PLN 10.0 million, i.e. they were 39.3% lower than in the prior year. This resulted from considerable reduction of 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); • lower administrative expenses. These amounted to
PLN 9.3 million and declined by 3.8% compared with 2014 – the result of a decrease in the contracts portfolio.
The profitability ratios achieved in 2015 by PZU Group exceed the levels achieved by the whole market (according to the data for three quarters of 2015).
One of the basic efficiency and operating measure of an insurance company is the combined ratio (COR) which is calculated for the non-life sector because of its specific nature
remains in the last few years at the level which guarantees
The results of investment contracts segment are presented as per the Polish Accounting Standards, which means that, among others, the following items were included: gross
Key profitability ratios of PZU Group 2015 2014 2013 2012 2011
Return on assets (ROA) (annualized net profit / average assets) x 100%
Administrative expenses ratio (administrative expenses / premium earned net of reinsurance) x 100%
Return on Sales (net revenue / gross written premium) x 100%
4. Acquisition expenses ratio (cquisition expenses/premium earned net of reinsurance) x 100%
7. Operating profit margin in life insurance (operating profit/gross written premium) x 100%
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The risk appetite is defined in PZU Group as the amount of risk taken in order to achieve business objectives and it is measured by the level of potential financial losses, decrease in the value of assets or an increase in the value of liabilities in a one-year period.
The procedure of determining the risk appetite and limits for individual risk categories has been implemented in all insurance companies of PZU Group and is consistent with the group process. The Management Board in each company determines the risk appetite, the risk profile and tolerance limits which reflect its strategic plans and objectives of the entire PZU Group. Such an attitude ensures appropriateness and efficiency of the risk management system in PZU Group and prevents risk acceptance at a level which could pose a threat to the financial stability of individual companies or the entire PZU Group. The Management Board of a respective company is responsible for determining the appropriate risk level for every company, whereas the risk unit reviews the level of risk appetite once a year. All the activities are coordinated at the Group level.
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 specific risks 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 consistent mechanisms, standards, and operational organization of an effective internal control system (with special focus on compliance function), risk management system (especially in the reinsurance area), and security management system at
Dedicated employees from PZU Group cooperate with Management Boards of the companies and with management of such areas as finance, risk, actuary, reinsurance, investment, and compliance, under relevant cooperation agreements; • solo level – ensures that a given PZU Group entity implements its business objectives in a safe way, adequate to the degree of risk involved by this entity. As a part of the integrated risk management system, PZU Group implements consistent mechanisms, standards, and operational organization of an effective internal control system (with special focus on the compliance function), risk management system (especially in the reinsurance area), and security management system.
The main types of risks incurred by PZU Group include underwriting risk, market risk, credit risk, concentration risk, operational risk, and compliance risk.
Underwriting risk assessment involves recognizing the degree of exposure or a group of exposures related to the possibility of incurring a loss and analyzing the risk elements in order to make a decision on whether PZU should accept a risk for insurance and assume liability. The aim of the risk assessment
(underwriting) GLOSSARY is the assessment of future claims and the reduction of adverse selection.
Underwriting risk measurement is based in particular on: • analysis of selected indicators; • 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.
Monitoring and controlling of underwriting risk includes the analysis of the level of risk by means of a set of reports including selected indicators.
The reporting aims to ensure efficient underwriting risk communication and supports underwriting risk management at different levels of decision-making process from the employee level to the Supervisory Board. The frequency of individual reports and the scope of information are tailored to meet the information needs at different decision-making levels.
The identification of market risk involves recognizing the actual and potential sources of this risk. In the case of assets, the market risk identification process begins when a decision is made to commence transactions on a given type of financial instrument. The units which decide to start transactions on a given type of a financial instrument prepare the description of the instrument, including, in particular, the description of the risk factors. The description is then submitted to the risk management unit which uses it to identify and assess the market risk.
The market risk is measured using the following measures of risk: • VaR, i.e. Value at Risk – a risk measure quantifying the potential economic loss which will not be exceeded over a one-year period with a 99.5% probability under normal market circumstances; • exposure and sensitivity measures; • accumulated monthly loss.
Monitoring and control of the market risk involves analyzing the risk levels and the utilization of limits.
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 to involve in 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.
Risk assessment is based on estimating a probability that the risk occurs and a potential impact of such an occurrence on the financial standing.
Concentration risk measurement for a single entity is calculated as the product of the following two values: • amount of exposure to this entity over the excessive concentration level; • concentration risk factor set for every internal rating.
Management actions with respect to credit risk and concentration risk include, in particular: • setting limits of exposure to a single entity, group of entities, sectors or states; • diversifying a portfolio of financial assets and insurance, mainly with respect to the state, sector; • accepting collateral; • concluding transactions aimed at mitigating credit risk, such as selling a financial instrument, closing out a derivative transaction or purchasing a hedging derivative, restructuring of the granted debt; • reinsuring a financial insurance portfolio; The structure of credit and concentration risk limits for individual issuers is determined by dedicated Committees in line with risk tolerance.
Risk that the Company or persons related to the Company violate or fail to comply with the provisions of law, internal regulations, or standards of conduct adopted by the Company, including ethical norms which result or may result in suffering by the Company or persons acting on its behalf legal sanctions, financial losses, or loss of reputation or credibility.
Compliance risk is identified and assessed for individual internal processes of PZU and PZU Życie by the managers of entities and organizational units, in line with the division of reporting responsibilities. Additionally, the compliance unit identifies risks on the basis of entries in the register of conflicts of interest, gifts, benefits and irregularities, as well as the enquiries received.
In 2015, PZU Group companies implemented Methodology for compliance risk identification and assessment, in accordance with solutions adopted at PZU; the methodology was used to perform first compliance risk identification and assessment.
The Compliance Bureau conducts e.g. the following actions: • analysis of monthly and quarterly reports received from compliance units from the Group companies; • assessment of impact of the companies’ compliance risk on
Protection; • review of the recommendations of PZU Group’s compliance unit; • ensuring coherent realization of compliance function in PZU
Management actions taken in response to the compliance risk comprise in particular: • acceptance of risk, e.g. in connection with legal or regulatory changes; • mitigation of risk, including adjustment of procedures and processes to regulatory requirements, issuing opinions and drafting internal regulations from the point of view of compliance, participating in the process of agreeing marketing activities; • avoiding risk through the prevention of involvement in activities which do not comply with regulatory requirements or good market practices or which could have an adverse effect on the image.
The analysis does not take into account the impact of changes
Change in assumptions used to calculate the provisions for capitalized annuities net of reinsurance in non-life insurance (in PLN million)
Change in assumptions for provisions for insurance and investment contracts with DPF in life insurance, excluding annuities (in PLN million)
in interest rates on the insurance or investment contracts presented as liabilities.
through, among others, a catastrophic non-proportional excess of loss contract and to the consequences of large one-off losses by non-proportional excess of loss contracts protecting property, technical, marine, aviation, TPL and MTPL
PZU’s risk is also mitigated through reinsurance of the financial insurance portfolio. In 2015, the main partners providing treaty reinsurance cover to PZU were Swiss Re, Hannover Re,
Scor, Munich Re, and Lloyd’s. As per S&P/AM Best, ratings of
PZU Group’s insurance companies. Further commitment to the protection of Baltic companies and Link4 resulted in an increase in the related written premium.
