As part of efforts aimed at reducing compliance risk in the PZU Group at system level and day-to-day level, the following risk mitigation actions are undertaken: • continuous implementation of an effective compliance function as a key management function; • participation in consultations with legislative and regulatory authorities (supervised entities within the PZU Group) at the stage of development of the regulations (social consultations); • delegating representatives of the PZU Group’s supervised entities to participate in the work of various commissions of regulatory authorities; • participation in implementation projects for new regulations; • training of staff on new regulations, standards of conduct and recommended management actions; • issuing opinions on internal regulations and recommending possible amendments to ensure compliance with the applicable laws and accepted standards of conduct; • verifying procedures and processes in the context of their compliance with the applicable laws and accepted standards of conduct; • aligning documentation to upcoming changes in legal requirements before they are enacted; • systemic supervision exercised by PZU over the execution of the compliance function in PZU Group entities; • analyses and ongoing monitoring of the application of “Chinese wall” rules – in connection with the additional investor commitments made by PZU in connection with the proceedings under the notification on the intent to purchase Bank Pekao’s shares; • ongoing monitoring of changes in the legal and regulatory environment in order to identify gaps or areas requiring action to ensure compliance.
Risk concentration When managing the various categories of risk, the PZU Group identifies, measures and monitors risk concentration. Compliance with the regulatory obligations imposed on groups identified as financial conglomerates is supported by the model introduced in 2020 to manage significant risk concentration in the PZU Financial Conglomerate in keeping with the requirements of the Supplementary Oversight Act.
Supplementary supervision protects the financial stability of lending institutions, insurance undertakings, reinsurance undertakings and investment firms being members of financial conglomerates. The supervision is exercised, among others, through measuring the risk concentration level in the financial conglomerate as a whole, also from the perspective of regulated entities being its members.
Regulated subsidiaries monitor and submit regular reports to the leading entity in the PZU Financial Conglomerate on the measures and data required to identify risk concentrations. In the case of identification of an excessive risk concentration, management actions are implemented on the level of the given entity or the whole financial conglomerate.
Risk concentration is measured and monitored, in particular, in the following dimensions • concentration per counterparty or group of counterparties,
• concentration per currency, • concentration per sector of economy, • concentration per country, • concentration per asset type.
Risk pertaining to financial assets The table below summarizes the results of sensitivity analysis on the value of the investment portfolio to volatility in interest rates, FX rates and the prices of equities. This analysis does not take into account the impact exerted by changing interest rates on the insurance agreements presented in liabilities or the investment contracts and receivables due from bank clients.
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The differences in asset portfolio sensitivity between 2020 and 2019 ensue from the execution of the adopted investment strategy and the adjustment of the investment portfolio to it.
Mortality at 110% of the assumed rate 134 128 134 129
Impact of the change in assumptions in annuity life insurance on the net financial result and equity
Morbidity and accident rate – 110% of the assumed rate (138) (205)
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This task is performed through obligatory reinsurance contracts supplemented by facultative reinsurance.
Reinsurance treaties in PZU PZU consciously and adequately protects the Company’s financial result against the results of materialization of natural risks, e.g. severe storms, floods, droughts or fires, associated with, among others, the climate change. For this purpose, the PZU Group runs, among others, periodic analyses of the non-life insurance portfolio for its exposure to natural disasters. The portfolio is divided into zones with specific degrees of exposure to the risk of floods and cyclones has been introduced. Each such zone is assigned a value of potential losses. They correspond to the severity of the given phenomenon and, consequently, specific probability levels. On this basis, as part of the annual reinsurance cover program design process, the distribution of the level of possible catastrophic loss is estimated.
PZU’s inward reinsurance business involves the PZU Group’s other insurance companies. As a result of the exposure to protect Baltic companies, Link4 and TUW PZUW, PZU continues to generate a high gross written premium by virtue thereof. In addition, PZU generates gross written premium on inward reinsurance on domestic business through facultative and obligatory reinsurance.
Reinsurance treaties in the PZU Group’s international companies, LINK4 and TUW PZUW The PZU Group’s other insurance companies, i.e. Lietuvos Draudimas, Lietuvos Draudimas Branch in Estonia, AAS Balta, PZU Ukraine, LINK4 and TUW PZUW have reinsurance cover aligned to the profile of their operations and their financial
Reinsurance premium under PZU’s obligatory treaties according to the S&P/AM Best rating
The PZU Group endeavors to do the following: • manage capital effectively by optimizing the usage of capital from the Group’s perspective, • maximize the rate of return on equity for the parent company’s shareholders, while maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions,
• ensure funds for growth and acquisitions in the coming years,
In Bank Pekao and Alior Bank, the capital adequacy ratio and the Tier 1 ratio were computed on the basis of Regulation (EU) No 575/2013 of the European Parliament and of the Council of
Main reinsurers in 2020: QBE, Mapfre , Toa Re, Nacional de Reaseguros
Source: PZU – the data after Q3 2020 (unaudited), in the case of the other insurers - data at the end of 2020
Reinsurance premium under PZU Życie’s obligatory treaties according to the S&P rating 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR Regulation) and also the various types of risk identified in the Internal Capital Adequacy Assessment Process (ICAAP)..
We are talented! Our employees have created new versions of PZU’s plain language hymn: Begone! Paltry e-mail, lacking finesse and spunk. Begone! Weak on content, half a day squandered, What a bunch of junk!
The shares of PZU, Bank Pekao and Alior Bank accounted for 12.4% of the trading volume on the Warsaw Stock Exchange in 2020 totaling PLN 36.8 billion. Their total market capitalization at year end was PLN 46.2 billion.
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2 The Fed – the Federal Reserve System – acts as the central bank of the United States
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The PZU Group on the capital and debt markets lost 7.7% y/y. According to analysts, this was caused, among other factors, by lingering risks in the banking and fuel sectors. In 2020, these two sectoral indices generated over PLN 86 billion in revenue, accounting for more than a third of revenue generated by all WIG20 companies. This divergence may have also been a result of Poland’s declining share in MSCI EM (being overtaken by China). At the end of 2020, this share stood at 0.6%, whereas 5 years ago it was approximately 1.5%.
The yields on 10-year treasury bonds slumped from 2.1% to 1.2% in 2020. The Polish treasury bond index TBSP, which serves as a reference point for most debt funds, went up 6.4% y/y6. SECTION 2.3. SITUATION ON THE FINANCIAL MARKETS
PLN 69.8 million while the average number of trades per session was
The percentage of foreign investors in PZU’s shareholder structure at the end of 2020 with North American investors holding
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PZU made its debut on the Warsaw Stock Exchange (WSE) on 12 May 2010. Since its floatation, it has been included in its most important index, namely WIG207, calculated on the basis of the portfolio value of the 20 largest and most heavily traded companies on WSE’s main market. PZU also belongs to the following Polish indices: WIG, WIG30, WIG-Poland, WIGdiv, WIG20TR, WIG.MS-FIN, CEEplus and WIG ESG (sustainable development index) and the following international indices: MSCI Poland (emerging markets), Stoxx Europe 600 (developed markets) and FTSE Russel mid-cap index (developed markets).
Warsaw Stock Exchange indices In 2020, the Polish blue chip index (WIG20) oscillated in the broad range between 1,306 and 2,200 points. The variance between the extreme points of this range, which reached 894 points, was 527 points greater than that observed in the corresponding period of 2019 (367 points). In 2020, WIG20 declined by 7.7% y/y or, taking dividends into account, by 7.2% (WIG20 TR). The broad-market WIG index lost 1.4% y/y. The small-company sWIG index performed much better in this period (up 33.6%), having recorded a double-digit rate of return for the second consecutive year.
Taking dividend distributions8 into account, the drop in the share price was much less severe. The price trough of PLN 20.55 hit on 28 October 2020 was comparable to the bottom price of January 2016. In fact, its value was 23.5% greater than the historically recorded minimum price on PZU stock. Since PZU’s IPO in 2010, the cumulative value of dividend distributions per share has been PLN 26.1. As at the end of 2020, the total rate of return (calculated in accordance with this methodology) was 75.7%.
The situation started to improve after 12 March. As was the case in global markets, local indices recovered most of their dips in Q2 2020. However, already in Q2 2020, the price of PZU’s stock began to underperform the benchmark WIG20 index. Among the factors that affected this outcome was the deterioration of macroeconomic conditions for the banking business. From March to May 2020, the NBP cut down its interest rates three times, bringing them down to almost 0%.
Moreover, on 26 March 2020, the Polish Financial Supervision Authority (KNF) issued a decision prohibiting the disbursement of dividends in 2020 by insurance companies and banks from their 2019 profits. This decision was triggered by the state of epidemic announced in Poland and its potential adverse impact on the country’s economy as well as the expected consequences for the banking and insurance sectors.
S&P Global Ratings (S&P) changed the ratings outlook for the Company from positive to stable. PZU’s financial strength and credit rating remained at A-
The Polish Financial Supervision Authority (KNF) issued a decision allowing the disbursement of dividends in an amount equal to 100% of the 2019 profit and 50% of the 2020 profit
BVPS (PLN) Book value per share 15.0 16.3 17.3 18.7 21.7
EPS (PLN) Net profit (loss) / number of shares 2.2 3.4 3.7 3.8 2.2 * Calculation based on the PZU Group’s data (according to IFRS); price per share and book value at yearend; net profit for 12 months; number of PZU shares: 863,523,000
Average turnover per session (PLN m) 66.8 75.6 69.6 67.0 69.8
Context in the banking sector In 2020, the WIG Banks index9 contracted by 29.6% y/y. The correlation between the WIG Banks index and the WIG20 index decreased to 80% (-10 p.p. y/y). The beta coefficient (in relation to WIG20) increased to 1.13, or by 0.15 9 It is an income-based index and thus, when it is calculated, it accounts for the prices of the underlying shares and the income from dividends and subscription rights.
y/y. The significant change in these indicators resulted from the relative weakness of the WIG Banks index compared to the main WIG20 index. It was also the weakest performance compared to other sectoral indices.
These declines were largely caused by the panic triggered by the COVID-19 pandemic. Investors were concerned about the deterioration of business conditions, which would have been of great consequence for the banking sector. The three consecutive interest rate cuts by the NBP to a level close to 0 were a significant environmental factor of a fundamental nature.
“Principles for PZU to Conduct its Information Policy for Capital Market Participants”.
