Business strategy 59 4.1 Summary of PZU Group Strategy 2020 60 4.2 Basic strategic assumptions 61 4.3 Core values of the strategy 62 4.4 Main strategic objectives 63 4.5 Development directions of PZU Group 65 4.6 Realization of key projects and initiatives in 2016 71 4.7 Key metrics of the Strategy for 2016-2020 74
Risk management 111 7.1 Risk management objective 112 7.2 Risk management system 112 7.3 Risk appetite 113 7.4 Risk management process 114 7.5 Risk profile of PZU Group 115 7.6 Sensitivity to risk 120
Photos from the event, co-organized by the PZU Group - „Bezpieczna Zima z GOPR” [Safe Winter with
Dear Shareholders, on behalf of the management boards of the PZU Group companies, I am pleased to present to you the Management’s
I can say with satisfaction that we were able to observe the first effects of these operations as early as 2016. The PZU
The PZU Group has all the components to become one of the most innovative groups in Europe. Specifically, we want to use Big Data to a greater extent in quotation and sales. We will develop electronic distribution and service channels. We will use the potential of cross-selling in insurance and banking products. We will implement effective know-how transfer within the PZU Group through local innovation centers: LINK4,
Despite emerging competition, we have no plans to lose in this area of operations, which is key to our profitability. In 2017 we will introduce new products that will raise our profile among small and medium enterprises. We will also introduce the offer of additional insurance coverage for millions of our life insurance clients.
By 2020, we want to be perceived as a stable, strong, highly profitable, and innovative financial center providing insurance, health, asset management, and banking products. In effect, the investment attractiveness of PZU will grow for both dividend investors as well as investors searching for growth companies with high potentials for generating capital gains on the market share valuation.
Accumulation Program. When these changes take effect, we will be able to offer attractive and efficient investment tools to our clients. We want to actively contribute to growth of the savings of Poles.
As we implement the adopted strategy, we will stay true to our values. We want to develop the PZU Group based on
of the consolidated net profit. The remaining capital will serve to accelerate growth through organic investments as well as mergers and acquisitions. The PZU Management Board wants to create one of the most innovative insurance groups in
Poland. From the perspective of the Management Board, we see the negotiated price as positive, as it included a severalpercent discount in relation to, both the sale price of 10%
PLN 11 billion, and strengthen its leadership in Poland where its market share grew by 3 p.p. y/y to 36.0%.
SA (Alior Bank). The next step saw Alior Bank acquire a part of
Bank BPH, including its core operations (without its mortgage loans portfolio and Investment Trust Company).
PZU announced in December 2016 that it had signed an agreement with UniCredit for purchase of 20% of the shares of Bank Pekao S.A. (together with the PFR Polish Development
PZU Group is one of the largest financial institutions in Poland and in Central and Eastern Europe. The Group is led by the Polish insurance company Powszechny Zakład Ubezpieczeń SA – a company quoted on the Warsaw Stock Exchange. The history of the PZU brand goes back to 1803 when the first Polish insurance company was established.
Market position by assets under management Insurance sold in direct sales channels via internet/ telephone * the purchase of a share package of Pekao from Unicredit hasn’t been finalized by the day of the presentation of the annual report ** assets controlled by Alior Bank
PZU operates its portfolio efficiently based on its unique knowhow while preserving high flexibility of the range and cost of protection for more than 11 million life insurance clients. Because of this, it was able to maintain a high margin in the key segment of group and individually continued insurance in 2016: 25.8%* (+3.3 p.p. y/y)
Share in the non-life insurance market Contribution to the PZU Group’s gross written premium
In 2016, PZU Zdrowie acquired three more medical entities (CM Cordis, Polmedic, and Artimed NZOZ). PZU Zdrowie also successively expanded cooperation with health care establishments (approximately 1,800 establishments in 2016), which produced growth of the gross written premium on health insurance by 38% from 2015.
Maintaining third place on the market in terms of assets under management
OFE PZU maintained its leadership in number of members on the Individual Pension Security Accounts (IKZE) market among the voluntary pension funds. It also recorded the highest rate of return out of all DFE on the market, i.e.
NAt the end of 2016, TFI PZU was managing net assets of over PLN 20 billion, i.e. a growth of 8.0%.
Poland PLN 18.8 bn Lietuvos Draudimas and PZU Litwa Życie PLN 651 mln
Human capital plays an important role in the long-term development of the Group. This is why the Management Board continues to strive to ensure the best possible conditions for the development of the employees and carry their involvement over onto good relations with clients and high quality of provided services.
gross written premium PLN 20.2 bn claims and benefits paid PLN 12 bn parent company net profit
PLN 1.95 bn prevention fund expenses PLN 77 mln market capitalization PLN 28.7 bn
PLN 691 mln donations given by PZU Foundation to support 414 projects
reduction of paper consumption thanks to Everest Platform implementation spontaneous PZU brand recognition spent volunteering 5,500 hours clients satisfield with claims handling process
PZU shares have been included in sustainable development RESPECT index since 2012
Foundation of business assets; after closing the purchase transaction of a stake in Pekao Bank, will rise up to approx. PLN 300 bn
Main consolidated financial data of PZU Group for 2012–2016 (in PLN million)
Products and innovations: for Link4 in category of: motor insurance for TFI PZU for the best fund: PZU Zrównoważony
Innovative company for IT solution introduced jointly with Naviexpert – “Safe drive with LINK4”.
Best Employer of the Year in the Large Enterprise category for LINK4
First place for: annual online report; 2015 PZU annual report, 2015 Management’s activity report 3 place in the Best IR Professionals in Poland ranking for PZU
acquisition of Centrum Medyczne Cordis in Poznań CM Cordis offers innovative diagnostic equipment and extensive range of specializations (including cardiology and cardiac surgery). The center provides services to commercial patients and holders of insurance and health care packages.
AUGUST publication of PZU Strategy 2020 Approval of PZU Group Strategy 2016-2020 by the Management Board and Supervisory Board. The Management Board specified three key strategic directions: profitability, growth, and innovation. They are planned to be realized both in the insurance sector, and the complementary areas that exhibit high potential for growth, that is asset management and health care.
MARCH acquisition of Bank BPH’s assets by Alior Bank Increaed engagement of PZU Group in the banking sector as a result of the acquiring by Alior Bank (PZU subsidiary) a separated part of Bank BPH. Due to the merger, Alior Bank was promoted to the 9th place among the largest banks in Poland in terms of asset value.
The GDP growth in 2016 amounted to 2.8%. Domestic demand remained the most important driver of growth.
A much-better-than-expected labor market situation and a significant increase in real household income led to the acceleration of household consumption growth to 3.6%, compared with 3.2% in 2015. The rate of the public consumption growth was also higher than in 2015. However, the investments fell in the same period by 5.5%. This decrease concerned mostly public investments – including investments of local governments. It was connected with the reduction of investments co-funded with the EU, as a result of the end of the previous EU financial perspective and prolonged waiting for the disbursement of funds under the new financial perspective. Large companies whose shares are held by the
December. It is 1.4 p.p. lower than the year before. According to LFS1, the unemployment rate declined in the fourth quarter to 5.5% year-on-year, while the seasonally adjusted unemployment rate according to EU statistics amounted to 5.9% in December 2016, which gave Poland the ninth place among the European Union Member States (the EU average is 8.2%).
(CSO), at the end of the third quarter of 2016, the number of vacancies in entities employing at least 1 person (95.5 thousand people) was higher by as much as 30.5% compared with the corresponding quarter of 2015. According to the
Poland (NBP), almost a third of all respondents reported open vacancies at the end of the third quarter. More than a third of all enterprises reported having problems finding employees.
The financial situation of households improved greatly in 2016, which was, to a large extent, due to the funds from the
“Family 500+” program, which started to be distributed in the second quarter. The real growth of the remuneration fund in enterprises was the highest in 8 years (7.7%). In the face of growing employment security and the growth in real income, the consumer confidence indicator published by the CSO
reached at the end of 2016 a level similar to the record level from 9 years ago.
1 LFS (Labor Force Survey) – a survey of the labor market situation conducted every quarter by the Central Statistical Office.
In such conditions, in the third quarter of 2016, the seasonally adjusted quarterly growth of household consumption was the biggest in the recent years (+1.4% quarter-on-quarter).
In the fourth quarter consumption dynamics increased up to 4.2% year-on-year basis. Consumption increased by 3.6%
2.2 Financial markets situation 2016 was another year of dynamic changes in the situation on financial markets. The first weeks of 2016 were very bad for the stock market, especially in Europe. Polish stock indices compared to Europe rather favourably, although WIG
Polish 10-year treasury bonds also lost some of their value at the beginning of the year in connection with the increase in risk aversion on financial markets, as well as circumstances which were Poland-specific. These included, among others, a worse assessment of the fiscal outlook of Poland by the
European Commission and the downgrading of the country by the rating agency Standard & Poor’s.
March in reaction to the prolonged deflation and the risks to economic growth. A decision was made to increase the monthly scale of purchase of securities within the framework of the quantitative easing program, to expand purchases in order to include also non-bank corporate bonds and to extend the program until March 2017. The deposit rate and the refinancing rate of the ECB were reduced. Simultaneously, the ECB, as part of the quarterly TLTRO2 z , offered banks cheap and long-term loans whose interest rates depended on the involvement in the financing of the economy. This easing of the monetary policy was more far-reaching than it was expected by the market at that point.
Thanks to, among others, the decisive actions of the ECB, favorable macroeconomic data from the United States, and accommodative Fed rhetoric, there was an improvement in the financial market sentiment in March and an increase in risk appetite among investors. The downward prices trend on the
Polish financial market was stopped. Besides global factors, the share prices received support from a very good reading of the economic growth in Poland for the fourth quarter of 2015.
The yields were supported by the reduction of the global uncertainty and the decline in the risk premium for Poland, which, however, continued to remain high.
In the last weeks of the first half of 2016, financial markets, especially in Europe, experienced the influence of the fear that the citizens of Great Britain would vote to exit from the
European Union – the so-called Brexit. The share prices were falling and there was high market volatility. The increased risk aversion on global markets produced increased variance of the
The difference between yields of Polish and German 10-year treasury bonds remained for most of June at the level of more than 300 bps – such a persistent increase above this level occurred for the first time since the end of 2012.
When the people of Great Britain voted for Brexit, their decision was a big shock for stock markets. However, in the subsequent calm, indices made up for the losses in the third quarter of 2016. This resulted from the fact that the first effects of Brexit turned out to be less severe than expected.
Later the Polish 10-year treasury bond yields returned to the path of growth, which was driven by, among other things, a gradual increase in yields in the USA.
Donald Trump may result in an increase in risk aversion, a decline in share prices, and the inflow of funds and assets to the countries considered to be „safe havens”. The election of
Donald Trump as the US President came as a great surprise, but the reaction of financial markets to this election result was even more unexpected. After initial weakening of the US
Republican Party. From then onwards, all price movements on global markets started to price in a so-called reflation scenario, which assumes a fiscal impulse in the US, leading to acceleration of economic growth and increase of inflation, and being at the same time conductive to the Fed raising interest rates and to the rise in US Treasury bonds yields. This scenario was made more probable when the Fed increased the reference rate in December by 25 bps.
The US presidential election was nevertheless not the only significant event. In December, the ECB decided to prolong the period of quantitative easing in the Euro zone. The ECB
The 2016 rate of registered unemployment rate was the lowest since 1991, it was at in December and dropped in 2016 by 1.4 p.p.
The inflation rate Poland in December 2016 reached 0.8% y/y despite the fact that most of the year was subject to deflation which was due mainly to improved export
In Q4 of 2016, the Ukrainian GDP grew by the year 2016 produced the first signs of improvement in economy and politics 4.7% y/y
Another important event was the Italian constitutional referendum which took place in early December. There was increased volatility and risk aversion on European markets before the referendum. However, its negative result did not have any serious negative market consequences. On the contrary, as it often happened with significant political events of 2016, the end of the period of uncertainty brought about a positive market rebound.
As a result, stock markets entered a phase of substantial growth in the last months of the year. Ultimately, the WIG
index rose by 11.4% and the WIG20 index increased by 4.8%
The yield of two-year treasury bonds increased by 40 bps, while the yields on 5- and 10-year bonds went up by about 60–70 bps. At the end of 2016, the 10-year treasury bonds yield amounted to about 3.60%.
According to the Ministry of Finance, the share of foreign investors in treasury bonds issued on the domestic market decreased from 39.5% at the end of 2015 to 32.8% at the end of 2016.
Treasury bond yields in 2016 the euro was worth about 4.42 PLN at the end of 2016 (up by 3.8%). The PLN weakened also in relation to the Swiss franc by 4.5% (the CHF/PLN exchange rate increased to about 4.12
PLN 1,378), that is 6 times less. Whereas a statistical Latvian
Estonian – 275 euro (PZU operates in Estonia through a branch of Lietuvos Draudimas – PZU Estonia).
3 „Total Premiums and Claims 2015” report published by the Insurance Europe of 30 August 2016, www.insuranceeurope.eu
In the end, the EUR/USD exchange rate fell in 2016 by 2.9%. At the same time, the PLN weakened against major world currencies. Throughout 2016, the dollar exchange rate expressed in PLN grew by as much as 7.1% to 4.18 PLN, while
The Act on Tax on Some Financial Institutions dated 15 January 2016. In accordance with the Act, as of February 2016, banks (domestic, branches of foreign banks, and branches of credit institutions), insurance and reinsurance companies, cooperative saving and credit institutions, and lending companies were subject to the so-called financial institution tax annually amounting to 0.44% of their assets’
value. For banks and cooperative saving and credit institutions, the value of tax-free assets is PLN 4 billion. For insurers this amount is PLN 2 billion, and PLN 200 million for lending companies. The limits of assets’ value beyond which insurance and reinsurance companies are subject to tax are specified for entire capital group and not respective companies.
Other regulations aimed at implementing EU legislation were also implemented in 2016: • Act dated 9 October 2015 amending the Personal Income
Acts. The main concept of the Act is to seal up tax system, clarification of the regulation in the way it eliminates questions concernin interpretation and limit the phenomena of tax avoidance. The most important amendments relate to: exclude from the exemption from CIT of closedend funds revenues (polish closed-end funds FIZ and comparable european union funds) as well as revenues from selling their shares and certain other revenues related to participation in such entities (including interests); introduction of tax rules related to contribution assets not constituting (organized part) companies in the market value; dependence of the exemption from tax on interest payments and royalties on the fulfillment by the recipient the actual status of the owner; introduction of so called
legislation, including also several amendments to Polish law which had or will have an impact on the operations of
PZU Group. Some of them are listed below: The Act dated 15 May 2015 – Restructuring Law. The two main goals of this act are: effective satisfaction of creditors and helping indebted companies stay in business. The provisions of the Act introduced for example new forms of restructuring proceedings: concerning arrangement approval, accelerated arrangement, arrangement and reorganization proceedings.
The Act dated 15 December 2016 amending of the Act on
Insurance of Agricultural Crops and Livestock. The Act came into force on 1 January 2017. It aims to improve the insurance system in agriculture. Tariff rates for packages with premiums subsidized from the state budget will be introduced to fulfill this goal, and there will be a significant increase in the budgetary reserve for this purpose in the coming years.
Fund (FUS) and the Open Pension Funds (OFE) in connection with the insured reaching an age of 10 years less than retirement age (the so-called slider mechanism).
own contribution in cash, and the missing 5% can be secured, for example, by the means of the savings accumulated on individual pension accounts (IKE) and individual pension security accounts (IKZE). From January 2017, the ratio rise up
The legislative works on a draft law on insurance distribution implementing into the domestic legal order the provisions of the Directive (EU) of the European Parliament and of the
(IDD – Insurance Distribution Directive) are currently still in progress. European Union Member States should carry out the implementation of the Directive by 23 February 2018.
The IDD Directive increases client protection regardless of the distribution channel the clients use to purchase insurance products, as well as it improves their confidence in insurance companies. According to the IDD, the clients should receive a product which is adjusted to their needs and capabilities.
Demographic Reserve Fund and 75% of funds to the newly created Individual Pension Accounts managed by General
The liquidation of the Open Pension Funds is also to be accompanied by the introduction of a new, comprehensive system of non-compulsory II pillar employee pension programs in the enterprise sector – Employee Capital Plans where premiums will be contributed by both the employer and the employee, and the funds will be managed by the
The inflation rate in 2016 grew faster than expected – 2.2%
year-on-year. Changes in oil prices and rising food prices had the biggest influence on the increase in inflation. The situation on the labor market has been improving over the last few years, which had a positive impact on economic growth in general – the unemployment rate is gradually decreasing, and the employment rate is increasing.
The decline in consumer prices, which started in 2014, continued in the first half of 2016. In the third quarter, prices began to rise year-on-year as a result of the end of earlier declines in energy prices. At the same time, the full impact of tax changes introduced at the beginning of 2016 began to be noticeable, which increased the inflation to 1.0% until September. The change in consumer price index
After two years of recession, 2016 brought the first signs of improving economic and political situation. In the fourth quarter of 2016, Ukraine’s GDP grew by 4.7% compared with the corresponding period in 2015. In 2016, the index of industrial production grew by 2.4% compared with previous year. The inflation increased by 12.4% in December of 2016 compared with December 2015. It should also be noted that in 2015 the annual inflation rate amounted to 43.4%, which was the record inflation level in the last 20 years. The growth of administratively regulated prices (gas, electricity, water) was the main factor influencing the inflation rate.
Turnover of retail and catering companies in Ukraine increased by 4.0% compared with the 2015 levels.
Entering the implementation phase of the investments cofinanced with EU funds will be of key importance. It will allow to revive investments in a significant way and, with a steady, solid growth in consumption, to boost the GDP
The prospect of the NBP real negative reference rate, with accelerating GDP growth, especially at the end of 2017, will force the Council to consider increasing the interest rates.
The prospect of higher inflation and economic growth should promote the growth of government bond yields, which in the long term is beneficial for PZU Group, although in the short term it may adversely affect the investment income. However, there are many risk factors which will increase the volatility of financial markets in 2017. Political decisions or election results in key EU countries, which are difficult to predict, may turn out to have particularly painful effects. They may significantly change the outlook for the various asset classes in the financial markets.
Increase in individual consumption in % (y/y) 3.5 3.6 3.2 2.6 0.3
Increase in prices of consumer goods and services in % (y/y, end of period) 1.9 0.8 (0.5) (1.0) 0.7
We are strengthening our leadership in financial services. The PZU Group brand includes: insurance, banks, investment and pension funds, and medical services.
Contents: 1. Structure of PZU Capital Group 2. Non-life insurance market (PZU, LINK4 and TUW PZUW)
PZU Group conducts various activities in the area of insurance and finance. In particular, PZU Group’s entities provide services in life insurance, non-life insurance, health insurance and asset management for clients within OPFs and investment funds, as well as banking services, thanks to the investment in
Alior Bank *** Warsaw PZU – 25.19% PZU Życie – 0.0376% PZU FIZ AN BIS 2 – 4.2164%
EMC Instytut Medyczny Wrocław PZU FIZ AN BIS 2 – 28.31%
PZU Ukraine Kiev PZU – 83.2292% PZU Życie – 0.0040% PZU Ukraina Life – 16.7668%
Affiliates * Armatura Group included the following entities: Armatura Kraków SA, Armatoora SA, Aquaform SA, Aquaform Badprodukte GmbH, Aquaform Ukraine TOW, Aquaform Romania SRL, Morehome.pl sp. z o.o. ** Centrum Medyczne Medica Group 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.