QBE Re, RGA, Partner Re and Arch Re are the partners providing reinsurance cover to PZU Życie. Reinsurance partners have high S&P ratings, which gives PZU Życie the certainty of reinsurer’s good financial standing.
Draudimas, AAS Balta and Link4, have reinsurance cover that matches their business profile. Every significant insurance portfolio is secured by a treaty contract. PZU, the main reinsurer of the subsidiaries, coordinates the protection of the
As at the end of the third quarter of 2015, the solvency ratio
(calculated according to the Solvency II standard formula) was assessed at a level of 296.1%1. Ratios as high as these place
Reinsurance share from PZU obligatory contracts as per Standard & Poor’s rating
Calculation of own funds for solvency margin coverage 2015 2014 2013 2012 2011
PZU Group's solvency margin coverage with own funds 281.5% 291.2% 351.8% 405.8% 352.9%
PZU's solvency margin coverage with own funds 550.4% 585.9% 697.7% 815.3% 686.6%
Antarctica is the only continent where there is no PZU shareholders. Our investors live in over 100 cities in Europe, America, Asia, Africa and Australia. To reach them we circled the globe more than 10 times. Since the IPO the trading value of PZU
In 2015, world markets remained under a very strong influence of central banks’ policies and economic situation of the Eurozone, USA, and China. FINANCIAL MARKETS
Chinese market, which had a negative impact on share prices both in Poland and abroad. What is more, the situation in the country was exacerbated by the perspective of introducing a new burden for the banking sector, which was to become reality after parliamentary elections in October 2015. The last quarter did not result in any improvement. The US Central
Bank increased its interest rate by 25 bps in December (first increase since 2006), the prices of raw materials were going down (particularly oil prices – a decline of 35% year-on-year), and the European Central Bank announced the intention of easing its monetary policy to a lesser extent that it was expected.
The above events had a significant influence on the Polish debt market. In entire 2015, the Polish treasury bonds yield of 5-year and 10-year treasuries grew by 10 and 40 bps to 2.2%
Deterioration of situation on the markets was reflected in the MSCI (Morgan Stanley Capital International Index) for emerging markets, which fell by 17.1%. In relation to this index, in 4Q 2015 there was also a significant weakening of the MSCI Poland index. This resulted from a substantial decline in bank capitalization on the Warsaw Stock Exchange.
The WIG index was slightly better and fell by 9.6% year-onyear. Small companies turned out to be the most resistant to decreases – the sWIG80 index gained 9.1% year-on-year.
On 30 November 2015, PZU split its stock, the operation consisting in decreasing the nominal value of shares from
With capitalization amounting to PLN 29 billion, at the end of 2015, PZU was the fourth company when it comes to the capitalization of domestic companies (5.7% of share in the WSE main market). In 2015, maximum PZU share price
(calculated after the split) amounted to PLN 50.9. The price reached its bottom on 14 December 2015 when it amounted to PLN 31.4 per share.
At the end of Q1 2015, PZU share prices were valued 11.0%
WIG20 and WIG BANKS ended the year with a decrease of 19.7% and 23.5% respectively. The sale of shares concerned also RESPECT index whose closing price was 15,5% lower than in 2014.
High dividend paid by PZU on 21 October 2015 offered some conciliation to the investors. The dividend amounted to nearly
Capital market ratios for PZU shares* 2015 2014 2013 2012 2011
P/E Price per share / profit per share 12.54 14.14 11.77 11.60 11.38
EPS (PLN) Profits (losses) per share / number of shares 2.71 3.44 3.82 3.77 2.72 *based on PZU Group data (IFRS)
The exchange rate at the last session of the year*(PLN) 34.0 48.6 44.9 43.7 30.9
Value of the volume (PLN million) 20,144.56 18,400.72 19,970.38 18,152.22 23,315.25
Average number of transactions per session 3,329 2,495 2,369 1,660 2,097
Capitalization at the end of the period (PLN million) 29,377.1 41,967.2 38,767.9 37,736.0 26,682.9 *prices calculated after a 1:10 stock split **trading volume alculated after a 1:10 stock split to pursue further transactions. Moreover, the market price of share of banks quoted on WSE, including Alior Bank shares, are valued significantly lower, which resulted in the decreased capitalization of PZU.
The P/E ratio for domestic companies decreased in 2015 by 7.6% to 18.2 year-on-year, while the P/BV ratio fell by 15.3%
Main events that influenced PZU share prices in 2015 to 1.1 year-on-year1. Share/Book Value ratio was 12,54, and
S&P confirmed PZU’s credit rating of A with a stable outlook
Announcement of the PZU 3.0 Strategy Signing the agreement for the sale of PZU Lietuva
500 million issued by PZU Finance AB (a public company) on 3 July 2014, they constitute one series, a so-called „tap” issue.
Britain, 12% Czech Republic, and 9% Germany). The issue price per bond with a nominal value of EUR 100,000 amounted to EUR 99,218. Bond yield was 1.593%. The bonds bear interest at a fixed interest rate of 1.375% per year and the coupon will be paid once a year. The issue was awarded
„A-” on 21 January 2016 due to the S&P’s decision to decrease
Poland rating from „A-” to „BBB+” for long-term liabilities in foreign currencies, the rating of PZU bonds dropped to the
The bonds are quoted on the regulated market of the Irish
The funds from the bond issue were planned to be used to increase the involvement of investment portfolio in investments denominated in euro, mange FX position, and use of debt financing, which is cheaper than equity.
In order to meet the highest information governance requirements for public companies and fulfilling information needs of different groups of stakeholders, the Management
PZU has consistently applied „Principles for PZU to Conduct its Information Policy for Capital Market
North American investors significantly grew – their share in shareholding nearly doubled to 9.9% year-on-year. The share of European investors (excluding Poland) slightly decreased by 0.3 p.p. and reached 17.9%. As for the structural changes, the higher activity of investors from the United Kingdom was strongly discernable. Their share in 2015 rose from 3.0% in 2014 to 8.1% in 2015. At the same time, the result of the conducted survey pointed to individual shareholding outside
The financial performance of PZU Group (for 2014, Q1 2015, 1H 2015 and Q3 2015) was presented and discussed by the Management Board of PZU during meetings with capital market analysts (all also broadcast live on the Internet). PZU
Strategy for the years 2015-2020, and the conference held on 1 June 2015 in connection with signing an agreement for purchase of Alior Bank shares.
( along with the most important events, achievements and plans. 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 Taxes.
(1x), Hong Kong and Singapore (1x); • 13 financial conferences held abroad with global institutional investors; • 5 conferences for institutional investors in Warsaw; • a number of group, one-on-one and group meetings, as well as teleconferences with investors and stock portfolio managers held in the company’s office.
Conference 2015 in Zakopane; • organized 4 chats with individual investors, in which the Member of the Management Board of PZU who is in charge of Finance Division in PZU Group also participated, after each publication of the results, and 1 chat after announcement of the PZU 3.0 Strategy; • participate in the „10 na 10 – komunikuj się skutecznie”
Activities of PZU regarding investor relations are highly appreciated both by investors, analysts and media. In 2015,
PZU received the following awards and prizes in this area: • Eight awards for the best investors relations in Poland and Central and Eastern Europe in Extel 2015 survey
The Extel survey included 16 thousand people from investment environment from 75 countries. The representatives of brokerage houses and investment analysts were rated by asset managers and IR department staff. 5.5 thousand individuals and over 1.5 thousand companies were subject to the survey in the field of investors relations. All data used for drafting the ranking were subject to an external audit which ensures their credibility and correctness.