According to a survey carried out among shareholders at the end of 2020, the shareholder structure in terms of stakes and geographies remained stable. The total stake held by domestic investors increased by 2.1 p.p. y/y, at the expense of foreign investors. This was likely partly related to the development of Employee Capital Schemes. The exposure of retail investors also increased, to 8.5%, or by 1.1 p.p. y/y.
Open-end pension funds and fund management companies in PZU’s shareholder composition
The share of open-end pension funds and mutual fund management companies remained at similar levels to those in the corresponding period of 2019: it stood at 16.9% and 4.7%, respectively.
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Europe (institutional investors excl. Polish State Treasury)* 330.2 m shares (38.2% share in capital)
Communication with capital market players using digital tools In 2020, all corporate events held with capital market participants in mind were broadcast in the form of a webcast (with simultaneous translation into English). Quarterly financial performance was presented and discussed by the PZU Group’s CFO (and other PZU Management Board Members) at online conferences, during which their participants had the opportunity to ask questions. Recordings of these meetings are available on PZU’s website in the “Investor relations” section at
The most important events, achievements and plans were presented once again in the form of an online Annual Report at raportroczny2019.pzu.pl/en. Users have been provided with tools enabling a multi-directional analysis of corporate and macroeconomic events as well as financial results. The report includes interactive infographics, animations and video clips, which offer a succinct presentation of the PZU Group’s activity in 2019.
Activities targeting institutional investors The COVID-19 pandemic has affected the way in which we communicate with institutional investors in particular. From February to the end of 2020, all meetings with such investors were held remotely via audiovisual messaging applications.
PZU’s representatives participated in 14 conferences held online (except for three in January) by global investment banks and brokerage houses in Poland (in 2019, 16 such conferences were held) and in 23 virtual events (in 2019, 40 such events were held). They gathered a total of 224 managers and analysts representing mutual funds, pension funds and other asset management firms.
Such information was provided in the form of online reports, newsletters, factsheets and other studies distributed by e-mail, and during direct meetings with investors, which enabled them to ask questions to PZU’s representatives. The latter included in particular: • 24th WallStreet 24 Conference, the largest meeting of retail investors in Poland held by the Polish Association of Individual Investors. Due to the pandemic, it was held online for the first time ever. The participants of the event had the opportunity to talk via an online chat application with the PZU Management Board Member in charge of the Finance Division and the Director for Investor Relations. PZU participated in the WallStreet 24 conference for the tenth time; • chats with retail investors, organized after each publication of quarterly financial results, hosted by the Member of the PZU Management Board in charge of the Finance Division.
IR strategy for 2021 The main objectives of PZU’s investor relations function in 2021 (continuation): • strengthen good relations between the PZU Management
Board and the community of investors, both in the local market and in the global market; • ensure understanding and approval for PZU’s new strategy among investors and analysts; • secure a deep and broad market for PZU’s shares by continuing to build a diversified base (in terms of geography, numbers and profile) of an appropriate number of well-informed investors familiar with the company; • ensure a reliable valuation for PZU’s stock by providing sellside analysts of investment banks and brokerage houses with high quality information about PZU’s operations, industry trends, drivers of financial performance and feedback after analysis of their recommendations; • ensure sell-side research coverage, in particular among international investment banks; • provide the PZU Management Board with regular feedback concerning the perception of PZU among capital market players and broad knowledge of current and potential shareholders of the company; • monitor investor sentiment towards PZU shares and changes in the shareholder structure in order to select the most adequate investor relations measures and tools; • develop digital tools to address investor needs better, including by implementing new solutions in the online annual report and enhancing the functionality of the investor relations service.
The main objectives of PZU’s investor relations function in 2021 (new initiatives): • increase the scope and frequency of remote meetings with investors; • extend the scope of non-financial reporting with elements related to climate change; • increase the degree of integration in the online report; • launch a pilot loyalty program for retail investors.
In 2020, fundamental valuations in global and local equity markets differed significantly from market valuations. The hard-to-estimate consequences of the COVID-19 pandemic prompted a significant group of investors to downsize their positions or exit the market completely. The situation normalized only in the last quarter of 2020, as more reports on the efficacy of vaccines were published.
In 2020, all recommendations for PZU’s shares were positive or neutral. However, for most of the year, the actual price of the Company’s stock was lower than the minimum price set by analysts. The difference between the target prices according to analysts’ recommendations and the PZU share price was 34% on average. It was growing from the beginning of the year and reached 55.6% in October.
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The PZU Group’s Capital and Dividend Policy in 2016-2020 was adopted in a PZU Supervisory Board resolution in 2016 SECTION 7.9 CAPITAL MANAGEMENT, and contains the following rules: The PZU Group endeavors to manage capital effectively and maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions; the dividend amount proposed and paid out by the PZU Management Board for the financial year is determined on the basis of the PZU Group’s consolidated financial result attributable to the parent company, where: no more than 20% will be earmarked as retained earnings (supplementary capital) for goals associated with organic growth and innovations as well as execution of growth initiatives, no less than 50% is subject to payment as an annual dividend, the remaining part will be paid in the form of annual dividend or will increase retained earnings (supplementary capital) if in the given year significant expenditures are incurred in connection with execution of the PZU Group Strategy, including in particular, mergers and acquisitions; with a reservation that: • according to the Management Board’s plans and risk and solvency self-assessment of the parent company, the own funds of PZU and the Group following the declaration or payment of a dividend will remain at a level that will ensure fulfillment of the conditions specified in the PZU Capital and Dividend Policy; • when determining the dividend the regulatory authority’s recommendations concerning dividends will be taken into consideration.
Distribution of the 2019 profit Due to the expectation expressed by the Polish Financial Supervision Authority (KNF) in a letter dated 26 March 2020 addressed to the management boards of insurance undertakings, regarding the retention of all profit generated in previous years, the PZU Shareholder Meeting (in compliance with the Management Board’s recommendation and a positive opinion issued by the Supervisory Board) adopted a resolution to refrain from the disbursement of a dividend from the 2019 profit.
• 26 May 2020 – Ordinary Shareholder Meeting’s resolution on the distribution of PZU’s net profit
The PZU Ordinary Shareholder Meeting adopted a resolution on the distribution of PZU’s net profit for the financial year ended 31 December 2019, in which it resolved to distribute the profit of PLN 2,651 million in the following manner: PLN 7 million as an allowance to the Company Social Benefit Fund, PLN 2,644 million as supplementary capital.
KNF’s recommendation on paying dividends from the profits generated in 2020 On 16 December 2020, KNF took a stance on the dividend policy of insurance and reinsurance undertakings.
The document permits insurance undertakings to: • disburse a dividend of up to 100% of the profit generated in 2019, • disburse a dividend of up to 50% of the profit generated in 2020, provided that the criteria set by KNF have been fulfilled.
According to KNF’s recommendation, dividends should be paid out only by insurance undertakings meeting certain financial criteria and ones that received a good or satisfactory score on their Test and Regulatory Assessment [Polish abbreviation: BION]11 for 2018. At the same time, the dividend payout should be limited to no more than 75% of the profit earned in 2019, while the coverage of the capital requirement for the quarter in which the dividend was distributed should be maintained at no less than 110%.
• 26 March 2020 – KNF’s recommendation on paying dividends from the profits generated in 2019
The Chairman of the Polish Financial Supervision Authority, in his letter of 26 March 2020, sent to the management boards of insurance undertakings, expressed the expectation that in connection with the state of epidemic announced in Poland and its possible adverse economic consequences, insurance undertakings should retain the entirety of profit earned in previous years.
KNF also pointed out that, when deciding on the level of dividends, insurance undertakings should take into account their additional capital needs within the period of 12 months from the approval date of the 2020 financial statements, which may result, among others, from changes in the market and legal environment, in particular from the high degree of uncertainty about the future evolution of the coronavirus pandemic, as it may bring new adverse consequences for insurance, reinsurance and insurance-and-reinsurance undertakings.
Up until the date of this Report, the PZU Management Board has not adopted a resolution concerning the distribution of profit for 2020. A report containing audited information on PZU’s solvency ratios and financial standing on a standalone basis will be published Q2 2021.
Dividend per share on the date of record (PLN) 2.08 1.40 2.50 2.80 **
* Yield calculated as the dividend (as at the dividend record date) in relation to the share price at the end of the previous reporting year ** The Ordinary Shareholder Meeting allocated no portion of the profit to the disbursement of a dividend (in accordance with KNF’s recommendation of 26 March 2020) *** Up to the date of preparing this report on the activities of the PZU Group, the PZU Management Board has not adopted a resolution concerning the proposed distribution of profit for 2020 Source: PZU’s data
Dividends paid by PZU from its earnings in the 2016-2020 financial years
PZU’s book value per share and gross accumulated dividends per share in PLN (2010-2020)
On 30 June 2017, PZU effected the largest issue of subordinated bonds (in Polish zloty) in the history of the Polish financial sector. At the same time, it was the first issue in Poland complying with Solvency II requirements. The bonds with a nominal value of PLN 2.25 billion bear interest at WIBOR6M GLOSSARY + 180 bps. The maturity date is 29 July 2027, or 10 years after issue with an early redemption option 5 years after the issue date.
Bank Securities – approval of the base prospectus for the 2nd Issue Program of Bank Securities for up to PLN 5 billion On 31 December 2020, KNF approved Alior Bank’s base prospectus prepared in connection with: • the opening of the 2nd Issue Program, to be offered in the
• its intention to apply for admission and floating of selected series of bank securities on a regulated market (main or parallel market) for securities operated by the Warsaw Stock Exchange.
Subordinated bonds The Bank did not conduct any subordinated bond issues in 2020.
Other unsecured bonds The Pekao Group’s various entities conduct programs to issue unsecured bonds backed by Bank Pekao. These instruments are used to diversify funding sources; in particular, they elevate the percentage of the Bank’s subsidiaries’ assets funded directly from the wholesale market.
On 6 April 2020, S&P Global Ratings (S&P) changed the ratings outlook for the Company from positive to stable. PZU’s financial strength and credit rating remained at A-.
Sovereign rating On 2 October 2020, S&P announced its decision to affirm Poland’s rating at A- and A-2 for long- and short-term liabilities in foreign currencies, respectively, and at A and A-1 for long- and short-term liabilities in the domestic currency, respectively. The rating outlook remained stable.
S&P pointed to the diversified economy, qualified workforce, manageable levels of public and private debt, the robust position of the external balance sheet, the cautiously pursued monetary policy with a stable banking system and the relatively deep domestic market as the bases for retaining its rating.