*** Alior Bank Group 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 TFI SA , New Commerce Services sp. z o.o., Absource Sp. z o. o. **** within PZU Zdrowie 2 branches are operating: CM Nasze Zdrowie in Warsaw and CM Cordis in Poznan. The structure does not cover investment funds and entities in liquidation.
Group in 2016 and until the release of this report: • On 8 December 2016, PZU and PFR concluded an agreement with UniCredit S.p.A. to purchase 32.8% of
PLN 123. It is one of the largest transactions performed in the banking sector in Europe in the recent years. CHAPTER
• On 11 March 2016, as part of the engagement in the banking sector, the acquisition of the third tranche of Alior
PZU held directly 25.2% of the shares in the share capital of Alior Bank, while indirectly – through PZU Życie and controlled investment funds – it held 4.2% of the shares in the share capital of Alior Bank. In addition, 16,525,801
• On 31 March 2016, Alior Bank signed with GE Investment
• PZU Zdrowie purchased shares in the following medical companies: CM Cordis (2016), Polmedic Sp. z o.o. (2016), and it indirectly became the owner of Specjalistyczna
Przychodnia Medycyny Pracy, Artimed (2016). Moreover, in 2016, the merger of Nasze Zdrowie Sp. z o.o. and Centrum
• On 16 June 2016, Armatura Kraków sold all shares of
(which is a consequence of cyclical increases that are being introduced since 2015 as an answer to persistently negative results of the motor insurance market) and higher premiums from indirect business (increase in MTPL of PLN 192 million year-on-year), had the biggest impact on the higher level of premiums.
Furthermore, there was a growth recorded in sales of property insurance (by PLN 256 million, +5.9%, PLN 135 million of which concerns indirect business) and insurance of assistance
The whole of the non-life insurance market in the first three quarters of 2016 generated a net profit of PLN 1,233 million
PLN 131 million (47.3%). After the first three quarters of 2016, the technical result of the non-life insurance market dropped by PLN 212 million, i.e. by 51.9% to the level of
PLN 196 million. This change was affected to the greatest extent by the drop of the technical result in MTPL insurance
(PLN -201 million). Some positive changes were recorded in the group of accident and illness (increase by PLN 87 million), motor own damage (increase by PLN 83 million) and TPL
The drop of the technical result in MTPL insurance derived mainly from higher dynamics of claims and benefits (increase of PLN 564 million, +12.3%), if compared with the dynamics of net earned premium (growth by PLN 493 million, +9.5%), which resulted predominantly from the implementation of the
(PLN -246 million on direct business) as a result of numerous claims in agricultural insurance which were caused by frost and hail.
PLN 53,064 million and rose by 1.9% from the end of 2015.
Non-life insurance companies, on aggregate, estimated the value of net technical provisions at PLN 43,343 million, which represented an increase of 3,9% compared with the end of 2015.
Gross written premium 1 January-30 September 2016 1 January-30 September 2015
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance market 3/2016, Insurance market 3/2015, data of PZU * including LINK4 and TUW PZUW
Gross written premium of non-life insurance companies in Poland (PLN million)
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance Market 3/2016. Insurance Market 3/2015, Insurance Market 3/2014, Insurance Market 3/2013, Insurance Market 3/2012.
PZU’s share in the motor insurance market reached after Q3 of 2016
Share of PZU’s technical result in the market’s technical result was 169.7%, which, with the market share of after Q3 of 2016, which is PZU Życie’s competitive advantage in the market
Share of PZU Życie in the life insurance segment (group I) was
PZU Życie generates over of both the technical result and net result of the life insurance market in Poland
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 3/2016 * The share of PZU Group calculated including the inward reinsurance of PZU to LINK4 and TUW PZUW
PZU, being the parent entity of PZU Group, offers a wide range of non-life insurance products, including motor, property, personal and agricultural insurance, as well as third party liability insurance. PZU has been controlling over 1/3 of the non-life insurance market by offering over 200 insurance products, of which the most important is motor insurance, with its share in the market amounting to 37.3% after the first three quarters of 2016, compared with 35.6% after the first three quarters of 2015.
Polish economy by granting insurance guarantees in its key areas, such as energy, infrastructure, and road construction.
Among the main initiatives of 2016 were: • increasing efficiency of the cooperation with SME sector by simplifying and accelerating the decision process – new rules for guarantee sales to the clients with guarantee exposure of up to PLN 1.5 million were introduced; • conducting activities aiming at increasing the market share concerning financial liability insurance – in H1, an agreement was concluded with a large entity from the fuel sector.
In 2016, PZU collected gross written premium of PLN 10,682 million, which was 20.6% more than in the previous year. At the same time, the sales structure changed only slightly: • value of MTPL insurance was PLN 4,072 million, which was 44.2% higher than in the previous year. It composed 38.1% of the entire portfolio, and its share grew by 6.2 p.p. from 2015. The increase in sales resulted mainly from substantial growth of average premium (a consequence of cyclical increases that are being introduced since 2015) and higher number of insurances; • PZU collected premiums amounting to PLN 2,760 million from motor own damage insurance, which is 27.3% more than in the previous year. Share of motor own damage insurance in the overall portfolio grew by 1.4 p.p. to 25.8%
in comparison with 2015; • share of gross premiums from non-motor insurance in total premium increased to 36.0% (as compared with 43.6%
in 2015). The value of gross written premium dropped by 0.4% year-on-year to PLN 3,850 million
In 2016, PZU generated a net profit of PLN 1,593 million, of which PLN 825 million was from the dividend from PZU Życie.
LINK4 is the leader of the Polish direct insurance market and offers a wide range of non-life insurance, which covers motor insurance, property insurance, personal insurance, and third party liability insurance.
• third-party liability insurance – PLN 9 million with the share in portfolio of 6.2%.
Apart from events of a catastrophic nature (such as floods, drought and spring frost), the main factors which can affect the situation of the non-life insurance sector in 2017 include: • the potential slowdown of the economic growth in Poland resulting from the deteriorating external conditions entailing expected unprecedented lack of investment growth and declined perspectives of economic growth.
After the first three quarters of 2016, the life insurance market in Poland measured by the gross written premium amounted to PLN 17,813 million, which means that it has declined by an annual average of 6.2% over the past 5 years. The premium collected during the first three quarters of 2016 was simultaneously lower by 14.5% than in the corresponding period of the previous year, which is a continued decline after a series of increases that ended in 2012, stimulated mainly by the single premium in investment products.
It should be noted that the premium decline year-on-year applied mainly to the single premium (a decline of PLN 2,893 million, i.e. 34.1% year-on-year, and from 2012, which was a record year in this matter, it has been a decline of PLN 9,773 million, i.e. 63.6%), mainly in the bancassurance channel.
The gross written premium of life insurance companies in Poland (PLN million)
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance market 3/2016, Insurance market 3/2015, Insurance market 3/2014, Insurance market 3/2013, Insurance market 3/2012
The total technical result achieved by life insurance companies in the first three quarters of 2016 was higher by PLN 50 million (2.4%) than in the corresponding period of 2015 and amounted to PLN 2,174 million. The improved performance is the effect of higher profitability, recorded especially in accident and illness insurance (class V) – year-on-year increase in the result by PLN 68 million (5.6%, mainly the influence of decrease in acquisition costs along with simultaneous growth in revenues).
At the same time, PZU Życie continued to remain the unquestionable leader in the periodical premium segment.
Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance market 3/2016, Insurance market 3/2015, data of PZU Życie
Life insurance companies - share in periodical gross written premium for 3 quarters of 2016 (in %)
Capital groups: Talanx - Warta, Europa, Open Life; VIG - Compensa Życie, Polisa Życie, Skandia Życie; Aviva - Aviva TUnŻ, BZ WBK-Aviva TUnŻ Source: PFSA Quarterly Bulletin. Insurance market 3/2016
Others premium of PZU Życie in this segment amounted to 1.5%, with the negative dynamics of other market participants at a level of -2.9%. One of the main factors was dynamic development of health insurance portfolio. PZU Życie insures around 1,3 million
Poles with the products of this kind. In 2016, for the first time
PZU Życie’s technical result margin on gross written premium was more than two times higher than the margin obtained by all other companies offering life insurance in total (20.0%
Procedures (ICD-9) and increasing the number of surgery classes from 3 to 5. The new version of the product, like the previous one, does not include the condition that the surgery has to be performed in hospital, which makes PZU
Plus – the insurance is an addition to the insurance in case of surgical operation mentioned above. The scope of the insurance covers the performance of: surgical operation under general anesthesia, surgical operation during a stay in hospital which lasts longer than 14 days, continuously, or surgical operation related to heart attack/stroke/
malignant cancer. Payment of the benefit will happen also if the surgery (included in the List of Surgical Operations)
Życie includes the products in case of death of the insured’s child, parents or in-laws. The introduction of the insurances increasing the benefit paid in case of death of the persons mentioned above due to a personal accident is the answer to clients’ expectations, which allows for the option to adjust the offer to better suit their needs; • insurance in case of death of the insured caused by traffic accident, which is an addition to individually continued insurance; • in the area of the additional insurance in case of permanent health impairment of the insured caused by a personal accident (for the clients of individual continuation), concluding the agreements with benefits higher than previously (even up to 8% of the insurance sum for 1% of the permanent health impairment) has been made possible.
Zdrowia” [For the love of health]. This individual product was created as an answer to changing preferences of the clients and in the face of the risk of serious civilization
Activity of PZU Group diseases. It allows PZU Życie to provide comprehensive medical and diagnostic care, rehabilitation, psychological support, and help of a caregiver in case of such diseases as cancer, stroke, or heart attack.
In 2016, in the area of investment-type insurance the following changes, among others, were made: • from 1 April 2016, in connection with the amendment to the Act on Insurance and Reinsurance Activity, a detailed analysis of the client’s needs in unit-linked and structured insurance is conducted, on the basis of which the client receives appropriate recommendations; • implementation of new unit-linked insurance with single premium, Program Inwestycyjny WORLD [WORLD
Multicurrency Investment Program were discontinued; • implementation of a new unit-linked insurance with single premium, Multi Kapitał [Multicapital], performed in cooperation with Alior Bank, with sales starting on 2
„Pewny Zysk” [Sure profit] from the offer from 1 June 2016 due to declining market conditions, including lingering historically lowest interest rates and, resulting from that, low attractiveness of the products to the clients.
Furthermore, there were 10 Świat Zysków subscriptions, which were very popular among structured insurance clients.
The bank channel saw continuation of the cooperation with two banks – Millenium Bank and PKO Bank Polski S.A. – in the scope of protection life insurance. Insurance offered to borrowers secures the payment of a credit/mortgage granted by the bank in case of borrower’s death.
PLN 8,034 million, which was 0.4% less than in the previous year. The vast majority of the Company’s premium was from periodical premium products. It represented 91.7% of the gross written premiums (as opposed to 89.9% in the previous year). It primarily included the written premium from group insurance and individually continued insurance, which had more than 11 million customers in Poland.
Factors, including risks and dangers, which will impact the activities in the life insurance sector in 2017
(Test-Achats), of 1 March 2011) with potential considerable impact on the value of new sales and the technical result; • bill of the law on insurance distribution – adaptation of insurance companies to new regulations resulting from the need to implement into the domestic legal order the provisions of the Directive (EU) 2016/97 of the
Purchase of shares of Bank Pekao was associated with PZU’s aspirations expressed in the strategy of the Group until the year 2020, which assumes achieving the assets amounting to at least PLN 140 billion in bank sector and PLN 50 billion in management on behalf of third parties. PZU and PFR will cooperate in order to ensure effective realization of the Bank
PFR mutually agreed to vote „for” adopting the resolutions concerning distribution of profit and dividend payout according to the rules and within the limits determined by the applicable provisions of law and PFSA’s recommendations and in line with the current practices of the bank.
On 31 March 2016, ended the negotiations which resulted in Alior Bank signing with GE Investments Poland Sp. z o.o.
TFI. The acquisition of the separated part of Bank BPH is in line with Alior Bank’s development strategy and is a significant step in the process of bank sector consolidation.
BPH took place on 4 November 2016. This means that all other products for individual clients and products for business clients were transferred to Alior Bank, and their owners became the clients of Alior Bank.
The acquisition of the separated part of Bank BPH is consistent with Alior Bank’s development strategy assuming growth basing on organic development and acquisitions. Due to the merger, Alior Bank was promoted to the 9th place among the largest banks in Poland in terms of asset value. At the end of December 2016, the amount of Alior Bank assets and the separated part of Bank BPH was PLN 46 billion and PLN 15 billion, respectively, which is PLN 61 billion in total.
Acquisition of the separated part of Bank BPH was preceded by the issue of Alior Bank shares. The public offering of Alior
Bank covered 56,550,249 new shares, whose issue price was set at PLN 38.90 per share. The issue was performed in observance of the pre-emptive right on the account of the existing shareholders of the bank. The value of the performed subscription amounted to PLN 2.2 billion, of which PZU’s involvement amounted to PLN 642 million. Hence, it has been the biggest public offering on the Warsaw Stock Exchange since 2013, and, simultaneously, the largest issue of shares with the pre-emptive right since 2009.
In 2016, the situation in the banking sector remained stable, which was facilitated by ongoing economic recovery and the environment of record low interest rates.
As at the end of 2016, there were 36 domestic banks, 558 cooperative banks, and 27 branches of credit intuitions operating on the Polish market. The number of commercial banks dropped from the end of 2015 by 2 banks. It should be expected that the trend of consolidation in the bank industry will continue in 2017 due to the need for reaching an appropriate scale of activity to maintain operating effectiveness in the perspective of regulative costs and scale of investment expenditures required in association with the ongoing technological revolution, which imposes changes to the bank product and service distribution model.
In 2016, similarly to the previous years, the banking network diminished (by 0.2% to 14,434 locations) and the employment level dropped by 1.2%.
The considerable growth from other banking activity is mainly due to the settlement of the transaction covering the sale of shares in VISA Europe in Q2 of 2016 (additional revenue of
PLN 111.3 billion) higher than at the end of 2015. The main areas of asset growth included the portfolio of assets available for sale and credits while the main areas in liabilities were deposits from households and the budget sector.
The value of equity in the banking sector for capital ratios measured in accordance with CRR regulations amounted to
PLN 172.3 billion at the end of September 2016 and rose by 15.4% from the end of September of 2015. The growth was related to the decision of certain banks to retain 2015 profits, exclude the financial data of Sk Bank from reporting, and new emissions of shares.
at the end of September 2016 (a growth by just over 2 p.p.
I core capital ratio amounted to 16.01% at the end of the above-mentioned period (an increase by roughly 1.8 p.p. from the end of March of 2015).
Alior Bank is a universal bank that is recognizable for its state-of-the-art solutions and a wide product offer. In 2016,
Alior Bank Group generated PLN 618 million in net profit per shareholders of the parent entity and reached ROE of 12.7%
Due to the consolidation of the financial results of Alior Bank with the financial results reached by the separated part of
Bank BPH between 4 November and 31 December of 2016, the revenue of Alior Bank grew by PLN 133 million and its operating costs grew by PLN 81.3 million.
The main source of the Group’s income in 2016 was the net interest result, which, despite pressure of low interest rates and thanks to the dynamic growth of the credit operation resulting from the merger with the separated part of Bank
The Group also recognizes the result from fees and commissions as a major source of income in 2016 as it reached PLN 331.1 million (a minimum year on year drop)
Considering the effective implementation of processes crowned by the acquisition of the separated part of Bank
BPH on 4 November of 2016 with simultaneously operated business activity considerably raising the operating scale of
Alior Bank, the Management Board sees the operating activity of 2016, the acquisition and progress of process aimed at the operating fusion with the separated part of Bank BPH, and the 2016 financial results as positive. According to the Alior Bank
Management Board, they are stable foundations for consistent and safe development of the Bank in the upcoming years.
The activity of the Bank is performed within different units, which offer certain products and services intended for certain segments of the market. At present, the Bank is managing its activity in the following industry segments: • individual client (retail segment) – intended for the market of mass client, meaning wealthy and very wealthy clients, to whom the Bank offers whole range of bank products and services and brokerage products offered by the
In April 2016, Alior Bank also extended the scope of cooperation with BGK under the de minimis program, introducing the POIG BGK guarantee for financing innovative projects with recognition of their character in terms of needs of financing current and investment activity. Thanks to this, the entrepreneurs planning investments in new technological enterprises can count on getting a credit within their current account intended for current financing as well as an investment credit, and the payment is secured with POIG BGK
In addition, in June 2016, Alior Bank provided a new website for entrepreneurs, zafirmowani.pl, thus offering its clients additional services, such as free application which allows them to keep simplified accounts on their own (Income and
Bucuresti as a branch of foreign credit institution within the meaning of Directive 2013/36/EU, under the number RB-
Wyszyńskiego. SKOK named after Cardinal Stefan Wyszyński had 34 thousand members, over PLN 180 million in deposits and has a network of 20 branches, while SKOK Powszechna
On 13 March 2017 Alior Bank announced its strategy for the years 2017 -2020 - „Digital disruptor”. It assumes a further increase in the importance of innovation in the development of the bank, through ia. implementation of cutting-edge technology solutions to support the customer and the employee. In addition, Alior Bank intends widely used the digital revolution on other places of action- setting trends in modern banking.
Polish economy; • gradual raising of contributions paid by Banks to BFG over the past several years; • macroeconomic situation in the Polish economy – increase in the Gross Domestic Products, as well as the employment and salary level, accompanied by historically low interest rates and low energy materials, positively affects the level of generated volume of credits and quality of credit portfolio.
OFE PZU Złota Jesień held of the total value of assets of open pension funds operating in Poland, making it the thirdbiggest pension fund in 2016
Lietuvos Draudimas is the leader in the Lithuanian non-life insurance market with a market share of of the Estonian non-life insurance market in
AAS Balta is among the leaders of the Latvian non-life insurance market with a market share of of the gross written premium in the Ukrainian non-life insurance sector, while PZU Ukraine Life obtained at the end of 2016 after Q3 of 2016 of the life insurance market
PLN 5 billion. Clients showed highest interest in the absolute rate of return funds (with inflows of over PLN +3 billion), cash and monetary funds (payments to which amounted to nearly PLN +3 billion), and debt funds (nearly PLN +2 billion).
The stock funds proved to be the worst, with balance of redemptions of PLN -3 billion.
The operations on the investment fund market in the scope of the PZU Group are carried out by Investment Fund
At the end of 2016, TFI PZU had 29 funds and sub-funds in its portfolio, of which 22 were offered to clients from outside PZU
A drop in the total value of the net assets of TFI PZU recorded at the end of 2016 resulted mainly from redemptions made by
However, in 2016, without taking into consideration the effect mentioned above, TFI PZU recorded a growth in the value of assets of external clients, which resulted mainly from: • active sales of funds and sub-funds – with a notable distinction of funds including share components,
The condition and results of the investment fund market will primarily depend on: • political situation – including the results of elections in
According to the Bank of Lithuania, the value of gross written premium on the non-life insurance market amounted to
The market dynamics was generated mostly by motor insurance (composing 58.0% of the market) with gross written premium growth by 16.0%. Motor TPL insurance grew by 14.7%, while motor own damage insurance grew by 18.0%.