Individual Investors Association to the companies that maintain high reliability of its information policy and protect the rights of investors.
Main objectives of investor relations in 2016: • establishing good relations between the Management
In 2015, recommendations for PZU shares were issued by 18 domestic and foreign financial institutions. In total, the sell-side analysts issued 28 recommendations. Positive and neutral recommendations dominated (92.9% of total recommendations issued.) The median of target prices (TP)
A considerable discrepancy between valuations of respective analysts and PZU market valuation, that was observable at the end of 2015, constitutes an evidence that the market valuations are isolated from the fundamental value. That situation was related e.g. to weakening investors’ sentiment towards shares on global markets (concerns related to situation in china, low oil prices, migration crisis), as well as such local factors in Poland as announcements concerning introduction of tax on financial institutions, etc. Additional burden for PZU shares was growing uncertainty as to further investments in consolidation of the banking sector in Poland and expected personal changes in the Management Board of
Analysts’ expectations towards PZU share price in 2015 on the basis of recommendation updated as at end of
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15
On 13 May 2014, the Management Boards for PZU decided to update the Capital Structure and Dividend Policy of PZU Group for the years 2013-2015 (Policy), approved on 26 August 2013. Thanks to the introduced changes, on 19 November 2013 an advance dividend expected at the end of 2013 financial year in the amount of PLN 1,727 million, that is,
The key objective of the implementation of the Policy is reduction of the cost of capital through optimization of the balance sheet structure by way of replacing equity with less expensive borrowed capital at the same time ensuring high security and maintaining funds for development.
• surplus capital, where the total amount of dividends paid from surplus capital in 2013-2015 cannot exceed
PZU is planning to amend the capital and dividend policy to address the requirements of Solvency II.
Consolidated net profit of PZU Group (in PLN million) 2,342.2 2,967.6 3,295.0 3,253.8 2,343.9
Standalone income of PZU (in PLN million) 2,248.5 2,636.7 5,106.0 2,581.0 2,582.0
Dividend paid per year (in PLN million) n/a 2,590.6 4,663.0 2,564.7 1,936.9
Dividend per share per year (in PLN)** n/a 3.00 5.40* 2.97 2.24
Dividend as at the date of establishing dividend right (in PLN)** 3.00 3.40 4.97 2.24 2.60
Dividend payout ratio from the consolidated result for the year n/a 87.3% 89.1%* 78.8% 82.6%
Similarly to the previous years, as per the supervisory institution’s recommendation, dividend should be paid only by the insurance companies that meet specific financial criteria.
Book value per share and gross accumulated dividend per share ** (PLN)
* dividend from surplus capitals paid in 2013 (PLN 2.00 per share), not included in dividend payout ratio ** historical data was calculated in 1:10 ratio as per stock split
Życie results from an analysis of the financial information, competitive position, management and corporate strategy as well as country financial situation. It also includes outlook, i.e.
„A” level and maintained a stable level of outlook for both companies.
PZU on its CreditWatch Negative list, as a result of resignation of the President of the Management Board, uncertainty as to the future strategy, and capability to pass the stress test of hypothetical bankruptcy of issuer’s country in connection with
The decision to lower PZU rating was a consequence of S&P’s downgrading Poland’s rating. Such a move did not result from a change in PZU financial standing.
On 15 January 2015, Standard & Poor’s Rating Services downgraded Poland’s credit rating from „A-” to „BBB+” for long-term liabilities in foreign currencies, and from „A/A-1”
analysts awarded a rating of A- to the new issue. On 21
Credit rating (long-term, in foreign currency) BBB+ /negative/ 15 January 2016 A- /positive/ 7 August 2015
Credit rating (short-term, in local currency) A–2 /negative/ 15 January 2016 A–1 /positive/ 7 August 2015
Credit rating (short-term, in foreign currency) A–2 /negative/ 15 January 2016 A-2 /positive/ 7 August 2015
STOCK SPLIT IS AN OPERATION PERFORMED BY A JOINT-STOCK COMPANY THAT CONSISTS IN DECREASING THE NOMINAL VALUE OF SHARES AND MAINTAINING THE VALUE OF SHARE CAPITAL AT THE SAME TIME..
Schedule of main corporate events in 2016 7 January General Shareholders’ Meeting
We are a part of the world around us. We believe that understanding the expectations of our clients and other stakeholders, taking care for our employees, and engaging in social life and environmental care are indispensable basis for building responsible business and creating value of a modern company.
Sustainable development and social responsibility in business are at the same time the most straightforward 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 interested parties.
For over 200 years, PZU Group has done its best to meet expectations and keep its customer services at the highest level. We respects all principles included in Code of Good
In order to ensure safety and guarantee top quality cooperation to our clients and other interested parties, PZU
PZU clients who benefited from claims handling process managed by PZU Group or received payment of benefits within the last 12 months was 7 p.p. higher than at the competitors. The Net Promoter Score (NPS) among the Group clients was 11%1. Among Link4 clients, NPS
amounted to 10% and was by 3 p.p. higher than at the competitors’ at the direct market2; • customer service quality survey – PZU regularly examines the quality of customer service in PZU branches and through the agents and partners of PZU. Conclusions from these observations are used to prepare training programs in customer service, including trainings for the agents and partners, in order to ensure constant improvement of the service qualityi; • Client Council – an exceptional advisory body composed of
PZU Group customers. The Council actively supports and provides feedback to PZU in selected initiatives, concerning, among others, service quality, ways of communication with clients, service processes, marketing materials, social actions; 1 Monthly survey carried out by GFK Polonia at the request of PZU. Presented data constitute an accumulated result of monthly assessments from January to December 2015 2 Monthly survey carried out by GFK Polonia at the request of PZU. Presented data constitute an accumulated result of monthly assessments from January to December 2015
Customer satisfaction of Link4 higher than with competitors on direct market
• social media and clients’ complaints – PZU contacts all interested parties e.g. via expert blogs or social media, such as Facebook, Twitter, Linkedin or Instagram. Such platforms enable better communication with diversified audience and thus allow for a better identification of space 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 discussion with interested parties; • client communication quality audits – audits of spoken and written language used by PZU employees in communication with clients, carried out by the Plain Polish Section of the
PZU – as the first insurer in Poland – introduced customer service in Polish Sign Language in some of its branches.
The service is provided in collaboration with Migam.org and facilitates a video connection with the translator via tablets.
Group focuses on ensuring best possible cooperation with agents, providing them with support programs, training (e.g.
Akademia Agenta [Agent’s Academy]) and a new internal communication portal within the network of the Group’s agents. Candidates for agents are trained as well. On the other hand, PZU expects its suppliers, vendors and agents to respect all valid regulations pertaining to their scope of operations and clearly communicates this expectation to all its partners.
Polish enterprises expect their insurance companies to offer excellent service and innovative solutions adapted to their demands. The PZU Lab research and development center was established to meet these demands and results directly from
PZU takes utmost care of the security of the data entrusted by the clients and other stakeholders, as well as the information it processes. In scope of its activity, PZU Group strictly obeys the personal information protection act, specifically the regulation
Everest platform – the next step toward perfect relations with the clients
Organization. PZU sees an effective and motivated staff as the most important element of realizing strategic objectives.