In S&P’s opinion, the pandemic will exert an adverse impact on the Polish economy, resulting in a 3.4% decline in real GDP in 2020. At the same time, S&P analysts indicated that this decline will be the lowest across the EU. It will be achieved owing to the relatively diversified and competitive export base, dependent to a lesser degree on the automotive sector and tourism, and also the usage of substantial funds under the extraordinary policy pursued to soften the adverse effects of the COVID-19 pandemic.
According to the agency, the fiscal means employed to respond to the crisis, as some of the highest in Central and Eastern Europe, combined with the measures taken at the EU level and the standard transfers of EU funds supported by domestic demand and the resurgence in the eurozone, may contribute to further economic growth in Poland, which S&P forecasts to be 4.5% in 2021 and 3.6% in 2022.12
Credit rating (long-term in foreign currency) A /stable/ 12 October 2018 BBB+ /positive/ 13 April 2018
Credit rating A /Stable/ 6 April 2020 A- /positive/ 14 June 2019
Fitch Ratings and S&P Global Ratings prepare their ratings at the Bank’s request under the contracts entered into between the Bank and these agencies. Because Moody’s Investors Service has no contract with Bank Pekao, the agency prepares its ratings based on publicly available information and review meetings.
On 14 April 2020, Fitch Ratings announced that, as a consequence of the COVID-19 pandemic, the Bank’s ratings
S&P GLOBAL RATINGS (COUNTERPARTY RATING IN THE EVENT OF FORCED RESTRUCTURING)
MOODY'S INVESTOR SERVICE LTD. (RATINGS NOT PROCURED BY THE BANK) Bank Pekao Poland
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Turn it into a hymn! Plain language now even has its own hymn in PZU. Its wording is humorous, though it does convey a serious message. It is entitled “Official style, begone!” and it is performed by Jasin Rammal-Rykała, a bass-baritone opera singer at the Grand National Opera Theater in Warsaw. “Another ASAP, mix-up, backup, damn corporate jargon” he sings to the majestic music in Beethoven’s Ninth Symphony. And he goes on to implore: “Let’s stop dabbling in all those cases - we can certainly understand one other without all that!”.
In this section: 1. Application of corporate governance rules 2. System of control applied during the preparation of the financial statements 3. Audit firm auditing the financial statements 4. Share capital and shareholders of PZU; stock held by members of its governing bodies 5. Rules for amending the Company’s Articles of Association 6. Shareholder Meeting and shareholder rights 7. Supervisory Board and Management Board 8. Remuneration paid to members of supervisory and management bodies 9. Diversity policy
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Since the day when its shares were admitted to trading on a regulated market, PZU has followed the corporate governance rules laid down in the Best Practices of WSE Listed Companies 2016 adopted by the Supervisory Board of the
Warsaw Stock Exchange (WSE) on 13 October 2015. This is a collection of corporate governance rules and rules of conduct that affect how public companies interact with their market environment. The document is available both on the Warsaw Stock Exchange website (www.gpw.pl/dobre-praktyki) and the PZU website ( compliance-pzu/dobre-praktyki-pzu).
PZU has also developed its own code defining the principal ethical standards governing the Company’s behavior in relations with its stakeholders. The PZU Group’s Best Practices are a set of standards followed by all members of the PZU Group. The values and principles laid down therein must be followed by all employees.
Information on the application of the Rules was presented by the PZU Management Board and Supervisory Board during the PZU Ordinary Shareholder Meeting (PZU OSM) held on 30 June 2015. The PZU OSM declared that, acting within its powers, it will be guided by the Corporate Governance Rules in the wording adopted by the Polish Financial Supervision Authority on 22 July 2014, except for certain specific rules waived by the PZU OSM.
Detailed information is provided on PZU’s website on the application of the Corporate Governance Rules, including rules that are partially applied, namely: • in reference to the rule laid down in § 8 sec. 4. of the
Corporate Governance Rules concerning the enabling of all shareholders to participate in the Shareholder Meeting, including by procuring the possibility of actively participating electronically in the Shareholder Meeting, it should be noted that, presently, PZU shareholders may follow the broadcast of the Shareholder Meeting, however the Issuer decided not to introduce the so-called e-Shareholder Meeting, because, in PZU’s opinion, there are a number of factors of a technological and legal nature which may affect the proper conduct of the Shareholder Meeting; legal concerns include the possibility of identifying the shareholders and verifying their legitimacy; the risk of the occurrence of technical difficulties, e.g. with the Internet connection or possible external interference in the IT systems, may disrupt the work of the Shareholder Meeting and evince doubts concerning the efficacy of the resolutions adopted during its course; the materialization of the above risks may affect the proper application of this rule to its full extent;; • in reference to the rule laid down in § 21 sec. 2. of the Corporate Governance Rules stating that the supervising body should have a separate chairperson function in charge of managing the work of the supervising body, and the selection of the chairperson of the supervising body should be accomplished on the basis of experience and team management skills while giving consideration to the criterion of independence; it should be emphasized that, in accordance with the Commercial Company Code and PZU’s Articles of Association, the Chairperson function has been established in the PZU Supervisory Board; the PZU Supervisory Board’s composition and the Chairperson function are shaped using the independence criteria in the Statutory Auditor Act; the Supervisory Board Chairperson is selected using the criterion of knowledge, experience and skills confirming the competences required to discharge duly the duties of supervision; applying the independence criterion to the Chairperson according to the KNF Office’s explanation of this rule may evince doubts concerning a possible collision with the legal regulations pertaining to shareholder rights; • in respect of the rule laid down in § 49 section 3 of the Corporate Governance Rules concerning the appointment and dismissal, in a regulated institution, of the person managing the internal audit cell and the person managing the compliance cell with the consent of the supervising body or the Audit Committee, it should be pointed out that PZU applies the rules laid down in § 14 of the Rules to their full extent, which means that the PZU Management Board is the sole body empowered to, and responsible for, managing the Company’s activity; moreover, according to the labor law regulations, the managing body exercises labor law activities; on account of the foregoing, PZU has adopted a solution that anticipates that the selection and dismissal of the person managing the internal audit cell is accomplished while taking into account the opinion of the Audit Committee; the person managing the compliance cell is appointed and dismissed in an identical manner; in making these decisions, the Management Board obtains the Audit Committee’s opinions.
In accordance with the resolution of 30 June 2015, the PZU OSM has waived the following rules: • the rule laid down in § 10 section 2 of the Corporate
220 221MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
PZU shareholders may follow the broadcast of the Shareholder Meeting, although the Company has refrained from adopting the so-called e-Shareholder Meeting, that is the option to cast electronic votes. According to PZU, this is due to the existence of a number of legal, technical and organizational factors that may affect the proper course of the Shareholder Meeting. Legal doubts pertain to the inability to identify shareholders and check their right to participate in the shareholder meeting. The risk of technical difficulties may disrupt the work of the Shareholder Meeting and evince doubts concerning the efficacy of the resolutions adopted during its course. PZU has a stable majority shareholder structure, and a large portion of the minority shareholder structure attends every shareholder meeting.
Detailed information on the status of PZU’s application of the recommendations and rules laid down in the Best Practices of WSE Listed Companies 2016 is available on the Company’s website in the Investor Relations section at: pl/relacje-inwestorskie/o-grupie/lad-korporacyjny.
PZU constantly monitors the degree and manner of compliance with the recommendations and principles laid down in the Best Practices of WSE Listed Companies 2016 and, if necessary, takes steps on an as-needed basis to ensure compliance with the Best Practices to the fullest extent and in an unquestionable manner. In particular: • On its website, the Company publishes, in two language versions, all information and documents referred to in rule I.Z.1. The scope and accessibility of information posted on the website are monitored on an ongoing basis, and in the event of detecting any technical problems posing an impediment to documents, efforts are promptly taken to reinstate the website’s full functionality.
The ICS comprises supervision, overall administrative and accounting procedures, organizational structures, reporting systems, solutions implemented in IT systems, the compliance function and other control mechanisms contributing to the security and stability of the Company’s operations by ensuring: • efficiency and effectiveness of the operating activity; • reliability of information communicated inside and outside the Company and assurance of availability and reliability of such information, in particular in respect of financial statements; • adequacy and effectiveness of risk controls (control operations should be commensurate with the level of risk involved in the operations and processes under control); • responsible and transparent management of the Company; • compliance of the Company’s activity with internal regulations and the standards of conduct adopted by the Company.
The following elements are distinguished within the ICS: • control function aiming at ensuring compliance with control mechanisms concerning, in particular, risk management in the Company; • independent compliance cell (Compliance Department – BCM) whose purpose is to execute the compliance function and to ensure systemic solutions with regard to efficiency and effectiveness of the ICS; • independent internal audit cell (Internal Audit Department – BAW) whose purpose is to carry out independent and objective assessment and evaluation of adequacy and effectiveness of the internal control system and other elements of the system of governance.
The head of the respective organizational division/unit/cell is responsible for the deployment of an effective Internal Control System in the supervised area of the Companies’ activity, in particular for designing and ensuring efficient operation of control actions as integral components of operating processes.
An element of the ICS adopted by PZU is the compliance function supervised by the Director of the Compliance Department. The appointment and dismissal of the Director of the Compliance Department must be consulted with the Audit Committee. The Director of the Compliance Department has direct access to the Company’s Management Board Members and Supervisory Board Members, and representatives of the Compliance Department participate in meetings of selected committees established within the Company’s structure.
Within the framework of the exchange of information and cooperation with subsidiaries, uniform standards and key methodological solutions are implemented in such entities. In particular, the following areas of cooperation and information exchange exist in relationships with these companies: • exchange of information regarding the organization of the internal control system, the implementation of internal controls and evaluation of the internal control system,
Management Board; • chart of accounts with a commentary; • other detailed internal regulations approved by the PZU
PZU monitors changes in external regulations concerning, without limitation, the accounting policy and reporting requirements applicable to insurers and carries out appropriate adaptation processes in these areas.
The accounting records are closed and financial statements are prepared in accordance with schedules, including the key activities and control points with assigned liability for timely and correct completion.
The consolidated financial reporting process is governed by a number of internal acts defining the principles of accounting policy adopted by the PZU Group and accounting standards. Moreover, they are subject to detailed schedules including the key activities and control points with assigned liability for timely and correct completion.