The higher written premium in motor insurance comprises mainly a growth in the average premium. The number of new insurance policies only grew by 4.0% in comparison with 2015. Also higher sales of property insurance (comprising 20.9% of the market) made a relevant impact on market development – the written premium grew by 14.7% in comparison with 2015.
Twelve companies were operating in the non-life insurance sector at the end of May 2016 (including 9 branches of insurance companies registered in other EU member states).
The 2016 gross written premium collected by Lithuanian life insurance companies amounted to EUR 247 million, which means a growth by 4.6% in comparison with the previous year. Only in December there was EUR 31 million in the written premium, which had been influenced by legislative changes limiting tax exemption to EUR 2 thousand starting in 2017. In the future these changes may substantially influence the written premium from the single-premium insurance.
The structure of life insurance was dominated by unit-linked insurance representing 71.9% of the premiums. Traditional life insurance accounted for 20.7% of the written premium.
At the end of 2016, 8 companies were active in the life insurance sector. The Lithuanian life insurance market is highly concentrated. At the end of the year, the share of total gross written premiums of the three largest life insurance companies amounted to 62.6%.
TPL it was 21.1%. Health and property insurances also have a significant position in the product structure (20.4% and 19.1%
share in the market, respectively). Health insurances present high dynamics – in comparison with the first three quarters of 2015, the written premium rose by 13.9%.
76 million, i.e. 25.2%, were collected by the branches of foreign insurance companies operating in Estonia.
The structure of non-life insurance in 2016 was dominated by motor insurance, which accounted for 59.8%, whereby the share of motor own damage insurance was 33.7%. Property insurance amounts to 26.3% of the gross written premium on the market.
Draudimas, which from May 2015 is the owner of a branch of PZU Estonia. The acquisition of Lietuvos Draudimas was conditioned by the sale of PZU Lithuania – the disinvestment took place on 30 September 2015.
Lietuvos Draudimas is the leader of Lithuanian non-life insurance with the market share of 29.5%. In 2016, it recorded a growth of the gross written premium by 7.4%
The Ukrainian insurance market recorded a growth of the gross written premium by 14.4% after the first three quarters of 2016, reaching the level of UAH 25 billion. The premium collected due to non-life insurance amounted to UAH 23 billion, a growth by 13.1.% in comparison with Q3 2015. This growth resulted mainly from the raise of insurance sums, which was caused by depreciation of the local currency, rising inflation, and the statutory increase in compulsory insurance rates. Motor insurance (29.7% share in the market) recorded increase in written premium of 19.0%, including the growth in the Green Card insurance by 21.3%. Life insurance companies collected gross written premium of UAH 2 billion in the corresponding period, which was 32.2% more than in
The Ukrainian insurance market is fragmented, as it was composed of 323 insurance companies as at the end of
TOP 20 largest life insurance companies generated 99.4% of the written premium.
PZU Group conducts its insurance business on the Ukrainian market through two companies: PrJSC IC PZU Ukraine (in terms of non-life insurance) – „PZU Ukraine” and PrJSC IC PZU
In 2016, the gross written premium in non-life insurance market for PZU Ukraine amounted to UAH 1 billion, i.e. it was 40.2% 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 non-life insurance played a particularly important role in the growth in written premiums. The gross written premium collected by
PZU Ukraine Life in 2016 amounted to UAH 240 million and was 34.7% higher than in 2015. This growth was achieved primarily in the bancassurance and brokerage channel, mainly thanks to the sales of life and endowment insurance.
In turn, on the life insurance market, PZU Ukraine Life held the fifth place after the first three quarters of 2016, with a market share of 8.5% (0.1 p.p. drop in comparison with the previous year).
Portal Świadczeniodawcy website); • development of a model for medical partners network management; • development of a manual and branding of own establishments.
Due to the building of the health care center and health insurance networks, PZU Group was expanded by the following companies in 2016 and until the release of this report: • CM Cordis (100% shares, from 1 February 2016) – provides specialized services for patients in Poznan; • Polmedic (100% shares, from 30 November 2016) –
provides health care services in Radom; • Artimed NZOZ (100% shares, from 21 December 2016) –
PLN 300 million in premiums to OFE PZU, which was 1.5%
Factors, including risks and dangers, which will impact the activities of pension funds in 2017
III and increasing its attractiveness, as well as shaping social awareness in terms of the needs related to making additional savings for future pensions.
Group’s subsidiaries established to provide assistance services to clients in scope of claims handling.
At the end of 2016, the company held the leading position on the market of intermediation in the sale of damaged vehicles through an online auction platform.
PZU CO an ancillary company for PZU Group’s subsidiaries established to provide services in the following areas: printing,
PZU Group’s operations on the debt market are realized through PZU Finance AB in Stockholm (Sweden). The 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.
Eurobonds in the amount of EUR 350 million. These bonds were assimilated and, together with the Eurobonds at value of EUR 500 million issued by PZU Finance AB (publ.) on 3
PZU Finanse Sp. z o.o. is a service provider established to keep accounting records for PZU Group’s subsidiaries (with the exception of PZU and PZU Życie).
Armatura Kraków SA (Armatura Kraków) is the parent entity in the Armatura Group. The Armatura Group includes: Armatura Kraków SA, Armatoora SA, Aquaform SA, Aquaform
Poland. The entities composing Armatura Group specialize in manufacturing of bathroom and kitchen taps, aluminum central heating radiators, a wide range of valves, and sanitary ware.
Business strategy 4.1 Summary of PZU Group Strategy 2020 2016 saw a number of changes in the composition of the corporate bodies of the PZU Group companies (CHAPTER
Board of PZU led by Michał Krupiński reviewed and updated the existing strategy. The Management Board identified areas where it saw a potential for continuation of activities performed to date, space for improvement, as well as new ambitious initiatives that, in the long haul, would result in creating competitive advantages of PZU and goodwill for its shareholders. The results of the strategy overview confirmed that insurance should continue to be the
Moreover, a greater potential for development of PZU Group’s business was identified in health care and investments. In addition, as far as the realization of long-term development perspectives is concerned, a decision was made to invest in the banking sector in Poland.
We are planning to concentrate on the area which has been a cornerstone of PZU identity for over 200 years – that is insurance business. We should put all our effects in offering to our clients the best and most innovative insurance products which protect their future, health, and property. That is why in everything we do, we will concentrate on ensuring that our core business is highly profitable, stable, and future-oriented.”
The PZU Group strategy 2016-2020 published on 24 August 2016 was developed on the basis of the following core values: profitability, growth, and innovation. The Management Board’s intention was to increase profitability of insurance activity and develop innovative tools for business management and customer service. The strategic goals took a form of ambitious growth initiatives, also related to such areas as PZU
Reduce �xed costs by PLN 400 million till the end of 2018
of net profit for dividend for shareholders. Should the budget allocated for acquisition be not used in a given financial year, it can be used for payment of dividend for shareholders.
• We are Effective – we offer friendly customer service and competitive prices; we control the costs and ensure that the processes are smooth.
• We are Innovative – we continually adapt to the changing needs of the client; we proactively search for ways to improve our business.
• We are here to provide our clients with peace of mind and safety. Our clients can always rely on us.
• We know our client very well and that is why we are able to meet their needs and rational expectations. The scale and efficiency of our operations help us provide premium services at competitive prices.
• Thanks to the scale of business ensured by our leading position in the Central European Market, we continue to provide exceptional profits to our shareholders.
• PZU creates a working environment that inspires our staff to do their best while maintaining an optimal work-life balance.
Realization of our strategic assumptions depend on proper capital management – financial, human, social, environmental, and intellectual. The Management Board follow one basic rule: increasing goodwill of PZU should stay in line with the interests of its environment and be based upon sustainable and responsible use of resources. CHAPTER 9. CORPORATE
Board of PZU approved the updated PZU Group Strategy 2016-2020. The Management Board specified three key strategic directions: profitability, growth, and innovation.
Net result attributable to the PZU Group in PLN mln (banking)
On the other hand, it accelerates the realization of the other key strategic targets: growth and profitability.
• development of innovation-driven culture that will support the process of generating new solutions by the employees.
The Group sees a high potential for growth in health care, old age pension, and property products. A 360° overview of the client and using additional interactions will allow for sales of
Assets of third party clients under management (PLN bn)PZU Zdrowie's revenues (PLN mln)
PZU Group will proactively support the creation an ecosystem that boosts Polish entrepreneurship and innovations, by providing the following: • support Polish entrepreneurs and scholars by own initiatives of PZU Group and cooperation with other projects that promote innovativeness (e.g. Witelo fund); • identifying and supporting external initiatives that are synergic and complementary with PZU Group’s activities; • financial support for initiatives of entrepreneurs provided on commercial basis, including via Venture Capital GLOSSARY.
The PZU strategy was diversified in a manner allowing for both generating stable and predictable cash flows (property and life insurance) and obtaining exceptional profits from complementary operations (asset management and health care). Investment activity, including in the banking sector, is also a part of the strategy of determining the scale of PZU
Group, which is why the retail client segment is an extremely important area for the Group from the point of view of maintaining high level of customer satisfaction, especially by means of appropriate and dynamic adaptation of services and products to rapidly changing needs.
PZU Group makes use of its two brands – PZU and LINK4 –
The strategy provides for a dynamic growth of PZU Group in individual business lines within the corporate client segment and Mid-Corpo segment (medium-sized corporations operating on the Polish market). PZU Group will be a business partner with strong expertise that provides its clients not only with insurance products, but also advice, at every stage of risk management process.
It is planned to increase the scale of cooperation with hospitals, local authorities and state-owned companies through development of Towarzystwa Ubezpieczeń
segment (Small and Medium Enterprises); • development of service processes applying new technologies and gradual introduction of self-service to group and individually continued insurance; • increase of the effectiveness of cross/up selling GLOSSARY
in the scope of property and life insurance; • development of sales of individual protection life insurance.
wants to become the leader in asset management in Central and Eastern Europe. By 2020, PZU Inwestycje will manage assets worth nearly PLN 100 billion, with the assets of external clients reaching the value of at least PLN 50 billion (TFI and
OFE). The contribution of the external asset management business to the financial result of PZU Group will also increase to PLN 200 million. These objectives will be achieved thanks to, among other things: • new products and widespread availability of the products of PZU Inwestycje in Poland, including through own distribution channels (e.g. Internet); • providing clients with a possibility of participating in PZU
Inwestycyjny Xelion sp. z o.o. – as one of the consequences of signing the agreement for purchase of Pekao Bank shares
Programme which is a comprehensive plan to build a voluntary > 20%
Operating margin in group and individual continued insurance capital savings scheme and long-term investment products in
In this context, the Capital Accumulation Programme constitutes great potential for implementation of sales of insurance products (the details of this program are to be provided by the end of 2017). If this scenario begins to be implemented, PZU Group will offer its clients attractive and effective investment tools, which will, among other things, make it easier for them to access global markets. PZU
Inwestycje is well positioned to become the leader of pension and savings programs.
The increase in investment efficiency, implemented with the assumed level of risk appetite, will be achieved, among others, through: • greater diversification of the asset portfolio (market, credit, sectoral, geographical and currency diversification); • optimization of asset classification; • increasing the efficiency of investment processes determining the medium and long-term shape of the investment portfolio; • opportunistic use of non-banking niche of enterprise financing (e.g. during M&A transactions) in order to improve the return/risk profile,
PZU Zdrowie’s EBITDA margin significantly closer to the leaders of the private health care market in Poland.
In line with the strategic objectives, by 2020, the contribution of the banking segment to the financial result of PZU Group will increase to PLN 450 million, and bank assets will reach the level of PLN 140 billion. In connection with the announced purchase transactions of a stake in Bank Pekao this measures will be achieved and exceeded already in 2017. PZU Group treats the involvement in the banking sector primarily as a form of investment. The Management Board of PZU is aware of the attractiveness of investment in this sector, in particular in: • long-term growth prospects (low level of debt in the form of loans, a steady economic growth and stable profitability with moderate risk) and 8.1 p.p.
BPH was signed on 31 March 2016. PZU supported Alior Bank financially in this transaction as a shareholder. A legal merger of Alior Bank with a separated part of Bank BPH took place on 4 November 2016. Operational merger should be completed in 2017. After the merger, the bank’s assets will amount to approx. PLN 61 billion, which will put Alior Bank on the ninth place in the banking sector. (CHAPTER
Fund (PFR) – 32.8%). Bank Pekao is the second largest bank in Poland in terms of the size of assets. The transaction should be completed in the second quarter of 2017 upon fulfillment of the precedent conditions specified in the sale agreement, which include, in particular, obtaining approvals of antitrust authorities in Poland and Ukraine and approvals or decisions of the Polish Financial Supervision Authority. The aim of PZU
WSE during the last six months (before signing the agreement on 8 December 2016.). It is expected that both ROE and
At the same time, with the closing of the transaction concerning the purchase of shares of Bank Pekao, the level of assets from banking activities1, as defined in the 2020 Strategy of PZU Group (PLN 140 billion), will be exceeded, which will result in the revision of the assumptions, in particular in the areas of banking and asset management. Therefore, in 2017, some of the measures of strategy implementation are planned to be updated. CHAPTER 4.7. SELECTED MEASURES OF PZU
Polish banking sector. In contrast, Bank Pekao is the second largest bank in Poland with a long history and a strong capital position, achieving some of the best results in the sector and offering attractive returns from just dividends alone.
PZU plans to generate additional value from these investments also on the level of cooperation in the field of cross-selling of insurance products through a network of branches/clients of Bank Pekao and Alior Bank and asset management, which will result in the revenue growth for both PZU and the banks.
The sale of bank products to PZU clients will likely also result in potential synergies. Thanks to these acquisitions, PZU
1 After the merger with BPH, Alior Bank’s assets plus assets of Bank Pekao amount to about PLN 238 billion.
Insurance 1. PZU strengthened its leading position on the non-life insurance market. According to PFSA data for the third quarter of 2016, PZU’s market share (direct business) was 33.0% (an increase by 1.6 p.p. year-on-year).
4. Strengthen the market position in Lithuania and Latvia. Market share in Lithuanian nonlife insurance market was 29.5% (decrease of 1.6 p.p. comparing to previous year), while the share in the Latvian market grew by 2.0 p.p. at the end of third quarter of 2016 and amounted to 27.2%. The market share in life Lithuanian market amounted to 4.8% (increase by 0.4 p.p.). The share of PZU Group in the Estonian non-life market amounted to 14.5% in 2016 and recorded growth by 0.6 p.p. The Ukrainian non-life company recorded after the third quarter of 2016 an increase in the market share (3.7%) by 1.0 p.p. compared to the same period of previous year, while the life company registered a decline in the market share (8.5% vs 8.6% y/y).
7. The analytic tool for pricing was implemented, which will be used for increasing the effectiveness of communication tariffs.
8. The agreements on research and development cooperation were signed with the Warsaw University of Technology as part of the “Scientific Council”.
9. Implementation of IT solutions improving life customers service efficiency. 10. Completion of the process of implementation of innovative PZU Branches – well-visible and common for the entire Group. There are altogether 190 Branches functioning within this new model.
11. Completion of work aiming to consolidate and improve the visualization standard of Exclusive Agent offices. From the start of the project, 1143 offices in the new standard were opened.
12. The development of a product providing continuous technological protection has begun, accompanied by insurance protection from the effects of cyber-attacks.
5. The net profit of PTE PZU at the end of 2016 amounted to PLN 60.3 million. 6. The Witelo fund was also established in cooperation with business partners. The fund will invest assets in the top venture capital funds in order to promote Poland as a place for investments and implementation of innovative projects.
8. Works related to the implementation of business initiatives aimed at developing cooperation between Alior Bank and PZU.
Health 1. At the end of 2016, the revenues of PZU Zdrowie amounted to PLN 363.8 million, which means a 40.2% increase year-on-year.
2. The gross written premium from group health insurance rose by 38.4% compared with 2015.
Banking 1. The acquisition of the third tranche of Alior Bank shares was settled. As a result of this transaction, PZU Group has the controlling package, i.e. 29.45%.
2. The declaration of backing from PZU in relation to the conclusion and implementation of the Sale of Shares and Division Agreement by Alior Bank, a subsidiary of PZU. The agreement concerned the acquisition of independent area of activity of Bank BPH. The assets of the merged banks (Alior Bank and Bank BPH) will reach the value of PLN 61 billion.
4. The contribution of the banking segment to the operating result of PZU Group amounted to PLN 691 million at the end of 2016.
4. Implementation of an application for self-handling of claims by clients. 5. Commencement of works on modernization of the infrastructure of data warehouses. 6. Implementation of works related to transforming PZU from a product-centered organization into a company organized in accordance with client segmentation. 7. Commencement of works on a self-service portal including all products of PZU Group. 8. Continuation of process related to the sale of real estate which is unnecessary from the point of view of the statutory activities of PZU and PZU Życie.
Socially responsible organization 1. PZU continued to follow the action lines adopted for social activities – safety, health and active lifestyle, the national heritage.
2. PZU Group’s involvement in running initiatives is the key way to promote active lifestyles and health prevention among Poles. PZU served as the strategic partner of, among others, the PZU Warsaw Marathon, PZU Warsaw Half-Marathon, PZU Gdynia Half-Marathon and the PZU Cracovia Royal Half-Marathon. All running events sponsored by PZU were accompanied by a “Podziel się kilometrem” (“Share Your Kilometer”) charity action, which encourages Poles to help others through their own physical activity.
3. PZU is a patron of culture – it is involved in the preservation of Polish cultural heritage, supporting the Royal Castle in Warsaw, Royal Łazienki Museum, Warsaw Uprising Museum, National Museum in Kraków, National Museum in Warsaw, National Theatre and Grand Theatre—National Opera.
4. A new prevention agreement was signed with rescue service, GOPR. The agreement will remain in force until 2019. The funds transferred by PZU will be used to purchase among others new quads and expedition backpacks for all rescue teams in southern Poland
2. Improvement of the administrative cost index for insurance segments in Poland by 0.7 p.p., at the end of 2016, the index amounted to 8.1 %
3. Improvement of the administrative cost index in foreign companies by 2.9 p.p., at the end of 2016. The index amounted to 11.0%
1 ROE attributable to the parent company 2 Direct business 3 PZU jointly with PZUW TUW and LINK4 4 Average during the Strategy implementation 5 Own funds after subtracting anticipated dividends and asset taxes 6 Net of transaction costs 7 Data on the annual basis regardless of the acquisition date; establishment’s revenue are presented as managed, in the same way as the other branches, i.e. including PZU Zdrowie
+9.1 p.p.8 8 Average surplus of period: Q1, Q2, Q3, Q4 of 2016 9 Value of the meter after 2014 – the last measurement 10 Lack of the research in 2016 11 Data after three quarters of 2016, unaudited 12 Data after three quarters of 2016
Even though PZU Group is constantly changing, the core of the business remains insurance. The main business model based on effective sales channels and efficient claims handling revolves around insurance.
Contents: 1. PZU Group’s business model 2. Business model – insurance 3. Business model – banking 4. Human resources management 5. Management of PZU Group’s brands
The main business model of PZU Group includes the following: • insurance – still the main and primary pillar of PZU Group’s activity. Each day, PZU ensures that the offered products match the needs of the clients and the quality of customer services concerning events covered by insurance is at the top possible level; • investment activity – the collected premium is invested according to the „prudent investor” rule. This means that all funds are invested in a way ensuring security, quality and liquidity with preservation of profitability.
reducing the time required to wait for doctor’s appointment, high-tech treatments and range of services. The key areas with the biggest impact on the results of PZU Group are listed below.