According to good practices, all PZU’s employees have equal opportunities. This rule serves as the foundation for our relations. It involves 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.
into an even friendlier workplace engaging all of the Group’s employees. One of the initiatives was the establishment of the Sport Team. Today, there are 11 active Sport Team
“ You have to create an attractive environment where the people are interested in the history they are creating” Carlos Goshn. CEO Renault/Nissan units: running, cycling, skiing, squash, volleyball, crossfit, soccer, sailing, basketball, table tennis, triathlon. The units are composed of almost 800 PZU employees. The PZU Sport
Team is regularly among the leaders in amateur tournaments and events, both open and organized only for employees of corporations. For example, PZU’s runners placed second in the
Volunteer projects. 27 different projects were launched in the spring and 29 in the fall in scope of the „Wolontariat to radość
PZU’s employees have contributed over 10 thousand hours of their time in volunteer initiatives.
Coalition – volunteer work to raise competences, where the members of the boards of our Group meet with students at their schools, share their experiences, and motivate them to develop their passions; • Zwolnieni z teorii [Exempt from theory – the first contest in Poland where the students demonstrate not their school knowledge, but their practical skills. They do not compete in tests and essays, but in social projects; • Szlachetna paczka [Noble package] – The PZU Foundation has served as the strategic partner of Szlachetna paczka
[Noble package] since 2013. The organizations came together for the concept of smart assistance, which offers immediate help, but also systemic solutions based on long-term activity and long-lasting effects. In 2015, 76 PZU
PZU’s effective ethics are an inseparable part of the Group’s operations and the foundation for its sustainable development.
The company is doing everything in its power to have them reflected in all activities of the Group’s employees. On one hand, the Rules are contained in the official documents such as the PZU Good Practices and the New Security Policy. On
Corporate social responsibility the other, they compose the foundation for Values, which the
Strong involvement in the social life is an inseparable longterm value of the social responsibility of business. PZU
provides support for local organizations and communities, both financial and in scope of sharing the knowledge and experience of its employees. The Group builds long-term relations with their partners to make sure that the initiatives it supports are continuously improved. With support from the PZU Foundation and the preventive fund, PZU promotes healthy lifestyle, educates in scope of safety, supports development of medical science, and carries out the Group’s philanthropic activity. These activities are permanent elements of its social involvement strategy.
In 2015, both PZU and PZU Życie cooperated with hospitals, non-government organizations and media who carried out health-related projects and contributed to purchases of medical equipment. The following preventive programs were aimed at improving health and prevention: • PZU Trasy Zdrowia [Health Routes] program
This is a program for the local governments in municipalities with up to 50 thousand inhabitants. It is aimed to create Routes in Poland for meetings, recreation, sports, or pro-health education, and consequentially integration of the local community. In 2015, the PZU
Idea Run], Kamienna Piątka [Rock Five]). The supported initiatives also included special running events, among others those promoting transplants (Bieg po Nowe Życie
In 2015, the PZU Foundation realized the second part of the campaign „Kochasz? Powiedz STOP Wariatom
PZU Group provides organizational and financial support to the Business Forum in Krynica. This so-called Polish
It is over 2.5 times more than last year: races participating in the Podziel się kilometrem (Share your kilometers) initiative31 charity organizations received funds thanks to our initiative32 7,212.9 km
Corporate social responsibility the political and business contacts in Europe to serve the development of regional and international political, business, cultural, and science relations.
Since 2004, the PZU Foundation has carried out charity activities of PZU Group which are among the most important elements of its community involvement strategy. The aim of the PZU Foundation is to promote education of children and teenagers, fostering talents and creating equal opportunities for people who are, for various reasons, disadvantaged, as well as to increase access to cultural assets and social life, that is, a broadly understood development of civil society.
In 2015, the PZU Foundation spent almost PLN 40 million for its statutory operations.
Classes] contest, which have been choosing the best projects for the past 10 years. 368 projects were submitted to the contest in 2015 and 22 organizations with initiatives deemed most interesting received financial support.
Place] – the objective of this program is to provide a place for youth, where they could spend their free time after school – take part in educational exercises, especially in scope of sciences, develop their interests, and do their homework under the supervision of someone who will help them out.
Warsaw. As the patron of the Museum, PZU wants to improve the security of both its priceless collections and visitors. PZU
guarantees free-of-charge professional therapy and provides all conveniences necessary for proper therapeutic progress during the therapy periods.
PZU cares for the environment through initiatives such as: • „rower zastępczy” [replacement bicycle] – in scope of this initiative, PZU offers to its clients a choice between a replacement vehicle and a bicycle, which they can keep in case of traffic collisions requiring repairs to their vehicle.
The objective of this innovative offer is to promote a healthy lifestyle, but it also reflects the company’s care for the environment; • introducing hybrid cars to the fleet. The drive complies with the highest EURO 5 standard of combustion, binding in the
We understand that, being the market leader, our role is to set the highest standards for the whole industry.
Since the IPO of PZU on a regulated market the Issuer has followed the corporate governance rules laid down in Good
Since 1 January 2013 to 31 December 2015 oblige document adopted by resolution of WSE Council dated 21 November 2017 regarding amendments to the Good Practices of
On 13 October 2015, a new set of corporate governance rules under the name of „Good Practices of Companies quoted on
Code of Good Insurance Practices adopted on 8 June 2009 by the General Meeting of the Polish Chamber of Insurance
(„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, stakeholder relations are based on our internal PZU
Practices of Companies quoted on WSE except for the one referred to in Section IV pt.10 and Section I pt.5, I pt.9 and
With regard to the principle referred to in Section IV pt.10, regarding enabling shareholders’ exercise voting rights personally or by proxy on in General Shareholders’ Meetings using IT tools to allow mutual real-time communication and participation in discussions during the meeting of shareholders who are physically absent at the meeting venue, please note that, in our opinion, there are a number of technical and legal factors that may affect the course of a General Shareholders’
The following issues mentioned in section I of Good practices of companies quoted on WSE defining “Recommendations concerning good practices of companies quoted on WSE”
should be emphasized: • as for the recommendation included in Section I pt.5 concerning the policy of remunerating members of management and supervisory bodies, remunerations of members of the Supervisory Board for participation in the works of the Board are determined by the General
Shareholders’ Meeting and those of the Management Board are set based on a resolution of the Supervisory Board; • policy of remunerating members of the management and supervisory bodies of PZU does not include all elements indicated in the recommendation of the
European Commission of 14 December 2004 fostering an appropriate regime for the remuneration of directors of quoted companies (2004/913/EC), supplemented by recommendation of EC of 30 April 2009 (2009/385/EC).