Internal audit The internal audit function is run in a manner ensuring its unbiased nature and independence from operational functions, and its purpose is to add value and enhance the PZU Group’s operational performance. The activity of the audit function involves a regular and orderly assessment of the adequacy and effectiveness of the internal control system and other components of the management system. The internal audit function supports the PZU Group in the pursuit of its objectives by providing – also through consulting – certainty as to the effectiveness of these processes.
The duties of the internal audit function comprise in particular: • establishment, implementation and maintenance of an audit plan, which defines the scope of audit work to be undertaken in subsequent years, with regard to all types of activity and the Company’s overall system of management; • making recommendations on the basis of the findings collected in the course of work according to the audit plan; • checks of execution of the corrective measures following from the recommendations made.
The audit plan is prepared on the basis of an annual risk identification and assessment conducted across all areas of PZU’s business. A draft plan is presented for evaluation by the Audit Committee and then approval by the Management Board.
The following adopted principles guarantee the independence and impartiality of internal audit: • the Internal Audit Department reports to the Audit
Committee; • the appointment and dismissal of the Managing Director on Audit, who manages the Internal Audit Department, requires an opinion of the Audit Committee; • The Managing Director on Audit participates in meetings of the Audit Committee and meetings of the Management Board, and representatives of the Internal Audit Department take part in meetings of selected committees operating within PZU’s structure; • PZU’s internal auditors demonstrate outstanding professional and ethical qualifications and possess the proper knowledge and skills, including the knowledge of issues necessary to conduct audits. They have access to the necessary information, explanations, documents and data, allowing for the timely and correct performance of their tasks; • the scope of audit activities performed during each audit and the resulting evaluations are autonomous decisions of internal audit. The tasks are allocated in such a manner so as to prevent potential and actual conflicts of interest. Each employee is required to notify their superior if a such a conflict occurs. Information on potential conflicts of interests is also collected and, where necessary, tasks assigned to members of the internal audit team are reallocated. Furthermore, no auditor is permitted, before the expiry of one year, to audit any activities they have themselves performed or managed, and no auditor may accept responsibility for any operating activity subject to assessment by internal audit.
Audit Committee The appointment of the Audit Committee has served the purpose of increasing the effectiveness of supervisory activities performed by the Supervisory Board with regard to the monitoring of financial reporting processes. Its composition, procedure of appointment, powers and tasks are described in SECTION 9.7 "Supervisory Board and Management Board"
The Committee’s tasks associated with monitoring the financial reporting process and the provision of advisory and evaluation services include, in particular: • tentative evaluation of the Management Board’s report on the activity of the Company and the Company’s annual financial statements; • tentative evaluation of the Management Board’s report on the activity of the Company’s group and the annual consolidated financial statements of the Company’s group; • tentative evaluation of all financial documents submitted to the Supervisory Board, in particular, an annual financial plan prepared by the Management Board and a report on its implementation; • issuing opinions on the core principles of the financial reporting and accounting system in place in the Company, including the criteria for consolidation of results of individual entities from the Company’s group; • providing the Supervisory Board with conclusions and recommendations concerning the rationale for any modification of the financial reporting system in place in the Company and the Company group and informing the Supervisory Board about significant irregularities in such system or risks associated with its organization and operation, known to the Committee.
A statutory auditor appointed by the PZU Supervisory Board, based on a recommendation of the Audit Committee, reviews interim standalone and consolidated financial statements, audits annual standalone and consolidated financial statements and audits annual solvency and financial standing reports required by the Solvency II Directive (for PZU and the PZU Group).
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As a consequence, the maximum permissible uninterrupted duration of the statutory audit engagements for an audit firm will be a period of 10 years, as specified in Article 17(1) second paragraph of Regulation (EU) No 537/2014 of the European Parliament and of the Council.
On this basis, the Supervisory Board decided to renew, for 2021-2022, with an option to extend until 2023, the orders for KPMG Audyt to review and audit the standalone financial statements of PZU and the consolidated financial statements of the PZU Group. The recommendation on the selection of an audit firm to conduct the audit satisfied the applicable terms.
audit of financial statements 8,371 8,698 other assurance services 5,148 4,901
compulsory audit of the annual financial statements / consolidated financial statements 828 945 other assurance services, including a review of financial statements/consolidated financial statements 878 939 tax advisory services - other services - -
The main objectives of the policy for the provision of permitted non-audit services by the audit firm conducting the statutory audit, its related entities and by a member of the audit firm’s network were as follows: • ensuring correctness in the process of procuring permitted services; • determining the responsibility and the duties of the participants in this process, • defining the catalogue of permitted services, • establishing the procedure for procuring permitted services.
On 30 June 2015, PZU’s Ordinary Shareholder Meeting adopted a resolution to split all PZU shares by decreasing the par value of each PZU share from PLN 1 to PLN 0.10 and increasing the number of PZU shares making up the share capital from 86,352,300 to 863,523,000 shares. The split was effected by exchanging all the shares at a ratio of 1:10 and did not affect the amount of PZU’s share capital.
According to this notification, the said funds increased their shareholding in PZU as a result of a transaction executed on 16 December 2020, whereby they exceeded the 5% threshold of votes at the PZU Shareholder Meeting.
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PZU did not issue, redeem or repay any debt or equity securities and did not issue any securities that would provide its shareholders with special control rights.
In 2013-2020, PZU did not have any employee stock programs in place.
Moreover, according to § 16 sec. 5 of the Articles of Association, the shareholders’ voting rights have been limited in such a manner that no shareholder may exercise more than 10% of the total number of votes in existence in PZU at its Shareholder Meeting on the date of holding a Shareholder Meeting subject to the reservation that for the purposes of determining the obligations of the buyers of significant equity stakes contemplated by the Act on Public Offerings and the Insurance Activity Act, such limitation of voting rights shall be deemed not to exist. The restriction on voting rights does not apply to the following: • shareholders who on the date of adopting the Shareholder
• shareholders acting with the shareholders specified in the item above pursuant to executed agreements pertaining to jointly exercising the voting rights attached to shares
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Corporate governance the entity submitting the notification referred to in Article 82(1) failed to provide additional information or documents required by the regulatory authority within the prescribed time limit, it is justified by the need of prudent and stable management of the domestic insurance undertaking due to a possible impact of the entity submitting the notification referred to in Article 82(1) on the domestic insurance undertaking or due to the assessment of the financial standing of the entity submitting the notification; • possible setting of a time limit for the acquisition of or subscription for shares or rights attaching to shares, by the regulatory authority, in accordance with Article 90(4) and (5) of the Act referred to in item 4, in a decision declaring the absence of grounds for filing an objection; • possible issuance, by the regulatory authority, in accordance with Article 98(5) of the Act referred to in item 4, of a decision requiring the disposal of shares within the prescribed time limit in the event that the authority issues a decision prohibiting the exercise of voting rights attaching to shares in a domestic insurance undertaking for the reasons specified in Article 98(1) of this Act; • prohibition to sell shares or rights attaching to shares held by the State Treasury under Article 13(1)(27) of the Act of 16 December 2016 on Rules for Managing State Property (consolidated text: Journal of Laws of 2020, item 735, as amended); which prohibition, pursuant to Article 13(2)(2) of this Act, does not apply to the case referred to in Article 73(2)(2) of the Act referred to in item 1 (disposal of shares in a quantity resulting in the achievement of no more than 33% of the total number of votes).
Association. On 26 August 2020, these amendments were entered in the register of commercial undertakings of the National Court Register by the District Court for the Capital City of Warsaw in Warsaw, 12th Commercial Division of the National Court Register.
• powers of the Supervisory Board and the Shareholder Meeting – by adding to the powers of the Supervisory Board an item regarding the granting of consent to: subscription for or acquisition of shares or ownership interests in another company, with the value exceeding: PLN 100,000,000, or 10% of total assets within the meaning of the Accounting
A Shareholder Meeting is held:: • as an Ordinary Shareholder Meeting which should be held within six months from the end of each financial year;
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• as an Extraordinary Shareholder Meeting which is convened in cases specified in the generally applicable law and the Articles of Association.
In accordance with the Articles of Association, the shareholders' voting right shall be restricted in a way that no shareholder may exercise at the Shareholder Meeting more than 10% of the overall number of votes existing in the Company on the date of the Shareholder Meeting, except that, for the purposes of determining the obligations of the buyers of large blocks of shares according to the Act of 29 July 2005 on Public Offerings and the Conditions for Offering Financial Instruments in an Organized Trading System and on Public Companies and the Insurance and Reinsurance Activity Act of 11 September 2015, such restriction of the voting right will be deemed non-existent. The restriction on voting rights does not apply to the following: • shareholders who on the date of adopting a Shareholder
In accordance with the Commercial Company Code, detailed procedures concerning participation in the Shareholder Meeting and exercising voting rights are always presented in an announcement of the Shareholder Meeting published on the date of convening the Shareholder Meeting on PZU’s corporate website in the “Investors relations” section under the “Shareholder Meeting” tab.
Members of the Supervisory Board are appointed by the Shareholder Meeting for a joint term of office which lasts three consecutive full financial years. At least one Supervisory Board Member must hold qualifications in accounting or auditing financial statements within the meaning of the Act on Statutory Auditors, Audit Firms and Public Supervision. At least two Supervisory Board Members must meet the independence criteria set forth in the Best Practices of WSE Listed Companies adopted by the Supervisory Board of Giełda Papierów Wartościowych w Warszawie S.A. (Warsaw Stock Exchange). Independent members of the Supervisory Board submit a written representation to the Company on meeting all the independence criteria and an obligation to notify the Company immediately about ceasing to meet such criteria.
• is not employed by the company, does not do work for it, or provide services to it, on the basis of some other legal relationship; • is not engaged in activities that are at odds with his/her duties as a member of a supervising body or that could evince a suspicion of partiality or interest or generate a conflict of interest with the company’s business; • meets the requirements for a member of a supervising body as laid down in separate regulations.
The Supervisory Board elects the Supervisory Board Chairperson and Supervisory Board Deputy Chairperson from among its Members. The Supervisory Board may elect the Supervisory Board Secretary from among its Members. The Supervisory Board Secretary supports the Supervisory Board Chairperson in discharging his/her duties specified in the Supervisory Board Rules and Regulations, in particular by: • organizing the work of the Supervisory Board; • supervising over the organizational and technical support for Supervisory Board meetings; • ensuring that minutes of meetings of the Supervisory Board are kept; • presenting draft reports prepared by the Supervisory Board as required by Company’s Articles of Association.