The organization of the PZU sales network guarantees sales effectiveness, while simultaneously assuring high quality of the provided services. PZU Group has the largest network of sales and service branches on the Polish market.
Customer Division, cooperated with about 1,100 insurance brokers in Poland. The Group’s companies worked with over 300 brokers in the Baltic states, where the broker channel is one of the main insurance distribution channels, and with approximately 40 brokers in Ukraine.
For the customer, claims handling process is the moment of truth in contacts with the insurer and an opportunity to test the quality of the purchased product. Satisfying his or her expectations in the claims/issue handling process is the key to building client ties with PZU. Because of this, PZU Group took numerous activities in 2016 to improve and shorten the process.
Poland Baltic states Ukraine residence of the insured or the place of the event. Competence centers handle certain types of claims; this results in higher specialization level and boosts customer satisfaction. Such units specialize, among others, in handling of motor, property and personal claims, corporate client claims, benefits, claims consisting in a complete theft of vehicles belonging to natural persons, and claims under the BLS service (direct claims handling). A separate entity provides technical support for motor and property claims. There is a similar claims handling model in PZU Estonia, where there are 3 competence centers.
Only handling of specific claims like bodily injury claims, major property claims, and marine claims is centralized. The claims handling process in the remaining Group’s companies operating in the Baltic states and Ukraine is fully centralized.
TPL insurance holders. PZU was the first to introduce its own fleet of replacement cars to the Polish 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 to all PZU clients.
In 2016, PZU Group continued cooperation with garages in the field of post-accident vehicle repairs in countries where operates. Every client who commissions a vehicle repair at a PZU Pomoc garage in Poland receives a Quality Certificate confirming that the repair met high quality standards.
Organization, infrastructure and human resources the Issue Consultant, who realizes the payment. The service allows easy and convenient participation in the decisionmaking process concerning the payment, and speeds up the entire process, thus shortening the period of waiting for money. Client satisfaction surveys conducted among the PZU
Claim/Issue Status – available for the Group’s clients in Poland is also very helpful tool for the clients. After logging to his or her claim/issue at www.pzu.pl, the client can learn how many stages the PZU customer service process involves, become familiar with every stage, and check his or her claim/
issue status, as well as see which activities have already been realized. Moreover, the www.pzu.pl website features also a video with tips related to online claims handling. Short videos depict PZU employees showing the clients how to quickly file a claim, change its status, or how to use the accident insurance in case of an accident. PZU – Video tips –
Another innovative move that supports the process of personal claims handling from TPL insurance was to appoint the
An important area of activity within the processes of claims and benefits handling is prevention of insurance frauds. PZU
continues to improve solutions limiting payments of unduly benefits and impeding practices of clients providing both false documentation during reporting the claim and untrue declarations concerning their health, as well as simplifying many processes.
In recent years, PZU has been intensively working on implementing innovative solutions to improve the customer experience as much as possible. This objective is supported by the Laboratory of Innovation, which was established at the end of 2013. The Laboratory of Innovation is currently working on implementing an innovation strategy for all of PZU Group, which covers building a culture of innovation and cooperation with other Group’s companies, including LINK4, Alior Bank and foreign insurance companies.
The Platform is a state-of-the-art tool that facilitates sales of non-life insurance, assessment of insurance risk, and management of policies and settlement, which PZU has been implementing since 2014. The implementation of the Everest platform in all channels will end in Q1 2017. The platform lets the Group distribute information faster and, consequentially, allows the agents to better recognize and understand the needs of clients from different sectors. As it improves and modernizes the working environment of the Group’s agents and employees (reduction of paper consumption by 70%
At the end of 2016, Alior Bank together with Bank BPH, had
PZU’s own agency network consisted of the agency network included roughly
In 2016, the average annual employment in PZU Group amounted to 27.0 thousand of the PZU Życie’s clients whose issues qualified for selfservice decided to take advantage of it
1,100 in the Baltic states and almost 700 agents in Ukraine multiagencies multiagencies in the Baltic states and 10 multiagencies in Ukraine insurance brokers in Poland brokers in Ukraine 40 banks in Poland
Last year, over 13 thousand agents were implemented following pilot tests in external distribution channels
(multiagents, dealers). The Everest platform was implemented also in the bancassurance channel and corporate client segment.
– in 2016 new and enhanced products were introduced, addressing the needs of corporate segment clients and small and medium-sized enterprises. The final quarter of 2016 the transfer of sales realized through offline channels to the platform was made (including motor and non-life leasing, bancassurance, and financial insurance).
Alior Bank is an innovative and universal savings and loan bank for private persons, legal entities, and other domestic and foreign entities. The bank’s activity covers bank account maintenance, granting financial credits and loans, issuing securities, and foreign currency exchange. The bank also offers brokerage services, financial consultants and agents, arrangement of corporate obligation issues, and other financial services.
Moreover, the Alior Bank distribution network grew by 56 branch offices and 291 partner branches as a result of acquiring separated part of Bank BPH and its 505 partner branches (franchise). The bank’s products were also offered by approximately 3 thousand financial agents and 10 thousand installment agents.
Notus. Although the available offer differs between agents, it is generally composed of cash loans, consolidation credits, mortgage credits, and installment credits.
The aforementioned distribution network is supported by 573 service points, which offer the bank’s products under the brand T Mobile Banking Services provided by Alior Bank.
Over the course of 2016, Alior Bank also received numerous awards for its innovations. One of them was the Dronn project, which took first place in the „Retail Banker
Consultant” combines automatic speech detection, semantic analysis, speech synthesis, natural speech transformation, and biometric voice identification. The Virtual Consultant is an artificial intelligence system – a virtual representative of the Bank designed to converse with the clients in a cohesive manner, i.e. respond to answers and ask appropriate questions. Alior Bank uses it in debt recovery to encourage clients to pay their debts and in marketing research.
As at the end of 2016, most of PZU Group’s1 employees were women, who represented nearly 65% of the total number of employees. Over 77% of the employees had college education. The employee age structure also remains stable.
As at the end of the year about 77% of the employees were under 44 years old at the end of the year.
On 9 March 2017, the Management Boards of PZU and PZU
and PZU Życie. The Management Boards of PZU and PZU Życie addressed the trade unions operating at PZU and PZU Życie to start working on agreements concerning group releases.
Remunerations in PZU Group are shaped with respect to employee’s scope of tasks and level of responsibility, and their market competitiveness is evaluated annually. An important element of the remuneration scheme is the variable, which is subject to restrictions in terms of the maximum amount possible to be granted – it is covered by the determined percentage relation to fixed base remuneration. The basis for determining the total amount of the remuneration subject to variations is the evaluation of performance of a given employee (taking into account financial and non-financial
Moreover, as part of the remuneration system, PZU offers its employees very rich additional benefits package, as well as it supports non-professional activities of the PZU Group’s employees (i.a. through the PZU Sport Team or employee volunteering program). CHAPTER 9 CORPORATE SOCIAL
Recruitment, training and building the image of an employer of choice
– Trainings) – trainings are selected for the employee on the basis of his/her DNA appraisal (PZU competence model), which have the objective of developing the key competences. Every program contained several training modules which develop competences in such fields as: client, result, responsibility, development, cooperation. The training cafeteria included 12 thematic fields. The program included a range of 2-day classroom training, supplemented with interactive forms of development. In 2016, 2,600 employees in total participated in trainings organized within the program; • there were also numerous workshops to provide an opportunity for sharing experiences and raising competences among the Groups in Poland (PZU, LINK4)
and foreign insurance companies, which covered finances, mass sales, claims and benefits handling, and marketing.
Najlepszych (20142017 )” [PZU. We attract the Best (2014–2017)] the Company continues also comprehensive activities promoting its brand as an employer, which are addressed to students and professionals. Last year, the campaign was held under the name of „Praca w PZU dobrze wróży” [Work at PZU is a Good Omen], the core of which was a recruitment and image-building video.
In 2016, the image-building activities of the Company as an employer gained recognition at the EB Kreator, EB Excellence
Contents: 1. Key factors affecting the achieved financial result 2. Income 3. Claims and technical provisions 4. Acquisition costs and administrative expenses 5. Structure of assets and liabilities 6. Share of industry segments in the result
In 2016, PZU Group achieved gross profit at the level of PLN
compared with the last year. The operating profit for 2016 amounted to PLN 3,034 million, up by PLN 94 million from the result for 2015.
The main reasons for the change were the following: • growth of the motor insurance gross written premium in mass client and corporate client segments resulting from growth of the average premium and number of insurances and increase in group and individually continued insurance, specifically in Health; • decreased profitability in the corporate insurance segment resulting from higher claims ratio; • higher profitability in the group and individually continued insurance segment associated mainly with increased insurance portfolio and decreased claims ratio of protection products; • profitability in the mass client insurance segment at a similar level to the previous year –
increased claims ratio in agriculture insurance resulting from a number of claims caused by force majeure (adverse effects of wintering) compensated with increased net premium earned; • lower net investment result (excluding banking activity)
mainly due to decline in share prices of Azoty Group from the long-term shares portfolio; • introduction of the tax on financial institutions effective as of 2016; • decrease of administrative expenses in insurance activity segments in Poland due to maintenance of cost discipline.
1 One-off events consist of: effect of long-term insurance contracts into annual renewable contracts in type P group, claims in agricultural insurance higher than the average during the most recent 3 years, update of assumptions concerning future payments applied in the calculation of reserves, profit from the bargain acquisition of the separated part of Bank BPH, the cost of restructuring provision in Alior Bank, and for the previous year - result on the sale of PZU Lithuania, impact on the profit and loss account due to consolidation of Alior Bank.
Alior Bank in December of 2015 and Alior Bank’s purchase of a specific segment of Bank BPH covering its core activity. The banking segment contributed to the operating result of PZU
Bank with the separated part of Bank BPH, which took place on 4 November 2016.
BPH, and the issuance of own debt instruments amounting to EUR 350 million in October 2015; • higher amount of claims and benefits. These amounted to PLN 12,732 million, i.e. they were 7.4% higher than in 2015. The growth applied mainly to the subsidized crop and livestock insurances in the mass client segment in H1 2016, as an effect of a number of claims caused by force of nature (adverse effects of wintering); • higher acquisition costs (growth by PLN 237 million) in both mass and corporate client segment related mainly to higher sales; • increase of the administrative expenses to PLN 2,843 million, in comparison with PLN 1,658 million in 2015, resulted from the launch of the consolidation of Alior Bank and the merger of Alior Bank with separated part of BPH.
At the same time, a drop in administrative expenses by PLN
Net profit (loss) attributable to owners of equity of parent company 1,947 2,343 2,968 3,293 3,255 * restated data for the period 2012-2014.
In 2016, PZU Group collected gross premiums of PLN 20,219 million, i.e. 10.1% more than in 2015. Within particular segments, the following trends were recorded: • sales in mass-client segment higher by PLN 1,433 million
TPL (resulting from the acquisition of several individually significant agreements); • growth of sales in the group and individually continued insurance segment – periodical premium higher by
Operating result of PZU Group in 2016 (PLN million) Insurance segment (PLN million) local accounting standards
Non-life insurance – Poland (externally written premium) 10,878 9,074 8,367 8,269 8,451
Total life insurance – Ukraine and Baltic states* 88 74 78 78 - * consolidated since 1 January 2013 2, 3,
N et r ev en ue fr om co m m is si on an d fe e in co m e
Change of the net investment result following the recognition of interest-bearing costs (PLN million)
net investment result in 2016 amounted to PLN 1,454 million and was higher than the result of the previous year by
PLN 74 million, mainly due to the following factors: • higher result on equity instruments, especially because of the upturn on WSE – the WIG index grew by 11.4%
compared with the drop of 9.6% in the corresponding period of the previous year; • drop in revenue from interest-bearing financial assets at fair value mainly due to decrease in value of Polish treasury bonds – resulting primarily from changed perspectives for global interest rates; • lower portfolio of bonds held until maturity resulting from temporarily lower level of reinvestments in the environment of low interest rates; • high level of negative exchange differences on own debt securities resulting from appreciation of EUR exchange rate against PLN is balanced with simultaneous increase in value of the assets portfolio denominated in EUR.
TPL motor insurance in Poland * Derivative instruments based on interest rates, currency exchange rates and prices of securities are presented in the category Debt market instruments – treasury, Money market instruments, and Quoted and non-quoted equity instruments.
In 2016, the balance of other net operating income and expenses was negative and amounted to PLN 740 million compared with the also negative balance for 2015 of
PLN 419 million. The following factors affected this result: • inclusion of Alior Bank in the results of PZU Group and merger of Alior Bank with separated part of BPH, including recognition of restructuring costs reserve associated with said merger in 2016 in the amount of PLN 268 million; • introduction of the tax on financial institutions – PZU
Group was encumbered (both in its insurance and banking activity) with this tax in the amount of PLN 395 million in 2016; • recognition of the costs of depreciation of intangible assets identified as a result of the acquisition of Alior Bank shares by PZU amounting to PLN 46 million and separated part of
insurance in mass client segment resulting mainly from the increased insurance portfolio.
In turn, the declined value of net benefits and compensations was determined by the lower growth of mathematical provisions in successive tranches of the individual structured product offered in PZU’s own network associated with the 2016 decline of gross written premium revenue following the record-setting previous year.
In 2016, PZU Group’s investment activity focused on continuing realization of strategic objectives, including optimization of investment activity profitability through increased diversification of the investment portfolio.
on o w n de bt in st ru m en ts
PLN 1 658 million in the previous year. The increase was mainly a result of the launch of the consolidation of Alior Bank, due to which PZU Group’s expenses grew by PLN 1,199 million.
(resulting inter alia from the issuance of shares performed on 10 June of the current year by Alior Bank in the total amount of PLN 2.2 billion and the growth in deposits for non-bank customers).
interest rate prove unprofitable. At the same time, a decrease in cash accumulated by Alior Bank in the central bank was recorded.
Just like in the case of asset structure, the structure of liabilities at the end of 2016 experienced considerable changes resulting from further development of activity in the banking sector. The share of technical and insurance provisions in the balance total dropped from 39.2% at the end of 2015 to 33.7% at the end of 2016.
At the end of 2016, the level of technical and insurance provisions rose by PLN 914 million, specifically due to the following: • increase in premium provisions in non-life insurance resulting mainly from the development of sales of motor insurance in Poland; • higher technical and insurance provisions in individual and group unit-linked products, offered in both own and bancassurance channel resulting from the positive results of investment activity and sales exceeding the level of paid benefits; • growth in damage provisions in motor insurance in Poland associated with the development of the portfolio.
The growth of technical and insurance provisions was partially compensated with the following: • in life insurance in Poland with lower provisions in structured and deposit bank products in relation to the end of insurance period of subsequent product tranches and no sales; • declining provisions in individual protection insurance associated with the fading oldest agreements with high unit provisions.
PLN 13,010 which is the result of the distribution of profit for 2015, including allocating PLN 1,796 million to the dividend payment, partially offset by the result for 2016 in the amount of 1,947 (profit attributable to owners of equity of parent company).
PLN 178 million at the end of 2016 – considerable drop from the 2015 balance of PLN 3,794 million.
PZU and PZU Życie. Under the guarantee line agreement of 7 October 2013 between PZU and Bank Millennium SA, the bank extended bank guarantees (bid bonds and contractual guarantees) to PZU’s organizational entities appearing in the procurement proceedings for insurance services and proper execution of a rental agreement for non-residential premises.
The significant year-on-year growth resulted mainly from the development of activity in the banking segment. The value of conditional liabilities provided to Alior Bank clients amounted to PLN 14,484 million. The balance of conditional liabilities of
Moreover, the balance of conditional liabilities includes also claims toward which no provisions have been created, including insurance-related claims. The 2016 balance of conditional liabilities from claims amounted to PLN 624 million and included PLN 169 million of claims for compensation due to disqualification from right to the dividend specified in point 48.1 of the Consolidated Financial Statements for 2016.
• investments – reported according to PAS – covering investment activity conducted with the use of PZU Group’s own funds defined as the surplus of investments over technical provisions in the PZU Group insurance companies seated in Poland increased by the surplus of investment income exceeding the risk-free rate from investments matching the value of technical and insurance provisions in the insurance products of PZU, LINK4, and PZU Życie, i.e.
(including consolidated investment funds); • Baltic states segment – non-life and life insurance products provided in Lithuania, Latvia, and Estonia; • investment contracts – including PZU Życie products which do not transfer significant insurance risk and do not meet the definition of an insurance contract. They include some products with a guaranteed rate of return and some unitlinked products; • other – this encompasses consolidated entities not allocated to any of the segments above.
The following factors primarily had a key impact on this segment result in 2016: • 11.1% growth of the net earned premium and simultaneous increase in the gross written premium by 22.2% compared with 2015, recorded mainly in: ◦ motor insurance resulting from the growing number of insurances and the growth of the average premium,
PLN 7,836 million with simultaneous growth of the gross written premium by 19.9% year-on-year (with the exception of the premium from the Group’s subsidiaries,
◦ increase in the value of claims and benefits in crop and livestock insurances as a result of a number of claims caused by force majeure occurring in H1 2016 (claims from adverse effects of wintering were over
PLN 230 million higher than the average during the last 3 years),
◦ increase in the level of claims and benefits in MTPL
PLN 634 million, which means a drop in comparison with the previous year by 4.7% or PLN 31 million, mainly as the result of limiting expenses due to the application of cost discipline inter alia in the scope of marketing and property costs partially compensated with the change in bancassurance group contracts and as a result recognition of remuneration for administrative activities in the amount of approximately PLN 50 million.
PLN 86 million (+1.3%) was primarily due to: ◦ development of group protection insurance (growth of the average premium and average number of additional agreements per insured person),
◦ acquisition of premium in group health insurance (new clients in ambulatory insurance and sales of drug product versions); PZU insures about 1.3 million clients with products of this kind,
◦ additional riders up-sale and rise of the insurance sum in individually continued products; • investment income – comprising revenue allocated according to transfer prices and income from investmenttype products – amounted to PLN 680 million, i.e. it increased year on year by 13%, mainly because of the higher revenue from unit-linked products (mainly EPP
◦ lower rate of conversion of long-term contracts into annual renewable contracts in type P group. As a result, provisions of PLN 40 million were released, i.e. PLN 35 million less than in the corresponding period of 2015,
PLN 1,745 million, compared with PLN 1,500 million in the corresponding period of 2015 (up by 16.3%). The simultaneous exclusion of the one-off factor of update of assumptions concerning future payments for permanent health impairment used in the calculation of provisions in individual continued insurance produced the 2016 result of
In 2016, the result in insurance of the individual life insurance segment amounted to PLN 244 million, i.e. it was 18.4%
higher than in the prior year. The main factors affecting the level of the segment’s profit on insurance were: • gross written premium drop of PLN 60 million (-4.9%) from 2015 resulted from the following: ◦ lower value of the structured product subscriptions in own channel in comparison with 2015, which was record-breaking in this respect,
◦ further decline in the deposits to the unit-linked Plan na
Życie [Plan for life] product, which was withdrawn from sales in the end of 2014.