Moreover, PZU did not present a declaration presenting remuneration policy on its corporate website. The decision concerning future compliance with the mentioned above rule will be taken by the Supervisory Board and the General
Shareholders’ Meeting; • at the same time, please note that implementing the
has always pursued the policy of appointing competent, creative, experienced and educated people to the
IV pt.12, regarding enabling shareholders’ participation in General Shareholders’ Meetings using IT tools to allow mutual real-time communication and participation in discussions during the meeting of shareholders who are physically absent at the meeting venue, please note that, in our opinion, there are a number of technical and legal factors that may affect the course of a General
The announcement on non-compliance with these recommendations was not issued in line with the waiver of the obligation to publish issuers’ reports referred to in Article 29.3 of the Regulations of WSE with respect to corporate governance principles set forth in Section I of Good practices of companies quoted on WSE, in accordance with the resolution of the Management Board of WSE dated 11 December 2007 regarding partial waiver of the obligation to publish reports on corporate governance adopted on the
declared that while acting within its mandate it will follow the
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: • principle specified in § 8.4: Principles facilitating the participation of all shareholders in the General
Principles concerning appointment and dismissal in supervised institutions of the person heading the internal audit unit or the person heading the compliance unit, it should be noted that PZU complies with the principles specified in § 14 of the Principles fully, which means that
State Treasury; • principle specified in § 12.1 in the following wording: „The shareholders are responsible for providing immediate capital injection to the supervised institution in a situation in which it is necessary for maintaining the own capitals of the supervised institution on a level required by the legal or supervisory regulations and also when it is required for the reasons concerning safety of the supervised institution.”
- waiver from applying the principle is justified by the unfinished privatization of the Company carried out by the
Moreover, the following rules do not apply to PZU: • principle specified in § 11.3 in the wording: „In the event that the decision concerning a transaction with a related party was made by the General Shareholders’ Meeting, all shareholders should have access to any information necessary for assessment of the terms on which the transaction is to be executed and its impact on the situation of the supervised institution.”
– in PZU the General Shareholders’ Meeting does not make decisions concerning transactions with related parties; • principle specified in § 49.4 in the following wording: „In a supervised institution, where there is no internal audit unit or compliance unit, the entitlements referred to in items 1–3 shall be held by the people responsible for performance of those functions.”
– there is both an internal audit unit and a compliance unit at PZU; • principle specified in § 52.2 in the following wording: „In a supervised institution, where there is no audit unit or compliance assurance unit, and where no unit responsible for that area has been appointed, the information referred to in item 1 shall be submitted by the people responsible for fulfilling those functions.”
Office) and central units operating based on applicable regulations. PZU Finance Division is supervised by a Member of the Management Board of PZU.
The key controls during preparation of the financial statements include: • controls and permanent monitoring of the quality of input data, supported by the financial systems with defined rules of data correctness, in accordance with PZU internal regulations concerning the control of correctness of the accounting data; • data mapping from the source systems to financial statements supporting appropriate presentation of data; • analytical review of financial statements by specialists to compare them with the business knowledge and knowledge about business transactions; • formal review of the financial statements to confirm compliance with the valid legal regulations and market practice in terms of required disclosures.
Audit Committee. At least one of them must be qualified in accounting or auditing, as understood by the Act on Statutory
The work referred to above will include three subsequent financial years ending, respectively, on: 31 December 2014, 31 December 2015 and 31 December 2016, with an option to extend the agreement for further two financial years ending, respectively, on 31 December 2017 and 31 December 2018.
On 3 November 2015, the District Court for the capital city of
Depository for Securities adopted at the request of PZU a resolution No. 789/15 on determining the day of 30 November 2015 as the day of splitting 86,348,289 PZU shares with the face value of PLN 1 each to 863,482,890 PZU shares with the face value of PLN 0.10 each.
Therefore, the share capital of PZU is divided into 863,523,000 ordinary shares with the face value of PLN 0.10 each, giving right to 863,523,000 votes on the General Shareholders’
From 2013 to 2015, no employee stock ownership plans existed in PZU.
In line with the PZU’s By-laws, the above voting restrictions will expire starting from the moment when a share of a shareholder who, at the date of adopting a resolution of the
Act on Insurance Activity GLOSSARY such change must be approved by the FSA and then recorded in the National Court
Group Directors 1. Tomasz Karusewicz - na na 3. Roman Pałac - na na 4. Tobiasz Bury nd 500 na 5. Rafał Grodzicki nd - na 6. Przemysław Henschke nd - na
Code and the By-laws of PZU, include passing resolutions concerning the following: • examination and approval of the Management Board report on the issuer’s activities, financial statements for the previous financial year and acknowledgement of the fulfillment of duties by members of the company’s authorities; • profit distribution or loss coverage; • making decisions concerning claims for redressing damage inflicted upon formation of the company or exercising management or supervision; • 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 merger with another company, its liquidation or dissolution; • appointing and dismissing members of the Supervisory
In accordance with the By-laws, a majority of three fourths of votes is required to pass the General Shareholders’ Meeting’s resolutions on the following: • amendments to the By-laws; • decrease in the share capital; • disposal of the enterprise or its organized part or its lease or establishment of a limited property right; 11. Zbigniew Ćwiąkalski na - na 12. Tomasz Zganiacz na - na 13. Zbigniew Derdziuk na - na 14. Dariusz Filar na - na 15. Dariusz Kacprzyk na - na 16. Jakub Karnowski na 280 na 17. Maciej Piotrowski na - na
Meeting is required to pass resolutions relating to the following: • preference shares; • issuer’s business combination by transferring all its assets to another company; • its merger by forming a new company; • dissolving the Company (also as a result of moving its seat or the head office abroad); • its liquidation, transformation or reduction in the share capital through redemption of a portion of shares without a similar capital increase.
General Shareholders’ Meeting. The rights of the shareholders and the method of exercising thereof at the General
General Shareholders’ Meeting and exercising the voting rights are always presented in an announcement of the General
Furthermore, at least one member of the Supervisory Board should meet the independence criteria specified in the Bylaws (Independent Member) concerning e.g. professional and personal relations, especially with members managing or supervising PZU and entities in PZU Group. The Independent
Board. The right will expire once the State Treasury ceases to be the Company’s shareholder.
Composition of the Supervisory Board of PZU as at 1 January 2015: • Aleksandra Magaczewska - Chairperson of the Board; • Zbigniew Ćwiąkalski - Deputy Chairman of the Board; • Tomasz Zganiacz - Secretary of the Board; • Zbigniew Derdziuk - Member of the Board; • Dariusz Filar - Member of the Board; • Dariusz Kacprzyk - Member of the Board; • Jakub Karnowski - Member of the Board; • Alojzy Nowak - Member of the Board; • Maciej Piotrowski - Member of the Board.
On 30 June 2015, Tomasz Zganiacz’s mandate of a member of the Supervisory Board expired.
Shareholders’ Meeting of PZU established the composition of the Supervisory Board of PZU of the new term as follows: Dariusz Kacprzyk, Dariusz Filar, Aleksandra Magaczewska,
On 8 July 2015, the Supervisory Board of PZU entrusted the function of the Chairperson of the Board to Zbigniew
(according to its composition as at 31 December 2015) have been presented below: Name and surname of the member of the Supervisory Board of PZU (the composition as at 31 December 2015) Term of office of the member of the Supervisory Board of PZU
Paweł Kaczmarek Deputy Chairman of the Supervisory Board from 8 July 2015 to 6 January 2016
Dariusz Kacprzyk Member of the Board from 18 June 2014 to 6 January 2016
The current term of office of the Supervisory Board of PZU
Aleksandra Magaczewska, Dariusz Filar. Simultaneously, on 7 January 2016, it appointed the following people to the
On 19 January 2016, the Supervisory Board of PZU entrusted the function of the Chairperson of the Board to Paweł
Board to Marcin Gargas, and the function of the Secretary of the Board to Maciej Zaborowski.