The mandate of a Supervisory Board Member expires at the end of his or her term of office or as a result of his or her demise, resignation or dismissal from the Supervisory Board.
On 21 April 2020, Mr. Alojzy Nowak tendered his resignation from serving in the capacity of PZU Supervisory Board Member.
Accordingly, from 22 April 2020 the Supervisory Board’s composition was as follows: • Maciej Łopiński - Supervisory Board Chairman • Paweł Górecki - Supervisory Board Deputy Chairman • Marcin Chludziński - Supervisory Board Member • Agata Górnicka - Supervisory Board Member • Robert Jastrzębski - Supervisory Board Member • Tomasz Kuczur - Supervisory Board Member • Elżbieta Mączyńska-Ziemacka - Supervisory Board Member • Krzysztof Opolski - Supervisory Board Member • Robert Śnitko - Supervisory Board Member • Maciej Zaborowski - Supervisory Board Member
On 26 May 2020, the PZU Ordinary Shareholder Meeting appointed Józef Wierzbowski to the Supervisory Board. Accordingly, from 26 May 2020 the Supervisory Board’s composition was as follows: • Maciej Łopiński – Supervisory Board Chairman; • Paweł Górecki – Supervisory Board Deputy Chairman; • Robert Śnitko – Supervisory Board Secretary; • Marcin Chludziński – Supervisory Board Member; • Agata Górnicka – Supervisory Board Member; • Robert Jastrzębski – Supervisory Board Member; • Tomasz Kuczur – Supervisory Board Member y; • Elżbieta Mączyńska-Ziemacka – Supervisory Board Member; • Krzysztof Opolski – Supervisory Board Member; • Józef Wierzbowski – Supervisory Board Member; • Maciej Zaborowski – Supervisory Board Member.
Maciej Łopiński, Robert Śnitko, Robert Jastrzębski, Tomasz Kuczur, Elżbieta Mączyńska-Ziemacka, Krzysztof Opolski, Józef Wierzbowski and Maciej Zaborowski submitted representations that they meet the independence criteria set forth in the Best Practices of WSE Listed Companies adopted by the Supervisory Board of Giełda Papierów Wartościowych w Warszawie S.A. (Warsaw Stock Exchange).
Graduate of the University of Gdańsk. In 1999 he passed the examination for candidates to become supervisory board members in companies in which the State Treasury holds an equity stake. Editor-in-Chief of Tygodnik Gdański, a journalist of Głos Wybrzeża and Tygodnik Czas, among others. A member of parliament in its 7th term of office.
Duda in 2015-2016. He has many years of experience in company law and corporate governance gained during his work in supervisory bodies in commercial law companies, including KGHM Polska Miedź SA, PZU Asset Management SA and
Doctor of juridical science and attorney-at-law. Graduate of the Faculty of Law, Administration and Economics at the
Graduate of the London School of Economics and Political Science, University of London, School of Oriental and African
H. Cegielski – FPS and ŚKSM, among others. President of the Republican Foundation economic think tank in 20112015. Since 2005 he has been sitting on management boards and supervisory boards of commercial law companies.
Graduate of a post-graduate study program in media management from the Kozminski University. She acquired her professional experience as follows: Telewizja Polska S.A. (2006-2012), Project Coordinator in the Bank Zachodni WBK S.A.
Supervisory Board. In October 2019 she started to serve as a member of the Supervisory Board of ORLEN Deutschland
(2010), the editorial committee of the Scholarly Papers of the Sejm Analysis Office journal (2016).
(currently, the Kazimierz Wielki University in Bydgoszcz). In 2011 he received a doctoral degree in juridical science from the
Faculty of Law and Administration at the University of Warmia and Mazury while in 2013 he received a Ph.D. Hab. degree from the University of Wrocław in social science with a specialization in political systems. A Professor Extraordinarius at the
Faculty of Humanities of the Kazimierz Wielki University in Bydgoszcz. A member of the Local Government Board of Appeals in Bydgoszcz. In 2013-2019 Supervisory Board Chairman of Bydgoski Fundusz Poręczeń Kredytowych. Supervisory Board member of Port Lotniczy Bydgoszcz S.A. since March 2019.
Plus” Forecasting Committee, the Economics Committee of the Polish Academy of Sciences and the Academic Council of the Institute of Economics of the Polish Academy of Sciences. President of the Polish Economic Society since 2005. In 19961998 member of the Supervisory Board of Polski Bank Rozwoju S.A. and in 2005-2007 member of the Supervisory Board of
BGŻ S.A. From June 2013 until August 2020 member of the Supervisory Board of PKO BP S.A. In 1994-2005 she acted as the scientific secretary and member of the Executive of the Socio-Economic Strategy Council of the Council of Ministers. She was a member of the National Development Council formed in 2010 by the President of the Republic of Poland.
238 239MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Graduate of the Faculty of Psychology and Pedagogy at the University of Warsaw. Professor Ordinarius of Economics.
Head of the Department of Banking, Finance and Accounting at the Faculty of Economics of the University of Warsaw.
Journal and the journal E-Finanse. A former member of the supervisory boards of Bank Handlowy S.A., AXA Polska S.A.
Polish Economic Exhibition jury and a member of the “Teraz Polska” Contest Jury.
Graduate of the Maria Grzegorzewska Academy of Special Education. He completed an MBA at the Apsley Business School of London and Warsaw Management University. He has 30 years of experience in managerial positions in national and local government administration and in companies in which the State Treasury is a shareholder. He served as an advisor to the Management Board and as Deputy Director of the Audit Department in PZU SA in 2007 and 2008. He has many years of experience in supervisory boards. He sat in the Supervisory Board of BondSpot S.A. in 2016-2017 and he currently sits in the Supervisory Board of GPW Benchmark S.A. and in the Supervisory Board of System Gazociągów Tranzytowych
Supervisory Board’s powers The Supervisory Board exercises permanent supervision over the Company’s operations in all areas of its activity. The powers of the Supervisory Board include: The Supervisory Board exercises permanent supervision over the Company’s operations in all areas of its activity. The powers of the Supervisory Board include: • evaluating the Management Board’s report on the
Company’s activity and the Management Board’s report on the activity of the PZU Group and the Company’s financial statements and consolidated financial statements of the PZU Group for the previous financial year for compliance with the accounting ledgers and documents as well as the facts; • approving the solvency and financial condition report of the Company and the solvency and financial condition report of the PZU group; • preparing an annual report on compensation for Management Board Members and Supervisory Board Members on the rules laid down in Article 90g section 1-5 of the Act on Public Offerings and the Conditions for Offering Financial Instruments in an Organized Trading System and on Public Companies of 29 July 2005; • evaluating the Management Board’s motions to distribute the profit or cover the loss; • submitting a written report to the Shareholder Meeting on the results of the evaluation referred to in the foregoing items and submitting a concise annual evaluation of the Company’s standing with an assessment of its internal control system and the system for managing significant risks to the Company, and an annual report on the Supervisory Board’s work; • concluding, terminating and amending agreements with Management Board Members and setting the rules for their compensation, giving consideration to the rules defined by the Shareholder Meeting, in accordance with § 18 item 12 of the Articles of Association; • appointing, suspending and dismissing the President of the Management Board, Management Board Members or the entire Management Board and making decisions to discontinue such a suspension; • granting consent to transferring an insurance portfolio in its entirety or in part; • giving consent to the acquisition, subscription for or disposal of ownership interests and shares in companies and on the Company’s participation in other entities – the Supervisory Board may define the maximum amount, the terms and conditions and the procedure that the
Management Board may use to conduct the foregoing activities without the obligation to obtain an approval from the Supervisory Board, except that the following require approval of the Supervisory Board: • subscription for or acquisition of shares or ownership interests in another company, with the value exceeding: PLN 100,000,000, or 10% of total assets within the meaning of the Accounting
Act of 29 September 1994, determined on the basis of the most recent approved financial statements; • seconding Supervisory Board Members to perform temporarily the functions of Management Board Members who have been dismissed, resigned or are unable to perform their functions for other reasons; • accepting instructions on how the Company’s representatives should vote at Shareholder Meetings of PZU Życie SA in matters on increasing or decreasing the share capital, issuing bonds, selling or leasing PZU Życie SA’s enterprise or establishing a usufruct right on the enterprise, dividing PZU Życie SA, merging PZU Życie SA with another company, liquidating or dissolving PZU Życie SA; • selecting the audit firm to carry out the mandatory audit of the financial statements, including the annual financial statements of the Company and the annual consolidated financial statements of the PZU Group and the solvency and financial condition report of the Company and the solvency and financial condition report of the PZU Group, and reviews of the financial statements in accordance with the obligations following from the prevailing laws; • deciding on the consolidated text of the revised Articles of Association; • approving the Company’s long-term development plans and annual financial plans prepared by the Management Board; • approving the Bylaws of the Management Board; • performing tasks resulting from the guidelines or recommendations of regulatory authorities, in particular the Polish Financial Supervision Authority, adopted in the Company; • examining and consulting matters submitted by the Management Board for deliberation at the Shareholder Meeting.