Positive results were brought by: ◦ higher deposits to IKE accounts, especially in Q4 2016; ◦ high sales of individual protection products, especially in
PZU Group’s branches; ◦ introduction of a new unit-linked product into the own channel offer in the end of 2015: Cel na Przyszłość
[Future goal]; • investment income consists of income allocated according to transfer pricing and income from investment products.
PLN 288 million, mainly due to the better performance recorded on IKE and the investment units in unit-linked products in the bank channel. The income allocated according to the transfer prices slightly declined; 1, 1,
PZU’s own network associated with the 2016 decline of gross written premium revenue following the record-setting previous year. Simultaneously, this effect was partially compensated with higher growth of reserves in unit-linked products like IKE and Cel na Przyszłość, which resulted from good sales results, improved investment results, and moderate level of surrenders; • significant decline in acquisition costs in this segment
Additionally, the investments segment includes income earned on other excess funds in PZU Group (including consolidated investment funds).
As at the end of December 2016, PZU, along with its subsidiaries, was in possession of 29.45% of the equity of
Business activity of Alior Bank in H1 2016 faced mainly a dynamic growth of the total assets - by PLN 21.2 billion to
– y/y growth by PLN 14.8 billion (including the impact of consolidation of the results of the separated part of Bank BPH
at PLN 9.2 billion) – and financial assets for sale – y/y growth by PLN 5.1 billion or 120%, and the main determinants of liabilities included client deposits – growth by PLN 17.7 billion
(including the impact of consolidation of the results of the separated part of Bank BPH at PLN 12.7 billion) and capitals
Cl ai m s, b en ef its an d ch an ge in te ch ni ca l p ro vi si on s
(not including amortization of intangibles obtained with the acquisition of Alior Bank) at the level of PLN 691 million, up from 2015 by PLN 305 million. At the same time, due to the 29.45% of shares in the bank’s equity held by PZU Group, in 2016 year the banking segment contributed PLN 204 million to the result attributed to the parent entity (not including amortization of intangibles obtained with the acquisition of
The result on interest is the main component of the Alior Bank group’s income, constituting 61% of said income. Its annual growth of 29.6% resulted from the organic growth of the volume of credits for clients and the accompanying growth of the client deposit base, as well as the acquisition of the separated part of Bank BPH. The adequately maintained price policy of both deposit and credit products in the conditions of the Bank’s operation in an environment of low interest rates also had positive impact on the level of generated interest revenue.
At the same time, the average interest rate of loans grew by 0.09 p.p. to 6.11%. In the same period, the average cost of deposits decreased to 1.46%, i.e. by 0.27 p.p.
In 2016, the average WIBOR 3M rate amounted to 1.70% and was 0.4 p.p. lower than the average from 2015.
The fee and commission result of 2016 remained almost the same as in the corresponding period of the previous year and amounted to PLN 331 million (-0.2% compared to 2015).
The commission result was composed of PLN 591 million of commission income (year on year growth of 8.2%) and
The main component of fee and commission income is commission associated with credits, accounts, transfers, deposits, payouts, loans, etc. The 2016 general administrative expenses amounted to PLN 1 567 million and were 41.4%
Simultaneously, the total value of costs suffered by the separated part of Bank BPH in 2016 amounted to approximately PLN 37 million.
The financial asset tax also had considerable influence on the level of the operational profit of the banking sector. Bank tax charge in Alior Bank amounted to PLN 131 million in 2016.
◦ decline in revenue resulting from a lower return of funds from the Guarantee Fund by PLN 2 million,
◦ PLN 1 million increase in revenue from due to the withdrawal of funds from the reserve account; • net investment revenue amounted to almost PLN 5 million and was lower by PLN 2 million due to the drop in financial assets;
PLN 4 million, i.e. they were 29.7% higher than in the previous year. This resulted from the informational activity conducted by OPF in 2016; • administrative expenses amounted to almost
◦ drop in costs of provisions for sending the annual information to members of OFE PZU in 2016 by almost
◦ drop of personnel costs resulting mainly from lower average employment and lower bonus remuneration costs.
Up to 30 September 2015, the Baltic states segment’s results included PZU Lithuania, which has considerable effect on the comparability of the 2015–2016 financial information.
PLN 694 million and were PLN 7 million higher than in the previous year – the value of claims and benefits of PZU
Lithuania in 2015 (PLN 48 million), the acquisition costs rose year-on-year by 22.5%, i.e. at a level similar to the growth of the gross written premium; • decrease in administrative expenses. They amounted to
– the total administrative expenses of PZU Lithuania in 2015 amounted to PLN 30 million. The dropping costs were accompanied by reduction of the administrative expenses indicator, which amounted to 10.0%, a drop of 3.3 p.p.
from 2015. Without the contribution of PZU Lithuania, the declined costs in the Baltic states segment was still visible at 6.4% year-on-year (with simultaneous drop of the indicator by 0.6 p.p.). Lowering of administrative expenses was possible due to maintaining cost discipline, mainly in the IT area.
The claims ratio from the net earned premium slightly rose in non-life insurance (by 0.2 p.p.) to 45.1%; • increase in acquisition costs. They amounted to PLN 60 million compared with PLN 47 million in the prior year. The level of growth resulted from the growth in the written premium; • increase in administrative expenses. They amounted to
PLN 21 million. Their increase was related, inter alia, to indexation of remuneration, UAH devaluation, and inflation.
In 2016, the Ukraine segment closed the year with a positive result on insurance at PLN 15 million, compared with PLN 12 million in the previous year.
The above categories have been eliminated for the purpose of the consolidated results.
PZU Group earned PLN 2 million of operating result compared with PLN 1 million in the previous year (increase of 100%) on
The profitability ratios achieved in 2016 by PZU Group exceed the levels achieved by the whole market (according to the data for three quarters of 2016).
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 a level which guarantees high profitability. In 2016, the ratio grew mainly due to the with higher claims ratio in agricultural insurance resulting from numerous damages caused by forces of nature (adverse effects of wintering).
Administrative expenses ratio for insurance segments (Administrative expenses/premium earned net of reinsurance) x 100%
Combined ratio in non-life insurance (claims + costs of insurance activity) / premium earned net of reinsurance x 100%
Return on Equity (ROE) – consolidated (annualized net profit / average equity) x 100% 15.0% 16.6% 22.6% 24.1% 24.0%
We devote a lot of time to a continued development of advanced risk management procedures. We consider them to be fundamental, because all we want for our
Clients is to feel secure and calm, while our results remain predictable.
Contents: 1. Risk management objective 2. Risk management system 3. Risk appetite 4. Risk management process 5. Risk profile of PZU Group 6. Sensitivity to risk 7. Reinsurance activity 8. Capital management
The main elements of an integrated risk management system are consistent for all insurance companies of PZU Group and implemented in a way which ensures the realization of strategic plans of individual companies and secures business objectives of the whole PZU Group. They include, among others: • systems of limits and restrictions of the acceptable risk level, including the level of risk appetite; • processes of identifying, measuring and assessing, monitoring and controlling, reporting and managing actions with respect to individual risks; • risk management organizational structure, in which
PZU supervises the PZU Group risk management system under cooperation agreements with PZU Group entities and on the basis of information provided as per such agreements. It also manages PZU Group aggregated risk, especially as far as the capital requirements are concerned.
Moreover, there exist the processes in PZU Group that help ensure effectiveness of risk management on the Group level.
Risk management rules in the PZU Group subsidiaries include recommendation of PZU (parent company) concerning the organization of risk management system in subsidiaries in both insurance and banking sector.
Committee; • Management Board, which organizes the risk management system and ensures its functionality through approving the strategy and policies and defining the risk appetite, the risk profile and tolerance for individual kinds of risk; • Committees which make decisions to reduce individual risks to a levels determined by the risk appetite. Committees implement the procedures and methodologies for mitigating individual risks and accept their limits.
(both Supervisory Boards and Management Boards of subsidiaries) in implementing effective risk management system which is consistent within the entire PZU Group. The objective of the PZU Group Risk Committee is to coordinate the actions and exercise supervision over risk management systems and processes present in PZU Group..
In all insurance PZU Group companies, the process of determining the risk appetite and limits for individual categories of risk that is in line with the group process was implemented. The Management Board in each company determines the risk appetite, 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 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 level of the
with Management Boards of the companies and with management of such areas as finance, risk, actuary, reinsurance, investment, and compliance, under relevant cooperation agreements; • entity level – ensures that a PZU Group entity implements its business objectives in a safe way which is adequate to the degree of risk involved by this entity. This level engages the monitoring of limits and specific risk categories present in a given entity and introducing coherent mechanisms, standards, and operational organization of an effective internal control system (with special focus on compliance function), risk management system (especially in the reinsurance field), and security management system to the structure of the integrated risk 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. The main risks associated with the activity of Alior Bank include the following: credit risk, operational risk, and market risk (covering interest rate, liquidity, foreign currency, and commodity price risk). The overall risk of Alior Bank constitutes approximately 9% of the total risk of PZU Group, whereas the credit risk makes up the largest contribution.
It is a risk of loss or an adverse change in the value of liabilities which may arise from insurance contracts and insurance guarantee agreements in relation to improper assumptions regarding premium valuation and establishment of technical and insurance provisions.
Reporting aims to ensure efficient underwriting risk communication and supports actuarial risk management at various position from the employee level to the Supervisory
The nature of the process of credit spread risk management and concentration risk varies from management process of other subcategories of market risk and has been defined in the next section (Credit and concentration risk) along with the process of managing counterparty insolvency risk.
The investment activity in PZU Group entities is regulated in a number of documents approved by the Supervisory Boards, the Management Boards and dedicated Committees.
The identification of market risk involves recognizing the actual and potential sources of such a 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.
Concentration risk is a risk arising from a lack of diversification in the portfolio of assets or from high exposure to the risk of default by a single issuer of instruments or a group of related issuers.
Risk assessment is based on estimating how probable it is that the risk occurs and a potential impact of such an occurrence on the financial standing.
Credit risk is measured with the use of the following tools: • exposure measures (the amount of the gross and net credit exposure and maturity-weighted net credit exposure); • standard formula.
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
Risk management 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 the individual issuers is determined by dedicated committee in line with the risk tolerance.
In the banking activity, credit products are granted in accordance with appropriate crediting methodologies depending on the client segment and product type. Client’s creditworthiness is assessed prior to issuing a decision on granting a credit product using a credit process support system and the following tools: scoring or rating; external information (such databases as CBD DZ, CBD BR, BIK, BIG)
To minimize credit risk, a collateral is established; the collateral is adjusted to the credit risk incurred and flexible with respect to the situation of the client. The establishment of a collateral does not exempt from the duty to examine the client’s creditworthiness.
The value of collaterals considered when determining impairment losses with respect retail and business credits in 2016 amounted to PLN 1,277 million (in 2015: PLN 994 million). In the case of credits for which no impairment was reported in 2016, it amounted to
Whereas, credit scoring is a tool supporting credit decisions for individual clients and microenterprises, whereas credit rating is applied to the segment of small, medium-sized and large enterprises.
Reporting consists of communicating the level of operational risk and the effects of monitoring and control to the different decision-making levels. The frequency of individual reports and the scope of information is tailored to meet the information needs at different decision-making levels.
It is a risk that the PZU Group entities or persons related to the PZU Group entities violate or fail to comply with the provisions of law, internal regulations, or standards of conduct adopted by the PZU Group entities, including ethical norms, which result or may result in suffering by PZU Group or persons acting on its behalf legal sanctions, financial losses, or loss of reputation or credibility.
Among systemic operations, the following should be noted: • development and implementation of systemic assumptions and internal regulations coherent with them; • recommendation of solutions concerning the method for coherent compliance function realization and systemic compliance risk management to other entities of PZU
In turn, the operations related to the ongoing management mean, among others: • compliance risk identification and assessment within the supervised area; • compliance risk measurement; • defining hedging instruments and instruments limiting the number and scale of occurring irregularities; • reporting threats and compliance risk events to the
In addition, at the PZU level, the Compliance Bureau cares for coherent and uniform standards of compliance solutions in all
In 2016, the PZU Group companies continued to adapt their compliance systems to standards set by PZU; the insurance companies subject to the Solvency 2 regime additionally concentrated on adapting their business operations to the requirements of the directive.
Such units assess and measure compliance risk and take appropriate remedial actions which will mitigate the materialization of such a risk.
The Compliance Bureau conducts i.a. 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
Compliance risk covers especially the risk of non-compliance of PZU Group companies’ operation with a changing legal environment. The risk may be materialized as a result of absence of clear and unambiguous provisions or any provisions at all, i.e. the so-called legal loophole. This may cause irregularities in PZU Group operations, which may in turn contribute to a cost increase (e.g. due to financial penalties), as well as higher risk of reputation loss, and – what follows – deteriorated credibility of the Group on the market
Compliance risk in the Group’s companies is identified and assessed for the individual internal processes by the managers of organizational units of such companies, in line with the division of reporting responsibilities. Additionally, the compliance units in PZU Group companies identify risks on the basis of entries in the register of conflicts of interest, gifts, benefits and irregularities, as well as the enquiries received.
Compliance risk is assessed and measured by determining the effects of materialization of the following risks: • financial, resulting i.a. from administrative penalties, court verdicts, Office of Competition and Consumer Protection
Change in assumptions for provisions for insurance and investment contracts with DPF in life insurance, excluding annuities (PLN million)
Estimates of the BPV for Alior Bank, which determines the estimated change in measurement of a given transaction/item due to a parallel shift of a yield curve by 1 bp are presented in the tables below.
The risk was more extensively presented in the Alior Bank financial statements.
Currency up to 6 months 1 year - 3 years 3-5 years 5-10 years Total
In 2016, the main partners providing treaty reinsurance cover to PZU were: Munich Re, Hannover Re, Scor and Swiss Re.
As per S&P/AM Best, ratings of PZU reinsurance partners are high, which is an evidence of reinsurer’s good financial standing and guarantees security to the Company.
PZU Group’s insurance companies. Further commitment to the protection of Baltic companies and LINK4 resulted in an increase in the related written premium.
Reinsurance share from PZU obligatory contracts as per S&P/AM Best rating
PZU Życie’s portfolio against the accumulation of risks, as well as protect individual policies with higher sums insured.
QBE, RGA, and Mapfre are the partners providing reinsurance cover to PZU Życie. As per S&P, ratings of the reinsurance partners are high, which is an evidence of reinsurer’s good financial standing and guarantees security to the Company.
PZU Group aims to effectively manage the capital and maximize the rate of return for the shareholders of the parent company, especially alongside with ensuring a steady safety level and maintaining capital funds for strategic development through acquisitions.
The introduction of the Policy results from the implementation of Directive 2009/138/EC of the European Parliament and the
Solvency II); • maintaining PZU Group’s leverage ratio at a level no higher than 0.35; • providing funds for development and acquisitions in the upcoming years; • no share issues by PZU in the period of the Policy being in effect.
As at the end of the third quarter of 2016, the solvency ratio
In 2016, PZU shares were the subject of over a million transactions, the trading value reached PLN 16.8 billion, the average spread was only 9 bps, and the trading volume was composed of 106.4% of shares in free float, which places PZU among the leaders of the most liquid shares on WSE
Contents: 1. Share and bond market 2. PZU share prices 3. PZU and Alior Bank debt financing 4. Banking sector on WSE
5. PZU investor relations 6. Analysts’ recommendations for PZU shares 7. PZU Group’s capital and dividend policy 8. Rating
In 2016, the domestic and global policy was the main factor determining the prices of shares and bonds. The capital markets were stimulated by the decisions of central banks to a lesser degree than in 2015. ECB (European Central
maintained a lax monetary policy and, additionally, market expectations indicated its milder than previously assessed.
(EUR denominated in PLN rose to its highest levels in 4 years), higher yield of Polish debt, and decreases on the stock exchange. In early December of 2016, S&P saw Poland in a more favorable light concerning areas like credibility of the economic policy and conditions of public finances and thus raised the rating outlook to stable.
In June of 2016, the global capital and currency markets experienced major turbulences associated with the United
Kingdom’s decision to exit the European Union. Furthermore, the situation on the Polish stock exchange did not benefit from global factors including, among others, concerns with the dynamics of further raise of interest rates by the Fed in the USA, the immigration crisis and its consequences in the European Union, the economic slowdown in China, the deteriorating situation in Russia, the continuing conflict in the Middle East, or the consequences of the attempted coup d’état in Turkey.
The end of 2016 saw an outflow of capital from treasury bonds and growths on the Polish stock market. After over one-year consolidation, the price of 10-year treasury bonds
* MSCI IMI, gross (USD): the index recognizes small, medium, and big companies and dividend reinvestments Source: Reuters
Source: Reuters 40,000 pts 42,000 pts 44,000 pts 46,000 pts 48,000 pts 50,000 pts 52,000 pts
Markets rose by 10.3% year-on-year, i.e. by 1.5 p.p. more than the MSCI of developed markets. MSCI Poland also followed this trend and recorded growth of 3.2% year-on-year.
shares more accessible to individual investors as well as to diversify the shareholder structure.
year-on-year, thus confirming the greater strength of small and medium enterprises quoted on WSE (mWIG gained 18.2% year-on-year). The RESPECT Index also presented high dynamics and closed at 10.9% higher than in 2015.
PLN 28.7 billion, at the end of 2016 PZU was the sixth company with regard to capitalization of domestic companies.
In the first half of 2015, WIG20 experienced a downward trend, which entailed a decline in the price of PZU. There was a strong attempt at reversing this trend in the fourth quarter of 2016, which saw PZU grow by 36.2% quarter-onquarter, i.e. considerably more than WIG20 and WIG, which rose appropriately by 13.9% and 9.9% quarter-on-quarter.
(recognized as the quotient of the standard deviation from the period’s average price) was 10.3%, only 68 bps lower than in 2015. In 2016, PZU’s systematic risk expressed by the Beta coefficient (PZU price compared with WIG for daily changes)
was 1.18 (1.07 in 2015). At the last session of 2016, WIG20 recorded growth of 4.8% year-on-year while PZU’s shares were quoted at a similar level to that of the end of 2015, i.e.
PZU shares were first traded on the Warsaw Stock Exchange on 12 May 2010. Since its IPO, the company has been included in the WIG20, WIG, WIG30, WIG-Poland, and WIGdiv indexes. Since 2012, PZU shares have been also included in the RESPECT sustainable development index (presence confirmed on 14 December 2016).
1 to PLN 0.1. The operation was purely technical (i.e. without
The total rate of return for shareholders in 2016 reached 3.7%
(PLN 2.08 of dividend per share), which is almost twice as high as the average for WIG20 and WIG Banks, which were at appropriately 2.8% and 3.1%1.