Paweł Kaczmarek – Chairman of the Supervisory Board since 19 January 2016; Deputy Chairman of the Supervisory Board from 8 July 2015 to 6 January 2016
He graduated from the Faculty of Law and Administration at the University of Łódź. In 19942014, he worked in the Ministry of Finance. For several years he dealt with legal aspects concerning the issue of public debt: its financing, conversion and restructuring, cooperation with the regulatory authorities of the capital market to develop regulations applying to broadly understood capital market, and also the state’s policy towards small and medium-sized enterprises, with particular consideration of financial support provided by the state. At present, he holds the position of the Director of the Strategic Companies Department in the Ministry of the State Treasury. His responsibilities include preparation of the system solutions concerning ownership supervision towards the companies whose shares are held by the State Treasury and which were indicated in separate instructions given by the Minister. In the past he was a member of several supervisory boards, including WSE, Industrial Development Agency S.A.
Marcin Gargas – Deputy Chairman of the Supervisory Board, in the Supervisory
Graduate in the field of Law from the Faculty of Law and Administration at Adam Mickiewicz
University in Poznań. In 2006-2009 he was a trainee legal advisor in the Regional Chamber of
Legal Advisors in Poznań. In 2010, he obtained the title of Legal Advisor (record No. PZ/2614).
He gained his professional experience working as a lawyer in Rödl & Partner’s branch office in Poznań (from September 2006 to July 2007). Then, from August 2007 to April 2009, he continued his career as a lawyer in the Legal Department of Ruch S.A. From May 2009 to
March 2010 he was employed as a lawyer in Zakrzewska, Skowronek, Jurkiewicz Kancelaria
Prawna Spółka Cywilna law office with its seat in Poznań. From April 2010 he leads the individual professional practice within the legal adviser’s office. He specializes in providing comprehensive legal services for business entities operating within the holding structures.
Graduate from the Faculty of Law and Administration at the University of Warsaw. He is also a graduate of XVI School of Civic Society Leaders, school founded by Prof. Zbigniew Pełczyński from Oxford University in United Kingdom, Center for American Law Studies (shared initiative of the Florida State University and the Faculty of Law and Administration of the University of Warsaw) and the Academy of Young Diplomats (European Academy of Diplomacy), specialization: Foreign Service. As of 2012, he holds the professional title of attorney. In addition, he completed 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. From
Justice – Prosecutor General. From September 2007 to February 2008 he worked as a legal expert at the Embassy of the Republic of Poland in Rome – Consular Department (his duties included i.a. organization and coordination of the state’s parliamentary elections taking place in the Italian Republic and duties of Vice-President of the District Electoral Committee in
Commission of the Polish Bar Council (legislative subcommittee) and a Member of the Young
Advocates Association – District Bar Council in Warsaw. Since March 2012 he has been the
Responsibility Foundation), (earlier, from January 2008 to February 2012, he was a Member of the Founders’ Board). He is a prizewinner of prestigious competition, Rising Stars – Prawnicy
Liderzy Jutra 2015 (Lawyers Leaders of Tomorrow 2015) organized by „Dziennik Gazeta
Prawna” and Wolters Kluwer. He is also commenting on the legal context of current affairs in
Panorama, news program on TVP 2 television channel. He holds safety certificate issued by the
Internal Security Agency (ABW) entitling to access classified information marked as „top secret”
Invent Grupa Doradztwa i Treningu (Invent Advisory and Training Group), and since 2006 he has been holding the position of the President of this company. Since 2009 he also has been holding the position of the President of the Management Board of Urbino sp. z o.o., an Internet technology company.
As a lecturer, he cooperates on a regular basis with i.a. the University of Warsaw, Collegium
Civitas and Łazarski University. He is qualified to sit on supervisory boards of companies whose shares are held by the State Treasury. He is experienced in supervising municipal heat companies. He published articles on public management in such periodicals as „Rzeczy
North Carolina at Charlotte. He is a graduate of the Academy of Leadership Psychology and the School of Mentors operating as a part of the School of Business of the Warsaw University of Technology. Lawyer in Warsaw since 2002. Author and co-author of several law books and dozens of articles published in Rzeczpospolita, Puls Biznesu, Dziennik Gazeta Prawna and many legal publications. Columnist for Forbes magazine. International partner in the global law firm
Krześniak sp. k. He has extensive experience in managing projects in the field of mergers and acquisitions, acquisition of companies, as well as intellectual property and manage complex negotiations. For years, he is indicated as a leading lawyer in Poland in international rankings of
In 2008-2009, he held the position of the Vice-Chairman of the Supervisory Board of PKO
Arbitration Court of the Polish Confederation of Private Employers Lewiatan. For several tenure he served as inspector and member of the District Bar Council in Warsaw for the training of trainee lawyers and the Committee. Foreign relations of the Supreme Bar Council; also acted as a mediator. He began his career in the nineties as a radio journalist and foreign correspondent in Germany and in the United States.
Alojzy Nowak – Member of the Supervisory Board since 30 May 2012
University of Berlin, while in 1997 in International Economics at RUCA. In 2002, he gained the title of Professor of Economics. He has won a number of prestigious awards, including Rector Award for Scientific Achievements (annually since 1997), Award of the Minister of Education for a book
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
Council of the National Bank of Poland, the Chairman of the Scientific Council of the National Bank of Poland. He held positions in supervisory boards of various institutions, to include: PTE WARTA
Zbigniew Grycan S.A. In 2000, he continued his professional career in audit department of
Arthur Andersen/Ernst&Young located in Wrocław, at positions from an assistant to a manager
Standards. He got a Certified Trainer at KPMG. He conducted trainings in the field of audit, accounting and personal and interpersonal competence for customers and employees of KPMG.
Furthermore, he was responsible for the actions of corporate social responsibility at KPMG office in Wroclaw. On 7 January 2016 he finished work at KPMG. On 1 February 2016 he assumed the position of Director of Internal Audit in Tauron Polska Energia SA. Since 2010 member of the
Holds a Ph.D. in Economics, his specialization is Management Science. He is a graduate of the
He completed his studies at the Faculty of Law and Administration of the University of Wrocław.
Banking Committee of Inquiry). He also held the position of the Member of the Supervisory
Shareholders’ Meeting of PZU Życie concerning: an increase and decrease in the share capital, bonds issue, disposal and lease of a PZU Życie enterprise or establishment of a usufruct right, division of PZU Życie combination of PZU
Moreover, a secret ballot may be chosen on request of a member of the Supervisory Board.
Supervisory Board of PZU: • Audit Committee; • Promotion and Compensation Committee; • Strategy Committee.
Supervisory Board of PZU established the following composition of the Audit Committee: • Marcin Chludziński – Chairman of the Committee; • Jerzy Paluchniak – Member of the Committee; • Paweł Kaczmarek – Member of the Committee.
Instruments of 29 July 2005, the Supervisory Board may appoint a Promotion and Compensation Committee.
In accordance with the By-laws, detailed responsibilities and the method of appointing members of the Promotion and
The Supervisory Board decided that the promotion and compensation committee would be composed of five persons.
of the new term on 1 July 2015 by the General Shareholders’
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.