Moreover, one of the Supervisory Board’s powers is to give consent to the following: • acquisition or disposal of real property, perpetual usufruct or share in a real property or perpetual usufruct with a value exceeding the equivalent of EUR 3,000,000; • execution, by the Company and a related party, of a material transaction of the kind referred to in Article 90i(3) of the Act of 29 July 2005 on Public Offerings and the Conditions for Offering Financial Instruments in an Organized Trading System and on Public Companies, taking into account the exclusions and specific regulations in this respect laid down in Chapter 4b of this Act; • consent for the Issuer to enter into an agreement with an underwriter of the kind referred to in Article 433 § 3 of the Commercial Company Code; • paying out an interim dividend; • creating and shutting down regional or foreign branches; • executing an agreement to provide legal, marketing, public relations and public communication services or management consulting services if the total net fee to be paid for such services under this agreement or other agreements executed with the same entity is greater than PLN 500,000 annually; • amending an agreement to provide legal, marketing, public relations and public communication services or management consulting services by increasing the said fee above and beyond the net amount of PLN 500,000 annually; • executing an agreement to provide legal, marketing, public relations and public communication services and management consulting services which do not specify the maximum amount of the fee; • executing a donation or other agreement having a similar effect, the value of which exceeds PLN 20,000 or 0.1% of total assets within the meaning of the Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements; • executing a debt release or other agreement having a similar effect, the value of which exceeds PLN 50,000 or 0.1% of total assets within the meaning of the Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements; • subject to § 18 item 11 of the Articles of Association, the disposal of non-current assets within the meaning of the Accounting Act of 29 September 1994 classified as intangible assets, property, plant and equipment or longterm investments, including contribution to a company or a cooperative – if the market value of those assets exceeds 5% of total assets within the meaning of the Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements; and also handing those assets over for use to another entity for a period longer than 180 days in a calendar year based on a legal act, if the market value of the subject matter of the legal act exceeds 5% of total assets, whereas the handing over of assets for use in the case of: • lease, rental and other agreements to hand over an asset for use to other entities against payment, the market value of the subject matter of a legal act is defined as the value of benefits for: one year if the asset is handed over on the basis of contracts entered into for an unspecified term, the full duration of the term of validity in the case of contracts entered into for an unspecified term,
• lending for use agreements and other agreements to hand over an asset to other entities for gratuitous use, the market value of the subject matter of a legal act is defined as the value of benefits that would be due if a lease or rental agreement was executed instead, for: one year if the asset is to be handed over on the basis of a contract entered into for an unspecified term, the full duration of the term of validity in the case of contracts executed for an unspecified term,
• subject to § 18 item 11, the acquisition of non-current assets within the meaning of the Accounting Act of 29 September 1994, with the value exceeding: PLN 100,000,000, or 5% of total assets within the meaning of the Accounting
Supervisory Board’s method of operation The Supervisory Board adopts the Rules and Regulations of the Supervisory Board which define its organization and manner of acting. The current Rules and Regulations, adopted by a Supervisory Board resolution of 9 September 2020, define the composition and manner of appointing members to the Supervisory Board, the tasks and scope of its operations and the procedure for convening and conducting meetings.
The Supervisory Board is required to meet at least once every quarter. Supervisory Board Members may participate in the Supervisory Board meeting using means of direct remote communication. The Supervisory Board may delegate its Members to fulfil specific supervising activities on their own and to this effect appoint temporary committees. The scope of responsibility of a delegated Supervisory Board Member and the committee is specified in a resolution of the Supervisory Board. The Supervisory Board adopts its resolutions by an absolute majority of votes. In the event of a voting tie, the Chairman of the Supervisory Board has the casting vote. Resolutions of the Supervisory Board may be adopted using means of direct remote communication and circular vote. Additionally, the Articles of Association stipulate that a vote may be cast in writing through another Supervisory Board Member.
Supervisory Board’s activity in 2020 The Supervisory Board held 12 meetings in 2020 at which it adopted 113 resolutions. It also adopted 27 resolutions between meetings under the written procedure. These resolutions pertained to all the areas of the Company’s business and were consistent with the scope of oversight functions defined by the requirements of the generally binding law, the Insurance and Reinsurance Activity Act of 11 September 2015, KNF’s recommendations, corporate governance rules and the ones described in PZU’s Articles of Association and the Supervisory Board Rules and Regulations.
Due to the pandemic Supervisory Board meetings in 2020 were held in the hybrid form – some Supervisory Board Members participated in the meetings on site and some remotely.
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The Audit Committee is an advisory and consultative body to the Supervisory Board and is appointed to improve the effectiveness of the Supervisory Board’s oversight activities in respect of the correctness of financial reporting, the effectiveness of internal control system, including internal audit, and the risk management system. In addition, the Audit Committee may request the Supervisory Board to request specific control activities in the Company, whereby the requested activities may be performed by an internal unit or external entity
The scope of the Audit Committee’s activities comprises: • monitoring the Company’s financial reporting process, • monitoring the effectiveness of internal control, internal audit and risk management systems, including as regards financial reporting; Maciej Łopiński
PZU takes into consideration the “Best practices for public interest entities pertaining to the appointment, composition and operation of the audit committee” as published by the Office of the Polish Financial Supervision Authority on 24 December 2019.
Changes in the composition of the Audit Committee in 2020 The following persons sat on the Audit Committee as at 1 January 2020: • Alojzy Nowak – Committee Chairperson; • Marcin Chludziński – Committee Member; • Krzysztof Opolski – Committee Member; • Robert Śnitko – Committee Member; • Maciej Zaborowski – Committee Member
On 28 April 2020, the Supervisory Board established the following composition of the Audit Committee : • Krzysztof Opolski – Committee Chairperson; • Marcin Chludziński – Committee Member; • Robert Śnitko – Committee Member; • Maciej Zaborowski – Committee Member.
Knowledge, skills and experience of Audit Committee members including the way in which they were acquired Krzysztof Opolski, Robert Śnitko and Maciej Zaborowski were designated as independent members within the meaning of Article 129 Section 3 of the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Supervision. Marcin Chludziński, Krzysztof Opolski and Robert Śnitko were designated as members holding qualifications in accounting or auditing financial statements. All Audit Committee members were named as members who have knowledge and skills in the industry in which the Company operates.
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Corporate governance years of experience on managerial and supervisory positions in commercial law companies. He was a Supervisory Board member at Bank Handlowy w Warszawie SA, AXA Polska SA and Centrum Giełdowe SA.
Robert Śnitko, PZU Supervisory Board Member since 12 April 2017, has the title of PhD in economics at the Warsaw School of Economics, is an university teacher and member of the International Institute for Strategic Studies. Graduate of the London School of Economics and Political Science, University of London, School of Oriental and African Studies, University of London and Faculty of Economics at the Radom Technical University. Discharges the function of director of the Sectoral, Local and Game Taxes at the Ministry of Finance.
Arbitration Court at the State Treasury Solicitors' Office. He has experience on supervisory positions in commercial law companies.
Activity of the Audit Committee in 2020 In 2020, 11 meetings were held.
Key issues addressed by the Audit Committee in 2020: • discussion of the risk report for Q4 2019 and for Q1-3 2020; • discussion of the annual report on the Internal Audit
Board on approving the Strategy in the risk management area; • information on the implementation of the strategy in the risk management area in 2018-2020; • discussion of the draft audit plan for 2021; • assessment of PZU’s financial statements and the PZU
• acceptance of the Audit Committee’s report on its activity in 2019; • review the draft PZU Supervisory Board report on its assessment of PZU’s financial statements for the year ended 31 December 2019, the consolidated financial statements of the PZU Group for the year ended 31 December 2019, the Management Board report on the activity of the PZU Group and PZU in 2019 and the Management Board’s motion to distribute PZU SA’s net profit for the year ended 31 December 2019; • discussion of the recommendations given by the audit firm (KPMG Audyt sp. z o.o. spółka komandytowa) after the audit of standalone and consolidated financial statements as well as the annual consolidated solvency and financial condition reports (SFCR) for 2019; • extension of the order for KPMG Audyt sp. z o.o. spółka komandytowa for the review and audit of the standalone financial statements of PZU and the consolidated financial statements of the PZU Group for the years 2021-2022 with an extension option for 2023; • discussion of the amendment to the Financial Plan of PZU and the PZU Group for 2020; • issuing recommendations to the Supervisory Board on the assessment of the solvency and financial condition report of PZU for the year ended 31 December 2019; • issuing recommendations to the Supervisory Board on the assessment of the solvency and financial condition report of the PZU Group for the year ended 31 December 2019.
The Nomination and Compensation Committee is not appointed if the Supervisory Board elected by group voting is composed of 5 members. In such case the Committee’s tasks are performed by the Supervisory Board in its full composition.
The committee is dissolved once five Members of the Supervisory Board are elected by group voting, following which its powers are taken over by the whole Supervisory Board.
In connection with the resignation of Alojzy Nowak from the Supervisory Board, on 21 April 2020 his membership in the Nomination and Compensation Committee ceased.
As at 31 December 2020 the composition of the Committee did not change.
Activity of the Nomination and Compensation Committee in 2020 In 2020, 6 meetings were held.
Management Board Members for 2020; • conducting a qualification procedure for the position of the new President and Members of the Management Board; • discussing the “Compensation policy for the PZU SA
Attendance of Members in Nomination and Compensation Committee meetings in 2020
Attendance at meetings number of meetings over the time of performing the mandate
• discussing the “Rules for assessment of suitability of the PZU Supervisory Board and Audit Committee”; • carrying out an assessment of suitability of PZU Supervisory Board Members and Audit Committee Members (individual and collective assessment); • discussing the Rules for assessment of suitability of the PZU Management Board; • assessment of suitability of Members of the PZU Management Board (individual and collective assessment); • verification of compliance of the provisions of Supervisory Board resolutions on the setting of compensation and management objectives and provisions of management service agreements adopted by the Ordinary Shareholder Meeting with the “Compensation policy for PZU SA Management Board and Supervisory Board Members”.
Strategy Committee The Strategy Committee was appointed by a Supervisory Board resolution of 29 July 2010.
The tasks of the Strategy Committee include, in particular, issuing opinions and presenting recommendations to the Supervisory Board with regard to its decisions pertaining to: • approving PZU’s long-term development plans prepared by the Management Board; • planned investments in PZU and the PZU Group; • consent for PZU to conclude an agreement with an underwriter referred to in Article 433 § 3 of the Commercial Company Code; • rules for purchase, subscription or sale of ownership interests and shares in companies as well as Company’s participation in other entities; • accepting the Management Board’s motions for purchase, subscription or sale of ownership interests and shares in companies as well as the Company’s participation in other entities; • consent to transferring an insurance portfolio in its entirety or in part.
Moreover, the scope of the Strategy Committee’s activities may include other matters entrusted to it by the Supervisory Board.
In connection with the resignation of Alojzy Nowak from the Supervisory Board, on 21 April 2020 his membership in the Strategy Committee ceased.
Most Committee meetings were attended also by the remaining Supervisory Board Members.
Composition of the Management Board The Management Board is composed of three to eight Members appointed for a joint term of office spanning three consecutive full financial years. As at 31 December 2020, the Management Board was composed of eight members.
A Management Board Member may not be a person who fulfills at least one of the following conditions: • acts as a social associate or is an employee of an MP’s office, senator’s office, MP-senator’s office or office of a member of European Parliament pursuant to an employment agreement or provides work on the basis of a mandate agreement or other similar agreement; • is a member of a political party’s governing body externally representing a political party and authorized to take down obligations; • is employed by a political party pursuant to an employment agreement or provides work on the basis of a mandate agreement or other similar agreement,
Changes in the composition of the Management Board in 2020 As of 1 January 2020 the Management Board composition was as follows: • Paweł Surówka – President of the Management Board; • Aleksandra Agatowska – Management Board Member; • Adam Brzozowski – Management Board Member; • Marcin Eckert – Management Board Member; • Elżbieta Häuser-Schöneich – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member.