PZU’s potential involvement in the consolidation of assets of the banking sector in Poland and the possible maintenance of attractive dividends from PZU. The anxiety went down when 1 2016 WSE Statistical Bulletin
8.7 PZU GROUP’s CAPITAL AND DIVIDEND POLICY and its purchase of a share package of Bank Pekao (8 December)
/ BANKING. The PZU Management Board declared that it wanted to continue to provide its shareholders with an attractive stream of rising dividends and that it had no plans for changes in Bank Pekao, neither in the Management Board nor in the Bank’s dividend policy and strategy. After the exchange session on 8 December, the value of PZU grew by
Set up of the Witelo Fund Announcement of the PZU dividend policy
Nabycie AAS Balta Emisja oobligacji o wartości 500 mln Euro Nabycie Elvita Jaworzno III
Alior Bank support in BPH acquisition Consent for the acquisition of BPH by Alior Bank Announcement of the PZU Strategy 2020
Announcement of signing the agreement for purchase of Pekao shares S&P confirmed PZU’s rating of A-
ratio for the banking industry (the most adequate comparison for PZU on WSE) was 11.7 while the P/BV was 0.762. PZU’s
Exchange rate at the last session of the year (PLN) 33.21 34.02 48.60 44.90 43.70
Capitalization at the end of the period (PLN million) 28,677.6 29,377.1 41,967.2 38,767.9 37,736.0
List of the Irish Main Securities Market and the Catalyst ASO
The funds from the issue were planned to be used to increase the involvement of investment portfolio in investments denominated in euro, manage FX position, and use of debt financing, which is cheaper than equity.
PZU General Shareholders Meeting regarding the adoption of the resolution on the issue of subordinated debt with a total par value not higher than PLN 3 bn.
To ensure a secure level for the coefficients of capital adequacy, Alior Bank issues debt instruments on a regular basis. As at 31 December 2016, Alior Bank enforced the following debt capital acquisition programs: • Emission of own bonds with maximum value of
PLN 2 billion; • Public Program of Subordinated Bond Emission with maximum value of PLN 800 million.
Emission saw Alior Bank issue the following in 2016: Capital market ratios for PZU shares* 2016 2015 2014 2013 2012
As at 31 December 2016, Alior Bank held the following obligations in bond form (presented cumulatively according to issue date): Series name
Alior Bank as capital instruments of Tier II, which is discussed in art. 63 of CRR.4 8.4 Banking sector on WSE
turned into a material factor which may determine the assessment of PZU on the stock exchange.
4 Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26 June 2013 on prudential requirements for credit institutions and investment companies, amending Regulation (EU) No. 648/2012 – Capital Requirements Regulation, CRR.
Banks on WSE in 2016 * Theoretical value of pre-emptive rights
In 2016, low interest rates, bank tax, mortgage credit requirements, and geopolitical risk caused the ratings of banks to stay under the pressure of the demand segment of the market. Regardless, the WIG Banks rose at the end of 2016 by 2.9% year-on-year (the total weight of Pekao and
However, from the perspective of the concluded agreement, assuming the price of PLN 123, which will be paid by PZU
Bank on 19 May 2016. After the adjustment of the historical price with the cut value, the annual rate of return on Alior
In order to meet the highest information governance requirements for public companies and fulfill the information needs of different groups of stakeholders, the PZU
As at 31 December 2016, the shareholders of PZU with significant share packages were as follows: the State Treasury of the Republic of Poland (34.2% of the share capital) and
Treasury) institutional investors (in PZU share structure in 2016) slightly dropped, i.e. by 0.8 p.p. to 43.7%. The most important changes in this group (in a relative depiction)
include the growth of the share of Polish investors by 2.9 p.p.
Europe institutional investors excl. Polish State Treasury * – 377.6 mln shares
PZU Management Board during meetings with capital market analysts (the meetings were also broadcasted live online at all times). PZU also held dedicated meetings with live online transmissions from the following events: • 24 August 2016 – announcement of the 2016–2020 strategy
• 8 December 2016 – announcement of signing the agreement to purchase package of shares of Bank Pekao from UniCredit
In 2016, PZU once again presented its most important events, achievements, and plans as an annual online report at http://
In 2016, representatives of PZU participated in: • 2 non-deal road shows in London and New York/Boston; • 15 financial conferences held abroad with global institutional investors in attendance; • 5 conferences for institutional investors in Warsaw; • numerous investor meetings at the company’s seat; 1on1, group meetings, and teleconferences.
PZU on capital and debt market registered investors) – the largest meeting of individual investors in Central and Eastern Europe; • organization of 4 on-line chats with individual investors, in which the Member of the PZU Management Board of who is in charge of Finance Division in PZU Group also participated, after each publication of the results.
program aimed at creating high communication standards for quoted companies to reach individual investors.
Activities of PZU regarding investor relations are highly appreciated both by investors, analysts, and media. In 2016,
Annual Report 2015, which is composed of the total assessment of the consolidated financial report, the management board report from the
Michał Krupiński in the top CEO ranking for investor relations in Poland and Central and Eastern Europe in the
Extel 2016 survey; • Third place (for both PZU and individually for the Head of
• Honorable mention by Individual Investors’ Association in the „10 na 10 – komunikuj się skutecznie” [Ten out of Ten: Effective Communication] program for preservation of high standards of communication with the capital market; • Business Sharks award (at the first Capital Market Forum)
The main aims for PZU’s Investor Relations in 2017 are: • strengthening good relations between the PZU
Management Board and investors; • ensuring understanding and approval for the PZU 3.0 strategy among the investors and analysts; • providing a broad market for PZU shares and bonds – by continuing pro-investor activities aiming to create a diversified (geographically, numerically, and in terms of their profiles) group of investors who know the company and are well-informed; • ensure wide coverage for PZU shares by analysts of investment banks and brokerages (sell-side) and ensure fair valuation of PZU shares by providing analysts with highquality information on the activities of PZU, industry trends, factors affecting the financial results and feedback on the analysis of the issued recommendations; • creating standards of investor relations for other quoted companies to follow; • providing the PZU Management Board with regular feedback on perception of PZU among capital market participants and wide knowledge on existing and potential shareholders of the company; • monitoring investors’ sentiment towards PZU shares and changes in shareholding structure in order to apply the most adequate IR actions and tools and IR plans effectiveness assessment.
Dividend yield for PZU’s shares dividend per share paid in 2016
PLN 28,677 million average number of transactions per session share of North America based investors
Analysts’ expectations towards PZU share price in 2017 on the basis of recommendation updated as at the end of
In 2016, recommendations for PZU shares were issued by 16 domestic and foreign financial institutions. In total, the sellside analysts GLOSSARY issued 27 recommendations. Positive
The biggest impact on the assessment of PZU shares by analysts in 2016 was made by the projections and premises concerning the new strategy, dividend policy, investments in the banking sector (specifically following the personal changes in the Management Boards of PZU Group’s companies) as well as projected changes in profitability resulting from the high dynamics of tariffs on the motor insurance market, and the expectations toward investment results derived from the high volatility of capital markets.
(9 sell and 4 hold). The median of their target prices (TP)
PLN 50 sty lut mar kwi maj cze lip sie wrz paź lis gru
On 3 October 2016, the Supervisory Board of PZU adopted a resolution to pass the PZU Group’s capital and dividend policy for 2016–2020 („Policy”).
The introduction of the Policy was the effect of the 1 January 2016 implementation of Directive 2009/138/EC of the
Reinsurance (Solvency II), as amended, the Act on Insurance and Reinsurance Activity of 11 September 2015, and the end of the „Capital Structure and Dividend Policy of PZU Group for the years 2013–2015”, which was updated in May of 2014.
Realization of the objectives of PZU Group Strategy in relation to mergers and acquisitions
Maintaining assets to cover provisions of particular PZU Group companies, i.e. PZU and PZU Życie, at the level not lower than 110% (as per Solvency I).
◦ the remaining part will be paid out as annual dividend or raise detained profits (supplementary capital) if the given year includes realization of important expenditures associated with performance of the premises in PZU
Group’s Strategy, specifically concerning fusion and acquisition transactions; with reservation of below points ; • according to the plans of the Management Board and own evaluation of risks and solvency of the dominating entity, the own funds of the dominating entity and PZU Group following declaration or payout of the dividend remain at a level ensuring fulfillment of the conditions specified in the capital policy; • recommendations of the authority supervising the dividend are taken into consideration for dividend determination.
Book value per share and gross accumulated dividend per PZU share (PLN)
Financial Supervision Authority presented an opinion concerning the dividend policy of banks, insurance and reinsurance companies, pension funds, brokerage houses, and investment funds in 2017 (download).
Payouts of PZU’s dividends and Total Shareholder Return - TSR (2010–2016)
equal to the total profit of 2016 as long as the coverage of the capital requirement (after subtraction of the projected dividends from equity) at the end of 31 December 2016 and for the quarter concerning the dividend payout is at the level of minimum 175% for companies operating in section I and at least 150% for companies operating in section II.
Group, the Management Board had not adopted a resolution concerning distribution of profit for 2016.
„A-” to „BBB+” for long-term liabilities in foreign currencies and from „A/A-” to „A-1/A-2” respectively for long- and shortterm liabilities in local currency. At the same time, the outlook was changed from positive to negative. On 2 December 2016, the rating outlook was raised to stable.
PZU Finance AB (a public company) on 3 July 2014, they constitute one series, a so-called tap issue. On 12 October 2015, S&P analysts awarded a rating of „A-” to the new issue.
On 21 January 2016, as a result of downgrading the rating of PZU (followed by the downgrade of Poland), the rating of
Since 2004 PZU and PZU Życie are regularly rated by S&P
On 31 October 2016, S&P maintained the long-term credit rating and financial strength rating of PZU and PZU Życie at
On 22 December 2016, S&P confirmed the financial strength rating and credit strength rating of PZU and PZU Życie at
Dividend as at the date of establishing dividend right (in PLN) 2.08 3.00 3.40 4.97 2.24
On 5 September 2013, Fitch Ratings Ltd. rated Alior Bank at grade „BB” with stable outlook. The rating did not change in accordance with the grade assigned on 12 April 2016.
We are a part of our world. We believe that the necessary elements of responsible business and foundations for developing the value of an innovative company include understanding of the expectations of our clients and other stakeholders, care for our employees, and involvement in social activity and environment protection.
PZU Group is the leader of the Polish insurance market and one of the largest financial institutions in Central and Eastern
Europe. Being the leader is an obligation to act responsibly, but PZU also sees it as a conscious choice and voluntary strategy. The management board wants to act as not just an entrepreneur but also as an active citizen who reacts to social problems and challenges. Group’s rising value complies with the interests of its environment and is based upon sustainable and responsible use of resources. Realization of the PZU 2020 strategy based on the proper capital management – financial, human, social, environmental, and intellectual. CHAPTER 4.
PZU’s mission is to provide our clients with peace of mind and sense of security. This would never be possible without their trust. It is the foundation of relations, because the client buys a promise of PZU’s assistance in difficult situations. But PZU’s activity affects not only its clients. Its employees, shareholders, suppliers, and the local communities covered by its operations are equally important. They should all know that they can rely on PZU.
Group and the prerequisite of sustainable development. PZU is doing everything in its power to have ethical conduct reflected in all activities of Group’s employees. PZU wants to create a corporate culture based on fairness, honesty, and respect. The benchmarks for all ethical matters are the formal documents
CHAPTER 4. STRATEGY OF DEVELOPMENT. The good practices have been adopted and applied by most of Group’s companies, including all insurance companies (PZU, PZU Życie,
In its day-to-day operations, PZU Group complies with the following four standards: • we address the needs – we provide top quality products which are best fitted to the expectations of our clients; • we value our people – we continuously develop the skills and competences of our staff to create good conditions to boost their personal interests; • we support the society – we strive to establish stable, longterm relations with the local communities by supporting initiatives that have a positive impact on the environment; • we care for the natural environment – we take responsibility for the environment where we operate.
GLOSSARY.; • customer service quality survey – PZU regularly examines the quality of customer service in PZU branches and through PZU agents and partners. Conclusions from these observations are used to prepare training programs in customer service, including training for the agents and partners, in order to ensure constant improvement of the service quality; • meetings with clients – PZU regularly meets with its clients and asks for their opinions concerning service quality, 1 Monthly survey realized by GFK Polonia on the order of PZU. Presented data are an accumulated result of monthly measurements in the period between January and December, 2016. 2 Monthly survey realized by GFK Polonia on the order of PZU. Presented data are an accumulated result of monthly measurements in the period between January and December, 2016.
When providing our clients with best possible access to our services, PZU Group also tries to support local communities.
PZU focuses greatly on establishing good relations with its service providers and cooperators. In particular, Group focuses on ensuring best possible cooperation with its agents, providing them with support programs, training
(e.g. Agent’s Academy) and a new internal communication portal within the network of Group’s agents. Candidates for agents are trained as well. On the other hand, PZU expects its suppliers, cooperators, and agents to respect all valid regulations pertaining to their scope of operations and clearly communicates this expectation to all its partners.
The dynamically developing market environment forces continuous improvement of own products and processes and the adaptation of development strategies. Polish enterprises expect their insurance companies to offer excellent service and innovative solutions adapted to their demands. The PZU
Lab research and development center has been established to meet these demands and resulted directly from PZU Group’s strategy, which concentrates on development and innovative solutions. The project is aimed to increase the awareness of Polish companies in the scope of risk management and promotion of “good practices” among the clients. PZU wants to be a business partner with a strong expert position to not only provide insurance products but also advise its clients at every risk management stage.
PZU takes utmost care of the security of information it processes, including that entrusted by its clients and other stakeholders. As the leader of the Polish insurance market,
By implementing the new IT system, PZU Group has provided the sales team with knowledge allowing for better and faster understanding of the clients’ needs in order to prepare comprehensive offers. More information in CHAPTER 5.2
Organization. PZU sees an effective and motivated staff as the most important element of realizing its strategic objectives.
Consistent strengthening of the intellectual and social capital by developing the talents of Group’s employees is directly reflected in the growth of the main effectiveness indexes and is one of the key conditions to guarantee future increase in the company’s value.
Contact Center is a good example. The initiative was started in 2015. It assumes the development of a unique organizational culture of the Contact Center unit to distinguish it in the company, yet to have it compliant with the values of
Passion” program, including sign language courses conducted by an individual who is hard of hearing, photography courses organized by photographers, a rafting trip organized by tourism enthusiasts, or an Excel course organized by a fan of the program. These events are attended in each instance
Our prevention of insurance accidents and their consequences saw us support over 2,600 prevention campaigns
We implemented employee volunteer projects for 8,336 beneficiaries, including 660 animals 707 of our employees volunteered and invited 255 people from outside of PZU to their projects hours volunteering we spent in the Podziel się Kilometrem [Share a Kilometer] zones beneficiaries to help
The satisfaction of our clients with claims handling or benefit payments was higher than that of the competition
Everyone can take advantage of the internal training courses and opportunities for career development. The recruitment process includes consideration of all applications which meet the expectations and requirements regarding knowledge, skills, and abilities.
Initiatives focused on personal development and increased job satisfaction strengthen employee motivation and establish a foundation for Group’s market success. Many programs were launched over the course of 2016 in the scope of personal and professional support for employees to assist the development of their skills in required areas. The examples of such initiatives include the PLUS program and the Manager 2.0 and Leader 2.0 programs for managers. CHAPTER 5.4 HUMAN
• second place in Eikiden 2016 in the category of insurance companies,
• second place and individual awards for the best shooter and best playmaker in the Bank and Finances Indoor
The most important project of 2016 was the contest for PZU
Social involvement is a very important aspect of PZU Group’s operations. This activity is based on the premise that social activity should result directly from the operations of PZU, from what it impacts. In its day-to-day operations, Group insures the property and actions of its clients to provide peace of mind and a sense of security. Because of this, it is only natural to assume responsibility for the improvement of safety in Poland and promotion of responsible and safe behaviors. The social activity is conducted under the slogan: ”We support that which is important”. PZU listens to its clients, the local communities they participate in, and various organizations, and subsequently decides with them on what to support both financially and by sharing the knowledge and experience of its employees. It builds long-term relations with its partners to make sure that the initiatives it supports are being continuously improved.
Zbierz grupę 3 osób z PZU - wybierzcie gwiazdę, czyli lidera * H Vel
With support from the PZU Foundation and the preventive fund, PZU promotes a healthy lifestyle, educates in the scope of safety, supports the development of medical science, and carries out a philanthropic activity, which is a permanent element of Group’s social involvement strategy.
In terms of prevention, PZU undertakes numerous initiatives aimed to improve safety and minimize the probability of occurrence - or its potential consequences – entailing the need to handle various types of claims.
PZU Group has been supporting the Police and the Voluntary and Professional Fire Departments for years by providing funds for firefighting and flood prevention equipment as well as professional training courses. The ”PZU Safe Homes” teach preschoolers and children attending school how to behave in a safe manner (moving in a smoke-filled space, obeying traffic and evacuation signs, saving themselves and others instead of things).There are seven such establishments operating in three voivodeships: Mazowieckie, Małopolskie, and Podkarpackie.
Save Children] association, children injured in traffic accidents receive comprehensive rehabilitation and psychological care at the Therapy Center in Dźwirzyno near Kołobrzeg. The children hurt in traffic accidents and collisions receive Bear Rescuer mascots, which are funded by PZU, from the rescue services.
Group also uses the prevention fund to support the activity of rescue organizations – Mountain Volunteer Search and Rescue
Ochotnicze Pogotowie Ratunkowe (WOPR)] – by contributing to equipment purchases, raising rescuers’ qualifications, and educational campaigns. It is actively involved in the initiatives of the Polish Freeskiing Association, which regularly organizes non-commercial avalanche course. These courses are conducted by experienced mountain rescuers under the scientific patronage of the head of the Tatra Volunteer
program since 2015 in the form of an extensive educational platform. The program enables children to have fun while learning. Together with the Fear-nots, they learn about the world and its hazards. They create animated stories with a moral and attend educational plays. There are also audiobooks, coloring books, games, and exercises available at niestraszki.pzu.pl, as well as contests and advice for parents.
In 2016, the Fear-nots helped out in extensive campaigns aimed to educate children about responsible behavior at home, on the road, on trips, or online. The Fear-nots informed about important things, thus helping parents with teaching their children the rules of safety. The activities performed in this respect included: • Sceny Kulturalne [Culture scenes] – PZU, being the partner of the undertaking, realized the greatest and the most visible summer project on the Polish coast, supporting parents’ efforts in the education of their children. This included all-day animations and activities for kids focused on the subject of safety. Each day in the Fear-not safety zone had a different patron – on Stach Trach Day, the children learned about safety on the road through games; on Julek Pechulek Day, they learned about safety on vacation; Tadek Niekradek was the patron of safety at home, Zuzka Wiruska was the patron of safety at sea, and on Lola Pola Day children were taught how to save money, water, and electricity. Together, they all gave the instructions on how to safely use the Internet. As a part of the project, 70 free educational theatrical performances titled ”Przygody Niestraszków” [The Adventures of Fearnots ] were held, which gathered over 28 thousand viewers.
– PZU engaged in a special educational project for children which combined modern technologies and fun. 26 workshop days were realized in the largest cities all over
Poland in the period between April and December. They engaged over 100 thousand children and parents, and over 1,200 children participated in the Fear-nots workshops on creating animated movies.
• TVP ABC – in December, PZU, in cooperation with TVP
ABC, realized an educational program for children. It was aimed at raising children’s awareness in the scope of safe behaviors.
In 2016, both PZU and PZU Życie cooperated with the hospitals, non-government organizations and media that carried out health-related projects and contributed to the purchases of medical equipment.
The pro-health prevention is aimed to minimize the negative effects of various incidents by spreading knowledge about safety and health promotion through mass running events supported by PZU and other campaigns.