Composition of the Audit Committee as at 1 January 2015: • Alojzy Nowak - Chairman of the Committee; • Zbigniew Derdziuk – Member of the Committee; • Aleksandra Magaczewska – Member of the Committee; • Jakub Karnowski – Member of the Committee; • Maciej Piotrowski – Member of the Committee.
Strategy Committee: • Alojzy Nowak – Chairman of the Committee; • Zbigniew Derdziuk – Member of the Committee; • Aleksandra Magaczewska – Member of the Committee; • Jakub Karnowski – Member of the Committee; • Maciej Piotrowski – Member of the Committee.
Since 1 January 2015, composition of the Management Board was as follows: • Andrzej Klesyk – Chairman of the Management Board; • Przemysław Dąbrowski – Member of the Management
Board; • Dariusz Krzewina – Member of the Management Board; • Tomasz Tarkowski – Member of the Management Board; • Ryszard Trepczyński – Member of the Management Board.
On 30 June 2015, Ryszard Trepczyński’s mandate of a member of the Supervisory Board expired, and on 1 July 2015, the Supervisory Board of PZU established the following composition of the Management Board of the new term: • Andrzej Klesyk – Chairman of the Management Board; • Przemysław Dąbrowski – Member of the Management
Board; • Rafał Grodzicki – Member of the Management Board; • Dariusz Krzewina – Member of the Management Board; • Tomasz Tarkowski – Member of the Management Board.
Management Board was as follows: • Andrzej Klesyk – Chairman of the Management Board; • Przemysław Dąbrowski – Member of the Management
Board; • Rafał Grodzicki – Member of the Management Board; • Witold Jaworski – Member of the Management Board; • Dariusz Krzewina – Member of the Management Board; • Tomasz Tarkowski – Member of the Management Board.
On 8 December 2015, Andrzej Klesyk and Witold Jaworski submitted a statement of resignation coming into effect on 9
Board was as follows: • Dariusz Krzewina – acting as Chairman of the Management
Board; • Rafał Grodzicki – Member of the Management Board; • Tomasz Tarkowski – Member of the Management Board.
Shareholders’ Meeting approving the financial statements for the last full financial year of their term.
Corporate government, HR, corporate insurance, administration and logistics, bancassurance and reinsurance
Member of the Management Board of PZU between 1 July 2015 and 18 January 2016 Member of the Management Board of PZU Życie between 11 August 2008 and 19 January 2016 Joined PZU Group in February 2004
Ryszard Trepczyński Member of the Management Board of PZU / PZU Życie between 1 July 2011 and 30 June 2015
Member of the Management Board of PZU between 1 September 2015 and 9 December 2015 Member of the Management Board of PZU Życie since 2 September 2015, Chairman of the Management Board of PZU Życie between 29 September 2015 to 9 December 2015
Sławomir Niemierka Member of the Management Board of PZU Życie / Director of the Group since 19 March 2012 Joined PZU Group in 2008
Member of the Management Board of PZU Życie / Director of the Group between 16 January 2014 and 29 January 2016 Joined PZU Group in 2009
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.
Resolution of the Board of 8 April 2013, and approved by a resolution of the Supervisory Board of 16 April 2013.
On 19 January 2016, Rafał Grodzicki and Tomasz Tarkowski submitted a statement of resignation, and the Supervisory
• Michał Krupiński – Chairman of the Management Board; • Przemysław Dąbrowski – 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
Dariusz Krzewina – CEO of PZU Życie since 10 August 2007, Member of the
From September 1997 to September 1998 he was a Member of the Management Board of PZU
January 2016 he has been holding the position of the CEO. From 1 February 2010 to 14 March 2013 Director in PZU Group. Member of the Management Board of PZU since 15 March 2013.
Between 9 December 2015 and 18 January 2016, he acted as CEO. He is in charge of corporate, financial insurance, life operations, agency sale of life insurance and products management of life insurance.
Completed an MBA program at Columbia University Graduate School of Business and, what is more, studied at 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,
Przemysław Dąbrowski graduated from the University of Warsaw, the Faculty of Information
Kearney and Accenture as a Manager and a Senior Manager. From October 2008 to March 2009, he held the function of the Director – Deputy Head of Financial Division in the Head Office of
PZU and PZU Życie. From November 2008 to February 2009, he was the Planning and Controlling
Director in the Head Office of PZU and PZU Życie, and in March 2009 he was appointed the
Information Management Director in the Head Office of PZU and PZU Życie. He has been holding the position of a Member of the Management Board of PZU Życie since January 2010. He has been holding the position of a Member of the Management Board of PZU since December 2010.
Roger Hodgkiss – Member of the Management Board in PZU from 19 January 2016
He was awarded prize of „Gazeta Ubezpieczeniowa”: the title of Człowiek Roku Ubezpieczeń
2014 (Man of the Year in Insurance). In PZU Group, he is responsible for retail sale of non-life insurance, sales support, direct channels, sales network, CRM and product management of nonlife insurance.
Board of PZU and then a Member of the Management Board of PZU. Moreover, she performed a function of a Member of the Supervisory Board of TFI PZU and PTE PZU, and also of a
Financial Market Supervision. She is involved in teaching activities at the Faculty of Law and
Administration of the University of Warsaw and the Faculty of Economics at the University of
Warsaw. In PZU Group, she is responsible for administration, purchases, non-life operations
Graduate from the Faculty of Law, Administration and Economics of the University of Wrocław,
Member of the Management Board in charge of organization and strategy in Dolfamex sp. z o.o.
Between 2006 and 2008, he was associated with Grupa Kapitałowa KGHM Polska Miedź S.A.
Between 2008 and 2011, he was running his own business (consulting services). His activities covered economic counseling concerning restructuration of business areas, strategic advice, and marketing. From January 2011 to January 2016, he was the CEO of Wrocław 2012 sp. z o.o.
Radio Merkury S.A. (Chairman of the Supervisory Board), WKS Zawisza Bydgoszcz S.A., PGE
Fund, he supervised the operational risk management system. He joined PZU Group in 2008 and was appointed the Managing Director in charge of auditing. On 19 March 2012, he joined the
Management Board of PZU Życie and was appointed the Director of PZU Group. He is in charge of risk management, reinsurance, compliance and safety.
Paweł Surówka – Member of the Management Board in PZU since 20 January 2016 /
Munich. Between 2007 and 2013, he worked as a financial advisor at Bank of America Merrill
Group. He also led restructuring processes of the companies from motor sector. Until January 2016, he was an advisor to the CEO of PKO Bank Polski S.A., and the Director of Corporate
Banking and Investments in Germany responsible for opening the first foreign corporate branch of PKO Bank Polski. His activities covered also counseling and financial processing for the largest corporate clients of PKO Bank Polski concerning their expansion and foreign operations. He is fluent in English, French and German. In PZU Group, he is in charge of investments.
Graduate from the Faculty of Economic Sciences and Management at the University of Szczecin
Board of Ciech S.A. He was also the Deputy Director of the Ownership Supervision Office, where he was performing ownership supervision over the companies of Ciech Group. In addition, he was a Member of the Supervisory Boards of the companies of Ciech Group, i.e. Zakłady Chemiczne
Member of Supervisory Board in PZU Życie, he is in charge of IT.
Board; • principles and organization of Board’s activities, including its meetings and decision making procedures; • rights and obligations of the Members of the Management
Management Board are held at least once a fortnight. The work of the Management Board is administered by the CEO
CEO who defines the scope of responsibility of each member of the Management Board.