Aleksandra Agatowska tendered her resignation from the PZU Management Board as of 19 February 2020. Accordingly, as of this date, the Management Board composition was as follows: • Paweł Surówka – President of the Management Board; • Adam Brzozowski – Management Board Member; • Marcin Eckert – Management Board Member; • Elżbieta Häuser-Schöneich – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member.
Paweł Surówka tendered his resignation from the PZU Management Board as of 12 March 2020. Consequently, on the same day the Supervisory Board appointed Beata KozłowskaChyła to the position of President of the Management Board subject to obtaining the consent of the Polish Financial Supervision Authority. Until the consent is obtained Beata Kozłowska-Chyła is the acting President of the Management Board. On the dame day, the Supervisory Board appointed Małgorzata Kot to the position of Management Board Member, effective as of 1 June 2020.
On 15 April 2020, in connection with submission of the representation on withdrawal of consent to sit on the PZU Management Board by Małgorzata Kot, the Supervisory Board repealed the resolution on her appointment. On 15 April 2020, the Supervisory Board appointed Ernest Bejda to the position of Management Board Member, effective as of 4 May 2020.
Management Board; • Ernest Bejda – Management Board Member; • Adam Brzozowski – Management Board Member; • Marcin Eckert – Management Board Member; • Elżbieta Häuser-Schöneich – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member.
On 9 September 2020, Elżbieta Häuser-Schöneich and Adam Brzozowski tendered their resignations. The Supervisory Board appointed Małgorzata Kot and Krzysztof Szypuła to the position of Management Board Members, effective as of 10 September 2020..
• Ernest Bejda – Management Board Member; • Marcin Eckert – Management Board Member; • Małgorzata Kot – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member • Krzysztof Szypuła – Management Board Member.
The following persons served as PZU Group Directors in PZU in 2020: • Aleksandra Agatowska (from 20 February 2020); • Małgorzata Kot (from 16 April to 9 September 2020); • Bartłomiej Litwińczuk; • Dorota Macieja; • Roman Pałac (to 12 March 2020).
The following persons served as PZU Group Directors in PZU Życie in 2020: • Adam Brzozowski (from 9 September 2020); • Ernest Bejda (from 4 May 2020).
Management Board’s powers and operating rules The Management Board exercises any and all rights related to managing PZU which are not otherwise reserved by law or the provisions of the Articles of Association to the Shareholder Meeting or the Supervisory Board. Two Management Board Members acting jointly or one Management Board Member acting jointly with a commercial proxy are authorized to represent the Company. The Management Board adopts its rules and regulations, which are approved by the Supervisory Board. On 9 September 2020, the Supervisory Board approved the new Rules and Regulations of the Management Board, adopted on 1 September 2020.
The Rules and Regulations of the Management Board define: • the scope of the Management Board’s powers and activities that require approval or confirmation by the Supervisory Board; • powers of the President of the Management Board and other Management Board Members; • principles and organization of the Management Board’s activities, including its meetings and decision making procedures; • rights and obligations of Management Board Members upon dismissal.
Company’s activity and the Management Board’s report on the activity of the PZU Group and the Company’s financial statements and consolidated financial statements of the PZU Group for the previous financial year; • accepting the solvency and financial condition report of the Company and the solvency and financial condition report of the PZU Group; • accepting the Company’s own risk and solvency assessment report and the PZU Group’s own risk and solvency assessment report; • adoption of a report on representation expenditures and expenditures for legal, marketing, public relations and public communication services and management consulting services; • adoption of a report on the application of best practices, as defined by the Prime Minister pursuant to the Act on Rules for Managing State Property of 16 December 2016, addressed to companies in which the State Treasury holds an equity stake; • approval of a motion to distribute profit or cover loss; • determining premiums in compulsory and voluntary insurance and the general terms and conditions of voluntary insurance; • determination of the scope and size of outward reinsurance and the tasks for inward reinsurance; • adoption of an annual audit and control plan and a report on its implementation with conclusions; • determining the terms and conditions of investment, prevention and sponsoring activities; • granting sureties and guarantees excluding insurance operations and contracting or providing credit facilities or loans by the Company - excluding credit facilities and loans granted from the Company Social Benefits Fund; • appointment of a commercial proxy.
The Management Board prepares and presents to the Company’s pertinent governing bodies, along with the Management Board’s report on the Company’s activity: • report on representation expenditures and expenditures for legal, marketing, public relations and public communication services and management consulting services; • report on the application of best practices, as defined by the Prime Minister pursuant to the Act on Rules for Managing State Property, addressed to companies in which the State Treasury holds an equity stake.
The Management Board adopts resolutions only in the presence of the President of the Management Board or a person designated to head the work of the Management Board during the President’s absence.
Resolutions of the Management Board are adopted by an absolute majority of votes; in the event of a voting tie, the President has the casting vote. With the consent of the President of the Management Board, the Management Board may adopt resolutions by written procedure or using means of direct remote communication, if all the Management Board Members have received the draft resolution with justification and at least half of the Management Board Members took part in the adoption of the resolution.
In 2020 the PZU Management Board adopted 364 resolutions – both at meetings and by written procedure or using means of direct remote communication.
Presented below are the scopes of responsibilities of the Management Board Members in office in 2020.
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President of the PZU Management Board since 2 October 2020 / acting President of the PZU Management Board from 12 March to 1 October 2020 internal audit, compliance, PZU Group strategy, strategic analyses, corporate communication, reinsurance
Ernest Bejda Member of the PZU Management Board since 4 May 2020 / PZU Group Director in PZU Życie since 4 May 2020
Member of the PZU Management Board since 28 March 2019 / Member of the PZU Życie Management Board since 1 May 2019 corporate management and corporate governance in the PZU Group, administration, IT, innovations, digital services, mobile application development
Name (Management Board composition at the end of 2020) In the PZU Group
PZU Życie bank protection products, investment products, sales of investment products
PZU and PZU Życie health product management, strategic management of the CRM product offer, remote sales PZU: mass products and insurance program management, tariff actuarial services, product research PZU Życie group and individual products management, tariff actuarial services, product research
In 2020, there were the following standing committees with participation of Management Board Members and PZU Group Directors: PZU Pricing Committee
Tasks • defining the pricing strategy and tactics through formulation of guidelines for the Head Office organizational units responsible for tariff setting in product groups or insurance products as regards prices and assumptions pertaining to product profitability;w
• monitoring pricing-related actions undertaken by directors authorized by the Management Board; • monitoring the key ratios for key insurance products, including profitability levels and loss ratios; • taking a stand on other key issues which influence product profitability and tariff-setting mechanisms.
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Purpose strategic coordination of Data Governance management processes at PZU and PZU Życie
Tasks • supervision over implementation of guideline no. 8 indicated in the “Guidelines for managing information technology and the security of the information and telecommunications environment in insurance and reinsurance companies” issued by the Polish Financial Supervision Authority on 16 December 2014; • defining the Data Governance strategy; • approving the draft Data Governance Policy and recommending its adoption to the Management Board; • approving the draft Solvency II Data Quality Management Policy and recommending its adoption to the
Purpose taking, and issuing opinions on, investment decisions; defining exposure limits
Tasks • making investment decisions on: individual transactions to the extent defined in the attachment to the “Investment activity rules and regulations”, individual transactions regardless of the amount limits defined in the attachment to the “Investment activity rules and regulations” within their powers, if the opinion of the Risk Department is negative, target value of assets denominated in foreign currencies and FX position in foreign currencies; • issuing opinions on investment decisions; issuing opinions, on TFI PZU’s request, on transactions above PLN 50,000,000 executed within the framework TFI PZU funds in which PZU and PZU Życie are the sole participants, issuing opinions on investment decisions on the request of the Management Board Member overseeing the Investment Division; • defining exposure limits in individual entities or groups of entities up to PLN 600,000,000 through setting credit limits and concentration limits.
Tasks excluding the tasks and decisions within the powers of the Company’s governing bodies and other committees operating in the Company’s organizational structures: • monitoring the solvency of the Company and the PZU Group; • supervising the risk management system and processes for the following risks: - actuarial risk, - market risk, - credit risk, - operational risk, with special focus on IT and security risk - compliance risk with regard to their monitoring, assessment and making decisions on their acceptance or mitigation; • supervision resulting from establishing the PZU Group as a financial conglomerate, in particular over: - capital adequacy of the financial conglomerate and the strategy to proceed in that regard - the material intra-group transaction area, - financial conglomerate risk concentration area, - risk management area and internal control area; • supervision over the reporting preparation process following from implementation of the provisions of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the takingup and pursuit of the business of Insurance and Reinsurance (Solvency II).
Purpose decision-making regarding market, credit and concentration risks on: (i) permissible sizes of individual risks; (ii) policies and methodologies for management of individual risks
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Purpose ensuring correct execution of the sales process for the properties in PZU’s and PZU Życie’s resources
Purpose facilitating the process for selection of suppliers of goods and services and monitoring the cooperation with suppliers in accordance with the PZU Group strategy
Tasks • making decisions on fulfilling requisitions or, on the Procurement Department’s request, on the final form of the description of the purchased item, if it is not possible to agree on such form between the Procurement Department and the Ordering Unit or Project; • ordering additional activities or providing additional information by the Ordering Unit, Project or Procurement Department by a specified deadline, if this is required for the decision on the final form of the requisition specified in item 1; • making decisions on initiating the process of renegotiation of the terms or termination of an existing agreement on a substantiated request of the Procurement Department if there is no agreement between the Procurement Department and the business owner in the given case; • inspection of selected purchasing procedures executed without participation of the Procurement Department or ordering such inspection from the Procurement Department.