The running events sponsored by PZU were accompanied with the charity campaign “Podziel się kilometrem” [Share a kilometer], which encouraged Poles to help others through their personal physical activity. According to the promoted slogan, everyone had to cover a given distance on a mechanical treadmill, cross-trainer, or exercycle. For every covered kilometer, PZU donated PLN 10 to charity.
PZU engages in the creation of solutions saving the lives of
Museum in Kraków. For many years, PZU has contributed to the purchases of museum exhibits and provided promotional and conceptual support. As a Patron of the Polish Culture,
Since 2004, the PZU Foundation has carried out charity activities of PZU Group, which are an element of its corporate community involvement strategy. The aim of the 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 the access to cultural assets and social life, that is, a broadly understood development of civil society. According to its motto: “Blisko ludzi i ich potrzeb” [Close to the people and their needs], it subsidizes projects carried out by nongovernmental organizations and institutions throughout Poland and abroad, providing scientific, organizational, and financial support. The operations of the PZU Foundation are focused on the following areas: education, health care and social assistance, culture and history, and safety.
PLN 14.6 million for subsidizing 414 projects carried out by non-governmental organizations and institutions from across the Poland.
The PZU Foundation cooperates with Krajowy Fundusz na rzecz Dzieci [the Polish Children’s Fund], which has been supporting talented youth for the past 30 years by providing free access to the Fund’s activities and subsidizing selected ventures for the benefit of their intellectual development.
The initiative aims to commemorate and honor those who took part in the Warsaw Uprising. Through its involvement in this project, the PZU Foundation sees an opportunity to build a dialogue between generations and recall the approach of the Warsaw Uprising insurgents, whose experience serves as a valuable history lesson. This is also an opportunity to preserve the timeless nature of patriotism and develop national awareness, which are among the main objectives of the Foundation.
offers an insurance guarantee for removal and liquidation of negative effects in and damage to the environment. The object of the guarantee is PZU’s obligation to pay the specified amount in situations in which the entity that applied for it has failed to remove the negative effects in the environment produced as the result of their operations and has not paid all or some of the liabilities resulting from the costs suffered in association with repairing the environmental damage.
Selected initiatives in environmental management: • „rower zastępczy” [replacement bicycle] – in the scope of this initiative, since the year 2012, PZU has offered their clients who were involved in traffic collisions requiring repairs of their vehicles a choice between a replacement car and a bicycle they can keep. 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 standard of combustion EURO 5 binding in the European Union, whereas cars, with proper driving techniques, use only about 4 l/100 km in a city; • economic management of resources and raw materials
When the car is at repair shop replacement car bicycle OWNERSHIP
The year 2016 included the social experiment aimed to demonstrate how important it is to be polite when driving a car.
– every September, the schoolchildren of all schools are insured by Lietuvos Draudimas against the consequences of unfortunate traffic accidents. The campaign has been organized since year 2000 together with the local communal centers, which provide special signs to pedestrian crossings near schools. In the past 10 years, the number of traffic collisions in Lithuania involving children has been reduced three times.
• „Kup ubezpieczenie mienia - zasadź drzewo” [Insure your property – plant a tree] – its main objective is to plant about 50 thousand trees. In response to the needs of its clients, the company has also launched an online selfservice portal and actively encourages communication with the use of innovative tools. The remote administration of the client accounts on the portal reduces paper printouts, the number of paper invoices and documents, shortens the response time, and considerably improves the claims handling process.
AAS BALTA contributes to the programs promoting safe behavior in everyday life. To promote traffic safety, it organizes an annual contest for entrepreneurs under the slogan: “Safest
In 2016, AAS BALTA received the Gold Category in the Latvian index of sustainable development [InCSR] and was one of only 24 companies in Latvia to receive the title of the “Company friendly to families”. This prestigious award is presented by the Ministry of Labor and Social Policy to companies which promote balance between professional and family life and create friendly workplaces.
LINK4 is a pioneer and leader in the field of direct insurance in Poland. It also expands its activity through other channels of distribution. According to the company’s mission, its employees “transform their passions into friendly and innovative solutions for the safety of their clients”. The company wants to set the trends for the future of the insurance market. To ensure security and top quality, the employees spend a lot of time making an analysis of the client needs, adjusting products, and studying satisfaction and service quality. LINK4 was the first direct insurance agency to receive the ISO 9001:2001 certificate in claims handling.
When LINK4 signed the Diversity Card in 2016, it joined the international initiative supporting diversity in the workplace.
Foundation “Organiści” promoting organ transplantation in Poland and the activities of Fundacja Dzieciom “Zdążyć
The company organizes numerous charity campaigns involving its employees. Last year, the company’s managers took part in the renovation of the gym at the association for the disable in Żelechów and in art workshops for the disable, as well as once again in the blood drive of Centrum
The company was also involved in the celebrations of the 72nd anniversary of the outbreak of the Warsaw Uprising. In August 2016, the company conducted the informational campaign
Alior Bank pays great attention to applying standards of social responsibility in its everyday operations. Its priorities are good relations with its clients and employees. The bank engages in educational, cultural, charity, and sponsorship activities.
Bank. The new HR strategy assumes the improvement of employee experiences throughout the whole employment cycle and building of an organizational culture supporting the transformation process. The employees can become experts in selected fields or team management, consequently developing their management skills. The dialogue serving to build relations with the employees included the internal survey “Alior Bank pod lupą” [Alior Bank under a magnifying glass]. It aimed to diagnose the current organizational culture of the bank, preferences concerning the employee offer, and evaluation of the quality of tools and processes. The obtained conclusions have allowed for the verification of the previous
Corporate social responsibility activity and development of the staff policy on local levels and the level of the whole bank.
During the 2016 winter break, the children of the employees of the Centers in Warsaw, Kraków, and Gdańsk had the opportunity to attend a day camp. The event allowed parents to work more comfortably in the daytime. In May and June 2016, Gdańsk, Kraków, and Warsaw hosted picnics for
Alior Bank employees and their families. They served as an excellent opportunity to get to know one another and integrate the teams through snacks and athletic games, also for the employees of the dispersed sales networks of Alior
As an institution stressing the importance of corporate responsibility, Alior Bank has been supporting local communities for years and engaging in numerous initiatives.
Such activities aim not only to assist in the realization of individual projects but also promote information about social responsibility and sustainable development among the Bank’s employees, clients, business partners, and shareholders. The employees often submit projects of their own initiative which they believe are important and reflect the values represented by the bank. As a result, more and more internal initiatives are combined with external campaigns each year.
The bank engages in educational programs directed to various age groups, including children. In January 2016 the Bank launched the pilot educational classes conducted by Alior Bank experts to promote matters associated with entrepreneurship and finances in cooperation with the Ekomini Foundation in one of the elementary schools in the Dolnośląskie Voivodeship.
“Czytam w podróży” [Reading en route] campaign promoting reading and the works of Zbigniew Herbert. Hundreds of volunteers joined last year’s event and handed out bookmarks with a poem of one of the top Polish poets of the 20th century in public transit, at bus stops and train stations. The cooperation with the Zbigniew Herbert Foundation saw the active participation of Alior Bank employees. In over 320 branches, they handed out bookmarks promoting the works of the author of “Mr. Cogito” and encouraging reading on the way to school, work, or a dream vacation place.
For Christmas, Alior Bank also organized the charity campaign titled “Świeć przykładem – pomóż dzieciom” [Set a good example – help the children]. The dedicated website saw the holiday star lit up 50 thousand times to provide financial support of PLN 50 thousand for five selected foster care centers in Gdańsk, Kraków, Krasnystaw, Szczecin, and
In 2016, for the second time in a row, Alior Bank became a sponsor and partner of Smogathon, an event organized to fight environmental pollution with the use of various technologies developed by different fields of science and business. Another initiative of the Bank was the sponsorship of the first programming competition in Poland which combined the new technologies with the world of culture -“HackArt”.
For more information concerning campaigns and programs in which Alior Bank was involved in 2016, please read the Alior
We fulfill this role not only by complying with a number of codes, but also by working on their continuous improvement. We believe that to be a part of wise changes that we can make in the world that surrounds us.
Since the IPO of PZU on a regulated market, the Issuer has followed the corporate governance principles laid down in
The document was accepted by WSE Council on 4 July 2007 and has undergone several modifications since then.
The current contents are available on the website devoted to corporate governance of WSE-quoted entities WWW.CORP-
The rules are a set of guidelines, which should be used by supervised entities from 1 January 2015 under the applicable law and with respect to the principle of proportionality.
The rules and information on how to use them can be found on the PZU website: zasady-ladu-korporacyjnego.
Quoted on WSE, except for recommendation IV.R.2 which refers to enabling the shareholders to participate in general shareholders’ meeting using electronic means of communication, especially by: • real-time broadcast of the general shareholders’ meeting,
• exercising, in person or via proxy, voting right at the general shareholders’ meeting.
declared their readiness to apply the Principles to the furthest objectively possible extent, taking into account the principle of proportionality and the “comply or explain” rule, arising from their content. These statements of the Management Board and the Supervisory Board of PZU were confirmed by their appropriate resolutions.
Meeting and raise doubts about the effectiveness of the resolutions adopted during the meeting; the occurrence of the above-mentioned risks may affect the correct application of the principle in full; • rule specified in § 21 section. 2. Principles which state that in the composition of the supervisory body there should be a separate function of a chairperson who manages the works of the supervisory body and that the choice of the chairperson of the supervisory body should be made based on the experience and team leadership skills, taking into account the criterion of independence; it must be emphasized that, in accordance with the Code of Commercial Companies GLOSSARY and the By-laws of PZU, there is a separate function of a chairperson in the Supervisory Board of PZU; the composition of the
Supervisory Board of PZU, including the office of the chairperson, are shaped according to the criterion of independence set out in the Act on statutory auditors
Supervisory Board is made on the basis of their knowledge, experience and skills, which confirm that the chosen person has the competencies necessary for the proper performance of their supervising duties; the application of the criterion of independence in the case of the chairperson in accordance with the PFSA’s explanation of the principle may raise doubts about the potential conflicts of law relating to shareholders’ rights; • rule specified in § 49 section 3 of the 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
State Treasury; • rule 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.”
- derogation from applying the principle is justified by the unfinished privatization of the Company carried out by the
State Treasury; • rule specified in § 28.4 in the following wording: “A
– in PZU the General Shareholders’ Meeting does not make decisions concerning transactions with related parties; • rule 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.”
PZU monitors the changes in the external regulations concerning e.g. the accounting policy (procedures) and reporting requirements of insurance undertakings and carries out appropriate adaptation processes.
Activities within the consolidated financial reporting are coordinated through the organizational structure of the
The process of consolidated financial reporting is regulated by a number of internal acts. The acts regulate the accounting principles (policy) adopted by PZU Group and applied accounting standards. Additionally, the process is also subject to detailed schedules including the key activities and control points with assigned liability for timely and correct completion.
The Supervisory Board of PZU appoints three members of the Audit Committee. At least one of them must be an
based on the recommendation of the Audit Committee reviews interim separate and consolidated financial statements of
Warsaw, entered on the list of entities authorized to audit financial statements under No. 3546 by the National Chamber of Statutory Auditors as the entity authorized to audit financial statements.
The scope of the agreement includes in particular: • audit of annual separate financial statements of PZU and of annual consolidated financial statements of PZU Group; Fee of the entity authorized to audit financial statements 1 January–31 December 1 January–31 December statutory audit of annual financial statements 1,365 1,488 other attestation services 1,350 248 tax advisory services other services 27 27
PZU adopted the resolution on splitting all shares of PZU by decreasing the nominal value of each PZU share from PLN 1 to PLN 0.10 and increasing the number of PZU shares which constitute the share capital from 86,352,300 to 863,523,000.
Warsaw, XII Economic Division of the National Court Register recorded the appropriate change to the By-laws of PZU.
On 27 April 2016, a notice from the Ministry of Treasury was delivered to PZU that informed about a decrease in State
Aviva BZ WBK that held 44 260 000 of shares, which constituted 5.13% of PZU share capital and translated into 44 260 000 votes at General Shareholders’ Meeting.
The Management Board of the Company has no knowledge about concluded agreements which may result in changes in the proportion of shares held by the shareholders.
PZU did not issue, redeem, or repay any debt or equity instruments that would provide its shareholders with special control rights.
In line with the PZU By-laws, the voting right of the shareholders is restricted in a way that none of them can exercise more than 10% of the total number of votes at PZU
Act on Public Offering and the Act on Insurance Activity, such voting restrictions are considered non-existent. The voting right restriction does not apply to: • shareholders who held shares entitling to more than 10% in the total number of votes in the Company as at the date of adopting a resolution of the General Shareholders’ Meeting; • shareholders co-acting with shareholders defined in the point above based on agreements concerning joint voting rights attached to the shares.
In line with the PZU’s By-laws, the above voting restrictions will expire when a share of a shareholder who, at the date of adopting a resolution of the shareholders’ meeting introducing the restriction, held shares entitling him to more than 10% in the total number of votes in the Company, drops below 5% of the share capital.
PZU shareholding structure as at 31 December 2016 10.7 By-laws of PZU
Court Register. The Supervisory Board can approve the unified amended text of the By-laws.
The General Shareholders’ Meeting is a body authorized to make decisions concerning issues related to the organization and operations of the issuer. Resolutions of the General
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; State Treasury 34.4%
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.
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.
Shareholders’ Meeting is deemed valid regardless of the number of attending shareholders or number of represented shares. Ballots are open. The secret ballot vote is used when appointing and dismissing members of the Issuer’s bodies or liquidators, in cases of their personal responsibility towards the issuer and in personal cases, except when an open ballot method is required by the applicable law, upon request of any shareholder present or represented at the General
General Shareholders’ Meeting have the right to participate in the Meeting (date of registration of attendance at the
Shareholders’ Meeting and to exercise the voting right may be granted in writing or in an electronic form. One share of PZU
General Shareholders’ Meeting for a shared term which includes three consecutive full financial years.
Body, Auditing Firms and on Public Oversight. Furthermore, at least one member of the Supervisory Board should meet the independence criteria specified in the By-laws (Independent
Composition of the Supervisory Board of PZU as at 1 January 2016: • Zbigniew Ćwiąkalski – Chairman of the Supervisory Board; • Paweł Kaczmarek – Deputy Chairman of the Supervisory
Board; • Dariusz Filar – Secretary of the Board; • Zbigniew Derdziuk – Member of the Board; • Dariusz Kacprzyk – Member of the Board; • Jakub Karnowski – Member of the Board; • Aleksandra Magaczewska – Member of the Board; • Alojzy Nowak – Member of the Board; • Maciej Piotrowski – Member of the Board.
Supervisory Board of the Company, with effect on 7 January 2016: Zbigniew Ćwiąkalski, Zbigniew Derdziuk, Maciej
Simultaneously, on 7 January 2016, it appointed the following people to the Supervisory Board of PZU: Piotr Paszko, Marcin
Board of PZU was as follows: • Paweł Kaczmarek – Chairman of the Supervisory Board; • Marcin Gargas – Deputy Chairman of the Supervisory Board
• Marcin Chludziński – Member of the Board; • Eligiusz Krześniak – Member of the Board; • Alojzy Nowak – Member of the Board; • Piotr Paszko – Member of the Board; • Radosław Potrzeszcz – Member of the Board; • Piotr Walkowiak – Member of the Board.
On 7 July 2016, acting under § 20 section 7 of PZU’s By-laws, the Minister of Treasury of the Republic of Poland appointed
Board; • Maciej Zaborowski – Secretary of the Board; • Marcin Chludziński – Member of the Board; • Eligiusz Krześniak – Member of the Board; • Alojzy Nowak – Member of the Board; • Jerzy Paluchniak – Member of the Board; • Piotr Paszko – Member of the Board; • Radosław Potrzeszcz – Member of the Board; • Piotr Walkowiak – Member of the Board.
On 4 August 2016, Piotr Walkowiak resigned from his membership in the PZU Supervisory Board as at 4 August 2016. Therefore, since 5 August 2016, composition of the
Supervisory Board of PZU was as follows: • Paweł Kaczmarek – Chairman of the Supervisory Board; • Marcin Gargas – Deputy Chairman of the Supervisory
Board; • Maciej Zaborowski – Secretary of the Board; • Marcin Chludziński – Member of the Board; • Eligiusz Krześniak – Member of the Board; • Alojzy Nowak – Member of the Board; • Jerzy Paluchniak – Member of the Board; • Piotr Paszko – Member of the Board; • Radosław Potrzeszcz – Member of the Board.
Meeting approving the financial statements for the last full financial year of their term.
Chairman of the Board since 19 January 2016 Member of the Board since 30 June 2015
Maciej Zaborowski Secretary of the Board since 19 January 2016 Member of the Board since 7 January 2016
Simultaneously, on 8 February 2017, it appointed the following people to the Supervisory Board of PZU: Agata Górnicka,
Supervisory Board of PZU was as follows: • Paweł Kaczmarek – Chairman of the Supervisory Board; • Maciej Zaborowski – Secretary of the Board; • Bogusław Banaszak – Member of the Board; • Marcin Chludziński – Member of the Board; • Paweł Górecki – Member of the Board; • Agata Górnicka – Member of the Board; • Alojzy Nowak – Member of the Board; • Jerzy Paluchniak – Member of the Board; • Łukasz Świerżewski – Member of the Board.
Alojzy Nowaki Secretary of the Board since 14 March 2017 Member of the Board since 7 January 2016
Górecki was appointed to the function of the Chairman of the
With regard to the above from 14 March 2017 the composition of the Supervisory Board of PZU was as follows: • Paweł Górecki – Chairman of the Board; • Łukasz Świerżewski – Deputy Chairman of the Supervisory
Board; • Alojzy Nowak – Secretary of the Board; • Bogusław Banaszak – Member of the Board; • Marcin Chludziński – Member of the Board; • Agata Górnicka – Member of the Board; • Paweł Kaczmarek – Member of the Board; • Jerzy Paluchniak – Member of the Board; • Maciej Zaborowski – Member of the Board.
Paweł Górecki – Chairman of the Supervisory Board since 14 March 2017
Post-graduate Studies. Holder of the scientific degree of doctor of laws. Completed judge’s and legal adviser’s internship, entered on the list of legal advisers. Attended numerous courses and seminars in evidence, civil, and criminal law as well as public entity management and public procurement planning and implementation. Authored dozens of reviewed publications in scope of law published in Polish and foreign science magazines and numerous unpublished legal opinions.
Active guest of scientific conferences organized by Polish academic centers. University lecturer.
Warsaw School of Economics. Warsaw School of Economics lecturer for postgraduate studies.
Associated with PKO Bank Polski for a period of three years. Jobs there included Director of the
Projects and Analysis Group. Previously worked as assistant editor-in-chief of Harvard Business
Review Poland and director of a research institute specializing in analyzing management practices of Polish enterprises. Worked as a journalist for Puls Biznesu in the years 1999-2004 in areas such as financial markets and institutions. Author of numerous economic and business publications. Currently serves as the director of the Office of Communication and Promotion and the Press Officer of the Ministry of Finances.
In 1984, he graduated from the present Warsaw School of Economics (Foreign Commerce faculty) and in 1992 from University of Illinois at Urbana – Champaign, USA, M.A. in economics.