Compensation and other short-therm employee benefits paid by PZU (PLN 000)
including bonuses and special prizes: including bonuses and special prizes: Contracts concluded with high level managers – High level management (Directors of PZU Group), including: Total estimated valued of benefits in kind allocated by PZU and its subsidiaries (PLN thousands) 1 January – 31 December 2015 1 January – 31 December 2014
Contracts concluded with high level managers – High level management (Directors of PZU Group), including: Rafał Grodzicki3 44 170
Positions of PZU Group Directors were established at PZU in relation to the implementation of the management model, according to which Members of the Management Board of PZU Życie as PZU Group Directors are in charge of the same business areas and functions in both companies. The positions of PZU Group Directors are established based on
Director of the Group, and on 15 February 2016 Roman Pałac also was appointed to perform this function. Moreover, on 29 January the following people ceased to hold the position of Director of the Group: Tobiasz Bury and Przemysław
Total estimated valued of benefits in kind allocated by PZU and its subsidiaries (PLN thousands) 1 January – 31 December 2015 1 January – 31 December 2014
The Management Board is not aware of any agreements concluded by the date of preparation of this Management’s
On 16 October 2015, PZU issued a guarantee in relation to the liabilities of PZU Finance AB (publ) arising from the bonds issued by the company. The maximum value of the guarantee was not established. The guarantee issued by PZU
Activity and the Polish Financial Supervision Authority. A stable rating outlook of PZU confirms that the Issuer has a strong business position, high levels of equity and is a competitive entity in the insurance market.
This Management Report of PZU Capital Group for 2015 includes 183 pages with sequential numbers.
In 2015 and by the date of preparation of this Management’s
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Basic and diluted weighted average number of ordinary shares* 863,523,000 863,519,490 863,519,490 863,523,000 863,523,000
Basic and diluted PZU Group’s profit per ordinary Issuer’s share (in PLN) 2.71 3.44 3.81 3.77 2.72
Basic and diluted profit per ordinary share (in PLN) 2.60 3.05 5.91 2.99 2.99 *including shares in consolidated funds
Entities measured using the equity method 54,065 66,311 48,595 - -
Appropriations on net profit during the financial year - - (1,727,046) - -
Unearned premium and unexpired risk reserve 5,855,996 5,250,103 4,540,011 4,537,167 4,521,396
Provisions for bonuses and discounts for the insured 2,662 2,291 2,893 4,227 7,192
Other liabilities, including current income tax 3,747,294 3,873,281 3,364,990 2,071,880 1,725,527
Liabilities directly associated with assets qualified as held for sale - 252,014 - - -
8. Property or its part excluding property or its part for own use 41,056 0.2% 25%
without limitations 15. Reinsurers’ share in technical provisions 518,419 2.8% 25%
Assets to cover technical provisions in PZU (PLN thousand) Assets to cover technical provisions in PZU Życie (excluding unit-linked assets) (PLN thousand)
without limitations 9. Tangible assets, other than property, if amortized using the prudence principle 67,912 0.4% 5%
C. Surplus (shortage) of assets covering technical provisions 3,278,529 19.0% -
Assets to cover unit-linked technical provisions in PZU Życie (PLN thousand)
B. Assets to cover technical provisions, total 5,088,723 100.0% 1. Debt issued or guaranteed by the State Treasury and international organizations to which the Republic of Poland belongs without limitations 2. Other fixed income securities 73,683 1.4% without limitations without limitations 4. Investment units or investment certificates in investment funds 3,021,680 59.4%
One-off events in PZU Group impact on gross result (PLN million)
Reducing the technical rate in PZU Życie - - - (408.5) -
Sales of shares from the AFS portfolio - - - 101.0 -
Appendix: PZU financial data 1. Claims ratio gross (Claims gross/written premium gross) x 100% 66.9% 69.5% 67.9% 76.2% 67.9%
3. Insurance activity costs ratio (Costs of insurance activity/premium earned net of reinsurance) x 100%
4. Acquisition costs ratio (Acquisition costs/ premium earned net of reinsurance) x 100%
6. Combined ratio in non-life insurance (Claims + costs of insurance activity)/ premium earned net of reinsurance x 100%
Data from the profit and loss account – corporate insurance (non-life insurance) (PLN thousand)
Reinsurance commission and share in profits 16,627 16,192 8,022 (5,715) 12,200
Acquisition costs ratio (including reinsurance commission)* 18.4% 19.8% 18.8% 19.4% 17.3%
Acquisition costs ratio (including reinsurance commission)* 20.6% 19.3% 16.4% 17.7% 19.2%
Operating profit (loss) excluding one-off events 1,499,341 1,691,965 1,476,325 1,561,157 1,349,144 * ratios calculated with gross premium written ** ratio calculated with gross premium written, excluding one-off events
exchange rate EUR (LTL) in PLN 4.1848 1.2133 1.2196 1.2087 1.1990 * ratios calculated with net premium earned
Act on Insurance Activity – Act on Insurance Activity of 11 September 2015 (Journal of Laws of 2015, item 1844); the majority of its provisions have been effective as of 1 January 2016. The Act introduces the Solvency II requirements to the
BLS (direct claims handling) – a system of handling a claim by an insurance company which issued MTPL
(CEE) companies. It consists of companies that meet quality criteria in the social and ecological area.
Civil Code – Act of 23 April 1964 – Civil Code (Journal of
Everest-– a system for managing non-life insurance which is being implemented in PZU.
(without including the reinsurers’ share) due on the insurance contracts executed in a financial year, regardless of the term of liability established by these contracts.
insurance agent – an entrepreneur performing agency activities under an agreement concluded with the insurance company. The agents’ activities focus on: customer acquisition, concluding insurance contracts, participating in the administration and performance of insurance contracts and organizing and supervising the activities of the agency.
Życie) – an indicator calculated as the ratio of the operating profit to gross written premium in the group and individuallycontinued insurance segment, net of one-off effects such as, for instance, the conversion effect, namely the conversion of long-term contracts into short-term contracts and changes to technical rates, namely the rate used to discount technical provisions.
reinsurance – yielding all or a portion of an insured risk or a group of risks along with the commensurate portion of the premiums to some other insurance company – a reinsurer.
risk-free rate – the rate of return on risk-free financial instruments. PZU’s risk-free rate is based on yield curves for treasury instruments, and it is also the basis for setting transfer prices in settlements between operating segments.
Calculation of the capital requirement is based on the calculation of the following risks: market, actuarial (insurance), counterparty insolvency, catastrophe, and operating risk, and afterwards undergoes a diversification analysis. The ratio can be calculated under a standard formula or, once an applicable permit of a supervisory body has been obtained, using a whole or partial internal model of the company.
technical provisions – provisions which should ensure full coverage of all current and future liabilities that may arise from insurance contracts. Technical provisions include in particular: provision for unearned premiums, provision for unpaid claims and provision for unexpired risks, provision where the investment risk is born by the policyholders, provision for bonuses and rebates for the policyholders.
technical rate – the rate used to discount technical provisions in life insurance and provisions for capitalized annuities in third party liability insurance. According to the
underwriting – the process of selecting and classifying risks declared for insurance to estimate and accept, according to suitable terms and conditions, or reject an insurance risk.
WIG20TR – the WIG20 index including the dividends paid by companies.