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 “Integracja europejska. Szansa dla Polski?” and a book titled
“Banki a gospodarstwa domowe – dynamika rozwoju”. He has been a member of scientific organizations and professional editing boards of periodicals, among others Foundations of
S.A. Warszawa editing company. External Reviewer in the PhD programs of the University of
Minister, to the Minister of Agriculture, the President of University Sports Association at the
University of Warsaw, a Member of the Advisory Committee NewConnect at Management Board of Warsaw Stock Exchange, a Member of the Foundation Council of the National Bank of Poland, the Chairman of the Scientific Council of the National Bank of Poland. Was seated on numerous supervisory boards, including of PTE WARTA S.A., PKO BP S.A., JSW S.A., TFI KBC, and served as
Marcin Chludziński – Member of the Supervisory Board since 7 January 2016
Invent Grupa Doradztwa i Treningu, and since 2006 he has been holding the position of the
Holds Master’s degree in political sciences from the Faculty of Journalism and Political Sciences of the University of Warsaw. Completed postgraduate media management at Leon Koźmiński
Bank Zachodni WBK S.A. in the years 2014–2015. Appointed to Director of the Political Cabinet of the Ministry of Development in December of 2015.
Full professor and Dean of the Law and Administration Faculty (from 2014) at the University of Zielona Góra and professor at the Witelon State University of Applied Sciences in Legnica
Administration and Economics at the University of Wrocław. In 1998, he received the title of
Professor of Law. Over the years 1998–2008, he was a professor of the Faculty of European
Law at the University Viadrina Frankfurt (Oder), where he was in charge of the Faculty of
Experts on the European Charter of Local Self-Government. Member of the editorial committees
Arts and Literature in Paris (from 2004) and member of the Committee for Legal Sciences of the Polish Academy of Sciences (from 2011). Also member of the following: Advisory Board for
Human Rights to the Minister of Foreign Affairs (2000-2001), Program Board to the Centre of
Advisory Directorate International at the American Biographical Institute (from 2009). Has been in close cooperation with the legislative forces of the parliament since 1992. Author of dozens of expert studies for supreme public authorities and of several expert studies for business entities. Author of over 300 scientific papers, including monographs, textbooks, commentaries, studies, and articles. Decorated with the following awards: the Polish Gold Cross of Merit
Association (2011). Also holds honorary degrees from the Pecs University (Hungary – 2004), the Alba Julia University (Romania – 2009), the Pitesti University (Romania – 2010), and the
He is a graduate of the Wrocław University of Economics, the Faculty of Management and
In 1999–2000, he gained his professional experience as an assistant of a Brand Manager in
Zielona Budka 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 (promoted in 2005). Since 2007 to 7 January 2016, he worked in audit department of KPMG located in Wrocław, where in 2008 he was promoted to a position of Senior Manager.
Audit director of Tauron Polska Energia S.A. responsible for internal audit in all companies of the
Tauron Polska Energia S.A. group, where he made extensive changes to internal audit functions adapting them to the new business model of Tauron Group. Since 2010 he has been a Member of the Regional Council of Chartered Auditors in Wrocław.
He graduated from the Faculty of Law and Administration at the University of Łódź. From 1994 to 2014, 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 bodies supervising 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 State Treasury Department in the Prime Minister’s Office. His responsibilities include coordination of execution of State Treasury authorizations in companies and ensuring uniform performance of rights from State Treasury shares, including development of systems solutions for ownership supervision in companies with shares held by the State
Treasury, execution of rights from shares held by the State Treasury including consequential personal rights, approval of written instructions for voting prepared by the entity authorized to execute rights from shares held by the State Treasury or state legal persons, organization and supervision of exams to the supervisory board of companies with shares held by the State
Treasury, provision of services to the Board for matters of companies with shares held by the
Maciej Zaborowski – Member of the Supervisory Board since 7 January 2016
Zaborowski Adwokaci i Radcowie Prawni sp. p. law firm. From his youngest years, he has been associated with pro publico bono activity, including as President of the Benefactor’s Council of
Leaders of Tomorrow contest organized by Gazeta Prawna and Wolters Kluwer publishing.
The Supervisory Board exercises constant supervision over the Company’s activities in all aspects of its business. In accordance with the By-laws, the powers of the Supervisory
Board include: • a review of the Management Board’s report on the activities of the Company and financial statements for the previous financial year in terms of their compliance with the accounting records, documents and facts; • review of the motions of the Management Board concerning profit distribution or loss coverage; • presenting the General Shareholders’ Meeting with a written report on the results of the review described above and submitting a brief annual assessment of the situation of the Company, including internal controls and key risk management and an annual report on the work of the
the Supervisory Board may specify the amount, terms and conditions and the way in which the Management Board may carry out the activities without the acceptance of the
• conclusion of a material agreement by the Company and its related party, as understood by the Ordinance on current and periodic information, excluding standard agreements concluded by the Company on an arm’s length basis as part of its operating activities; • conclusion of the agreement by the Issuer with the underwriter referred to in Article 433.3 of the Code of
Board were adopted by its Resolution of 24 February 2016 and specify its composition and the way in which its members are appointed, the tasks and the scope of its activities and the manner of calling the Supervisory Board and conducting debates.
The By-laws stipulate that the Supervisory Board should meet at least once every quarter. The Supervisory Board may delegate its members to fulfill specific supervising activities on their own and to this effect appoint temporary committees.
The resolutions of the Supervisory Board are adopted in an open ballot, except for resolutions concerning appointment of the chairman, Deputy Chairman and the Secretary of the
Audit Committee is an advisory and consultative body to the Supervisory Board and is appointed to improve the effectiveness of the supervision of the correctness of financial reporting and of internal control, including internal audit and risk management, exercised by the Supervisory Board.
On 18 March 2016, the PZU Supervisory Board changed the composition of the audit committee into the following: • Piotr Paszko – Chairman of the Committee; • Marcin Chludziński – Member of the Committee; • Jerzy Paluchniak – Member of the Committee.
On 22 July 2016, the PZU Supervisory Board confirmed the composition of the audit committee into the following: • Piotr Paszko – Chairman of the Committee; • Marcin Chludziński – Member of the Committee; • Jerzy Paluchniak – Member of the Committee.
As at 31 December 2016, the composition of the Committee did not change.
Committee should consist of 3 people, while simultaneously establishing the following composition of the Committee: • Bogusław Banaszak – Chairman of the Committee; • Marcin Chludziński – Member of the Committee; • Jerzy Paluchniak – Member of the Committee.
The Supervisory Board decided that the promotion and compensation committee would be composed of 5 persons.
Composition of the Promotion and Compensation Committee as at 1 January 2016: • Zbigniew Ćwiąkalski – Chairman of the Committee;; • Zbigniew Derdziuk – Member of the Committee; • Dariusz Filar – Member of the Committee; • Paweł Kaczmarek – Member of the Committee; • Maciej Piotrowski – Member of the Committee.
• In relation to the changes in the composition of the
Compensation Committee should consist of 3 people, while simultaneously establishing the following composition of the Committee: • Agata Górnicka – Chairwoman of the Committee; • Paweł Górecki – Member of the Committee; • Paweł Kaczmarek – Member of the Committee.
Supervisory Board are elected in a vote cast in groups and its rights are then taken by the entire Supervisory Board.
According to the regulations of the Strategy Committee adopted by a resolution of the Supervisory Board of 4
Supervisory Board and is to improve efficiency of the Board’s supervisory activities related to consulting of all strategic documents presented by the Management Board (in particular, the Company development strategy) and presenting the
Supervisory Board with recommendations on planned investments that materially impact the Company’s assets.
Composition of the Audit Committee as at 1 January 2016: • Alojzy Nowak – Chairman of the Committee; • Zbigniew Derdziuk – Member of the Committee; • Jakub Karnowski – Member of the Committee; • Aleksandra Magaczewska – Member of the Committee; • Maciej Piotrowski – Member of the Committee.
Board of PZU decided that the Strategy Committee should consist of 6 people, while simultaneously establishing the following composition of the Committee: • Alojzy Nowak – Chairman of the Committee; • Marcin Chludziński – Member of the Committee; • Marcin Gargas – Member of the Committee; • Piotr Paszko – Member of the Committee; • Radosław Potrzeszcz – Member of the Committee; • Maciej Zaborowski – Member of the Committee.
Members of the Management Board, including the Chairman of the Management Board, are appointed and dismissed by the
Supervisory Board. The CEO of the new term appointed before the end of the current term may apply to the Supervisory
On 13 May 2016, Robert Pietryszyn resigned from his membership in the Management Board. Moreover, on 13 May 2016, the PZU Supervisory Board appointed Andrzej Jaworski as a Member of the Management Board, effective as of 14
Board; • Dariusz Krzewina – Member of the Management Board; • Maciej Rapkiewicz – Member of the Management Board
Kulik as a Member of the Management Board. Therefore, the composition of the Management Board was as follows: • Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Andrzej Jaworski – Member of the Management Board; • Tomasz Kulik – Member of the Management Board; • Maciej Rapkiewicz – Member of the Management Board.
Board was as follows: • Michał Krupiński – Chairman of the Management Board; • Roger Hodgkiss – Member of the Management Board; • Andrzej Jaworski – Member of the Management Board; • Tomasz Kulik – Member of the Management Board; • Maciej Rapkiewicz – Member of the Management Board.
The Management Board exercises all management rights which have not been reserved by the provisions of law or provisions of the By-laws for the General Shareholders’
Management Board on 2 October 2012, amended with a Resolution of the Board of 8 April 2013, and approved by a resolution of the Supervisory Board of 16 April 2013.
Board; • competencies of the CEO and Members of the Management
In accordance with the regulations of the Management Board, resolutions of the Management Board are especially required for: • approval of a long-term plan for development and operations of the Company; • approval of an action and development plan for PZU Group; • approval of an annual financial plan and a report on its implementation; • approval of the financial statements for the previous financial year and the management report on the activities of the Company; • approval of a motion concerning profit distribution or loss coverage; • determination of premiums in the compulsory and noncompulsory insurance and general non-compulsory insurance terms and conditions; • determination of the scope and size of outward reinsurance and the tasks for inward reinsurance; • approval of an annual audit and control plan and a report on its implementation with conclusions; • determination of the terms and conditions of investments, prevention and sponsoring; • giving sureties and guarantees (excluding insurance operations) and taking out and giving credit facilities or loans by the Company (excluding credit facilities and loans given from the Company’s Social Benefits Fund); • appointment of a commercial representation.
whose powers include in particular: • defining the scope of responsibility of each member of the
Board; • applying to the Supervisory Board for appointing and dismissing members of the Management Board; • designating a person to administer the work of the
The CEO takes decisions in the form of orders and official instructions. Other Members of the Management Board administer the operations of the Company within the scope specified by the CEO.
MBA program at Columbia University Graduate School of Business and, what is more, studied at
Since 2011, he has been the CEO of Merrill Lynch Polska and Head of Investment Banking for Central and Eastern Europe in Bank of America Merrill Lynch. His responsibilities concern governing and managing the projects centered on mergers and acquisitions and financing in private and public markets. He used to work as a counselor. His advisory activities focused on asset management, investment policy and capital structure, i.a. in banking and insurance sector.
Earlier, between 2008 and 2011, he was the Alternate Executive Director – Member of the Board of Directors at the World Bank in Washington. He co-decided on the proposals concerning IBRD
Roger Hodgkiss – Member of the Management Board in PZU since 19 January 2016 /
He has many years of experience in financial services. He graduated with honors from the
Kingdom. Between 1998 and 2007, he worked for GE Capital on various management positions concerning finance. In the years 2007–2008, he held the position of the CEO of AAS Balta – the largest insurance company in Latvia. From 2008 to 2009, he worked as Commercial Director in
He was awarded prize of “Gazeta Ubezpieczeniowa”: the title of Człowiek Roku Ubezpieczeń
Tomasz Kulik – Member of the PZU Management Board since 14 October 2016 /
Adam Mickiewicz University in Poznań in 1995. Graduate of doctoral studies in political sciences and social studies at ATK in Warsaw in 1999 (Cardinal Stefan Wyszyński University). Completed numerous courses and postgraduate studies, including “Modernes Firmenmanagement: Marketing und Finanzen” (Berlin International Academy) and “The Baltic Sea Environment”
Members of Supervisory Boards of State Treasury Single-Person Companies. Over the years 1999–2003 worked as chief specialist and subsequently Deputy Director for tourism at the
Budownictwa Warszawa sp. z o.o. In the years 2006–2008, Mr. Andrzej Jaworski held the position of President of the Management Board of Stocznia Gdańsk S.A. He also served as the Chairman of the Supervisory Board of MCSE sp. z o.o., Chairman of the Supervisory Board of KE Energa, and Member of the Supervisory Board of PKP Intercity. Deputy of the Sejm of the Republic of Poland in the 6th and 7th terms. His community services included service as instructor of the independent Polish Organization of Scouts and he initiated the establishment of the first
Graduate of Universitẻ Paris I Panthẻon Sorbonne and Ecole des Hautes Etudes en Sciences
Sociales (EHESS). Completed his main studies at Ludwig Maximilian Universität (LMU) in
Lynch. He represented the Bank in the CEE region by building relationships with investors. His activities covered counseling on portfolio management, asset allocation and their diversification, alternative financial instruments and market analysis. From 2013 to 2015, he was a Member of the Management Board of Boryszew S.A., the Office Director in charge of automotive sector development, and the CEO of the subsidiaries from the automotive sector. During his time spent in Boryszew Group, he was responsible for strategic and operational management and supervision over budget policy of the automotive sector. His activities covered preparation and implementation of a business strategy for automotive area. Moreover, he was responsible for mergers and acquisitions performed as a part of expansion policy and disinvestment of
Specializes in company management. He is also a certified internal auditor and qualified to sit on supervisory boards of State Treasury companies. He gained his experience and vast practical knowledge on functioning of large economic entities during his work in the area of supervision, institutional control and internal audit. As a member of supervisory boards of commercial law companies, he participated in decision-making processes which were strategically vital to current operations of these entities, concerning i.a. such areas as: investments, planning, IT strategy, acquisition, or finance operations. Between 2003 and 2005, he was employed by the Municipal
From 2006 to 2008, he worked in Ciech Group. He was a Member of the Supervisory 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
Alwernia S.A. and Ciech Polfa Sp. z o.o. From 2007 to 2009, he worked as the Deputy Director of the Foreign Investments Office (Business Development Office) at PZU S.A. Between 2010 and 2012, he worked in Telewizja Polska S.A. At first, as the Deputy Director of the Office of the
Management Board and Corporate Issues, then – as the Director of the Audit and Internal Control
Aleksandra Agatowska – Member of the Management Board of PZU Życie and
Graduate of the Jagiellonian University with specialization in Sociology of Economics and Market
Research. Previously associated with the private financial sector. Worked for ING Group’s companies, including ING Życie, ING Powszechne Towarzystwo Emerytalne, and ING Spółka
Dystrybucyjna. Chosen for the Talent Pool program for two percent of the most talented employees and recognized with the award of employee of the year in the Marketing Division.
Also worked with the group of the Center of Evaluation and Analyses of Public Policies of the
She then was in charge of Marketing Intelligence at Sony Europe and coordinated work in 20
Committee of the General Inspectorate of Banking Supervision in charge of the implementation of the second Basel Accord, supervision over risk models, operational risk and accounting standards. He was in a Team in charge of the development of the risk management system in the National Bank of Poland. As a Member of the Management Board of the Bank Guarantee
In 2003-2007, he worked at a Project Manager in the World Bank where he was responsible for preparing and coordinating the implementation of borrowing programs that were aimed to introduce policies to improve energy efficiency in the CEE countries. He coordinated also the works on a coal industry reform in Poland. In 2009-2016, he has collaborated with The Boston
Michał Krupiński Chairman of the PZU Management Board since 19 January 2016
Member of the Management Board of PZU since 19 January 2016 Member of the Management Board of PZU Życie since 29 January 2016
Member of the Management Board of PZU since 22 March 2016 Member of the Management Board of PZU Życie since 25 May 2016
Member of the Management Board of PZU between 20 January 2016 and 19 March 2016 Member of the Management Board of PZU Życie since 29 January 2016 Chairman of the PZU Życie’s Management Board since 23 June 2016 (acting as a Chairman from 17 June 2016) Director in PZU Group since 1 November 2016
Aleksandra Agatowska Member of the Management Board of PZU Życie/ Director in PZU Group since 25 March 2016
Sławomir Niemierka Member of the Management Board of PZU Życie/ Director of the Group since 19 March 2012
Roman Pałac Member of the Management Board of PZU Życie/ Director in PZU Group since 15 February 2016
Board, do not include compensation for resignation or dismissal from their positions without a valid reason, or if the dismissal results from a business combination through an acquisition of the issuer.
Rules of granting annual bonuses to the Members of the Management Board
On 29 January 2016, Tomasz Karusewicz was appointed a Director of the Group, and on 15 February 2016 Roman
Remuneration and other short-term employee benefits paid by other entities of PZU Group (in thousands)
including bonuses and special benefits: including bonuses and special benefits: Top management (PZU Group Directors), including: 2,332 107 1,546 492
Total estimated value of non-financial benefits granted by PZU and the subsidiaries of PZU (in thousands) 1 January – 31 December 2016 1 January – 31 December 2015
The Management Board of PZU represents that the entity authorized to audit financial statements - KPMG Audyt Sp.
z o.o. sp. k. - which audited the annual consolidated financial statements was selected in accordance with the provisions of law and that the entity and certified auditors who audited the financial statements met the requirements to express an unbiased and independent opinion on the audited annual consolidated financial statements, in accordance with the applicable provisions of law and professional standards.
shares for the total amount of PLN 10.6 billion. 3.4 BANKING.
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. 8.3 DEBT FINANCING
Related party transactions other than ones concluded on an market terms
PZU Group companies provide services to each other, as part of their capital and business ties. With the exception of companies of the Tax Capital Group, transactions are concluded on market terms.
Omicron Bis SA. The tax capital group was established for a 3-year period - between 1 January 2015 and 31 December 2017.
PZU is the dominating and representing company of the tax capital group. In accordance with art. 25 section 1 of the CIT
Życie provides PZU with advance CIT payments concerning the business activity of PZU Życie.
The companies within PZU Group grant mutual loans to one another. The below table presents the list of loans granted in 2016 to entities related to the issuer (date of granting the loan based on cash-flow): Amount date of granting the loan maturity date borrower lender
Insurance contracts that exceed 25% of the total technical provisions and equity
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 on the insurance market.
Competition and Consumer Protection (OCCP) is included in the consolidated financial statements of PZU Group for 2016.
3,374 million of liabilities and PLN 983 million of receivables of
Basic amounts of the consolidated profit and loss account (PLN million) 2016 2015 2014 2013 2012
Basic and diluted PZU Group’s profit per ordinary Issuer’s share (in PLN) 2.25 2.71 3.44 3.81 3.77
Entities measured using the equity method 37 54 66 49 -
Gain on acquisition of the spun-off part of Bank BPH 508 - - - -
Release of provisions for employee benefits associated with termination of the Company Collective Bargaining Agreement
Sales of shares from the AFS portfolio - - - - 101 1. Claims ratio gross (Gross claims /gross written premium) x 100% 63.7% 66.9% 69.5% 67.9% 76.2%
Administrative expenses ratio in insurance segments (Administrative expenses/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%
Acquisition costs ratio (including reinsurance commission)* 20.7% 18.4% 19.8% 18.8% 19.4%
Acquisition costs ratio (including reinsurance commission)* 20.0% 20.6% 19.3% 16.4% 17.7%