Tasks • issuing opinions on the strategic structure of investments to ensure the appropriate level of safety, financial liquidity and profitability and quality of the investment portfolio for PZU and PZU Życie, including issuing opinions on the investment strategy;; • preparing recommendations for the Management Board of PZU and PZU Życie or the Company’s organizational structures, including with regard to: - investment strategy, - levels of technical rates, - principles of participation in profits in insurance products, - efforts increasing the level of own funds and increasing liquidity; • making decisions on: - rules of management of the Company’s financial liquidity, - investment objectives and guidelines or investment limitations and benchmarks for the Company’s organizational structures and investment management entities in the PZU Group,, - matching assets to liabilities and the current asset structure, including: - approving the model asset allocation for the given year and deviation limits within the investment strategy approved by the Management Board, - approving the investment objectives and guidelines or investment limitations and benchmarks for the
Company’s organizational structures and investment management entities, - setting limitations for the decisions made by the Management Board Member overseeing the Investment
Division, - approving the methodologies, principles or policies pertaining to liquidity management, - approving the rules for matching assets to liabilities and the methodologies of matching assets to liabilities.
Tasks Tasks pertaining to oversight over business continuity management system: • current oversight over the business continuity management system in the Company and issuing recommendations pertaining to tasks and directions of development in this regard; • accepting the tasks and directions of development of the business continuity management system during regular meetings of the Team or by circulation in the form of a written decision or email acceptance by Team members.
PZU Group entities, and the PZU Group spokesperson regarding external information campaigns.
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Tasks Key tasks: • approving the distribution of the budget earmarked for projects to key business areas proposed by the
Efficiency Department; • accepting rules for cooperation between dedicated areas and the Project Department as regards IT
Capacity management, prepared by the Project Department and the IT Design and Efficiency Department; • prioritizing the executed projects and making decisions on allocating IT capacity in connection with the priorities; • making directional decisions associated with changes of the IT capacity and division of the IT capacity within the Company’s current operations; • making directional decisions associated with changes of the budget earmarked for projects; • making decisions on creation, change and liquidation of dedicated areas together with apportioning IT
Asset and Liability Management Committee Committee Deputy Chairperson: PZU Group Risk Committee
Committee Deputy Chairperson: Investment Committee Committee Member: PZU Group Risk Committee, Investment Risk Committee,
Ernest Bejda Member of the PZU Management Board / PZU Group Director at PZU Życie
Marcin Eckert Member of the PZU Management Board / Member of the PZU Życie Management Board /
Deputy Committee Chairperson: Sponsorship, Prevention and CSR Committee Committee Member: Data Governance Committee, Innovations Committee,
Maciej Rapkiewicz Member of the PZU Management Board / Member of the PZU Życie Management Board
Member of the Crisis Management Team for Contacts with Strategic Partners Committee Member: PZU Pricing Committee, Data Governance Committee,
Member of the Crisis Management Team for Real Estate Committee Chairperson: Sponsorship, Prevention and CSR Committee, Property
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Ernest Bejda PZU Management Board Member since 4 May 2020 and PZU Group Director since 4 May 2020. Graduate of the Faculty of Law and Administration at the Maria Curie-Skłodowska University in Lublin. He completed prosecutor and advocate trainee programs. Prior to his employment in the PZU Group he worked in the General Customs Inspectorate in Warsaw, and then he ran his own advocate practice. He co-founded the Central Anti-Corruption Bureau in which he served as its Deputy Head (2006-2009), and then headed it up (2016-2020). Supervisory Board Chairman of PZU Centrum Operacji S.A., Supervisory Board Deputy Chairman of Alior Bank S.A. and Supervisory Board Member of TFI PZU S.A.
Małgorzata Kot PZU Management Board Member since 10 September 2020 / PZU Życie Management Board Member since 16 April 2020. Graduate of the Department of Economic Sciences and Management at the Nicholas Copernicus University in Toruń. She completed her post-graduate studies at the Economic University in Poznań in the field of economic insurance and in the Warsaw School of Economics – the Professional Coach Academy. She is a manager with more than twenty years of experience in the insurance industry in the sales of life and non-life insurance. In 2001-2012 she held managerial positions in STU Ergo Hestia, PZU and HDI Asekuracja TU. Since 2012 she has been affiliated with TUiR Allianz Polska SA, where she served in the following functions: Director of the Department for Cooperation with Key Partners, Director of the Department for Cooperation with Multiagencies and Director of the Department for Cooperation with Key Partners and Bancassurance.
Tomasz Kulik Member of the PZU Management Board since 14 October 2016 / in the PZU Życie Management Board since 19 October 2016. Graduate of the Warsaw School of Economics. He also completed MBA studies at the University of Illinois and the Warsaw-Illinois Executive MBA program. Graduate of the Harvard Business School Advanced Management Program. A member of The Association of Chartered Certified Accountants (ACCA). Through most of his professional career, he was associated with the Aviva Group (formerly Commercial Union). Prior to his appointment to the PZU Management Board, he served as the Director of the Planning and Controlling Department. He prepared the PZU Group’s strategy in 2016-2020 and the capital and dividend policy. Supervisory Board Deputy Chairman of Alior Bank S.A. in 2017-2020. Supervisory Board Chairman of TFI PZU S.A. since 2017.
Małgorzata Sadurska Member of the PZU Management Board since 13 June 2017 / PZU Życie Management Board since 19 June 2017. Graduate of the Law and Administration Faculty of the Maria Curie-Skłodowska University in Lublin and a postgraduate course in Organization and Management at the Lublin School of Business. She completed her Master of Business Administration studies at the Faculty of Management at the Lublin University of Technology and the Strategic Leadership Academy. From 2002 to 2005, she was a Member of the Puławy County Board. In 20052015 she was a member of parliament in the Republic of Poland’s Sejm. She was also a member of the National Council of the Judiciary of Poland and Supervisory Board Chairwoman of the ZUS Social Insurance Institution. In 2007, she was the Secretary of the State on labor and social policy at the Prime Minister’s Office. In 2015-2017, she served as Head of the Chancellery of the President of the Republic of Poland. She serves as the Supervisory Board Chairwoman of PZU TUW and Supervisory Board Member of Bank Pekao S.A. and LINK4 TU S.A.
Aleksandra Agatowska President of the PZU Życie SA from 15 February 2021 (from 19 February 2020 to 14 February 2021 acting President of the PZU Życie SA, before that: 25 March 2016 Member of the PZU Życie Management Board), PZU Group Director since 20 February 2020 (before that: from 24 October 2019 to 19 February 2020 Member of the PZU Management Board and from 25 March 2016 to 23 October 2019 PZU Group Director). Graduate of the Jagiellonian University majoring in Economic Sociology and Market Research and Executive MBA at the Kozminski University in Warsaw. She also completed the Education Program: Implementing Winnning Stategies (Columbia Business School), Managerial Finance (The London School of Economics and Political Science) and Strategic Change Management (Kellogg School of Management). She gained her professional experience working for ING Życie, ING Powszechne Towarzystwo Emerytalne and ING Spółka Dystrybucyjna. She also collaborated with the team of the Public Policy Evaluation and Analysis Center. For HDI (currently Warta S.A.), she managed the product marketing team, developing and executing sales support campaigns. Then she headed the Marketing Intelligence team at Sony Europe. At Philips S.A. she managed the Marketing and Business Intelligence team in 17 countries of the region. As an external consultant, she advised among others Aviva SA on the implementation of distribution channel projects. She also has experience in corporate governance. Currently, she serves as the Supervisory Board Chairwoman of Alior Bank S.A.
Bartłomiej Litwińczuk PZU Życie SA Management Board Member and PZU Group Director since 19 August 2016. Graduate of the Faculty of Law and Administration at the University of Warsaw. In 2009 he completed his advocate trainee program and passed the professional examination. Advocate in the Warsaw Bar Association. He specializes in civil law. He combines his business knowledge with extensive experience resulting from his provision of legal assistance services, in particular in cases related to commercial company law, copyright law, administrative law and criminal business law. In the past, he also served as an advisor to the Extraordinary Committee of the Sejm for changes in legal codes. He has experience in corporate governance. Moreover, he is a member of the regulatory authorities of commercial law companies.
Corporate governance 9.8 Compensation paid to members of supervisory and management bodies
As at 31 December 2020, the benefits for 2017 and 2018 for PZU Management Board members under the variable compensation system were awarded and paid. This payment was for the non-deferred portion of variable compensation and the first tranche of the deferred variable compensation.
Below is the compensation or non-cash benefits paid or transferred in 2019 or 2018 to the current and former Members of the PZU Management Board and Supervisory Board and PZU Group Directors.
Management Board, of which: 1,761 - 2,007 1 Including remuneration and bonus for function of Managing Director for Product Strategy discharged from 1 January to 9 September 2020 2 Including non-competition fee of PLN 210 thousand and severance pay of PLN 233 thousand 3 Including non-competition fee of PLN 210 thousand and severance pay of PLN 233 thousand 4 Including non-competition fee of PLN 483 thousand and severance pay of PLN 242 thousand 5 Including non-competition fee of PLN 383 thousand and severance pay of PLN 192 thousand 6 Including non-competition fee of PLN 193 thousand and severance pay of PLN 97 thousand 7 Including non-competition fee of PLN 49 thousand and severance pay of PLN 77 thousand
Tomasz Karusewicz 8573 515 n/a n/a 1Including fixed remuneration and annual bonus for the Managing Director for Product Strategy discharged from 1 January to 9 September 2020 2 Including non-competition fee of PLN 280 thousand and severance pay of PLN 140 thousand 3 Including non-competition fee of PLN 74 thousand and severance pay of PLN 115 thousand
Tomasz Karusewicz 143 n/a 1 Including PLN 445 thousand for Advanced Management Program at Harvard Business School 2 Including PLN 473 thousand for Advanced Management Program at Harvard Business School 3 Including PLN 515 thousand for Advanced Management Program at Harvard Business School
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Respecting individuality, equal treatment and prevention of discrimination are supported by the adopted procedures and undertaken initiatives: • countering mobbing – support is given by the Anti-mobbing
“PZU Group’s Best Practices”, which are a code of ethics for all employees, promote mutual respect, cooperation and equal treatment, taking into account diversity of roles, character and personality traits. These are the foundations on which the success of the whole organization is built.
Management Board and Supervisory Board Members are selected for the new term of office in compliance with the principles of equal access of men and women to positions in the company’s statutory bodies. The composition of the PZU Management Board and Supervisory Board also addresses the need of age diversification among their Members.
PZU Management Board number of persons % number of persons % number of persons %
women men women men women men women men women men women men
Representation by the Parent Company’s Management Board on the preparation of standalone and consolidated financial statements and the activity report To the best knowledge of the PZU Management Board, the PZU Group and Issuer’s annual consolidated financial statements and comparative data have been prepared in line with the prevailing accounting principles, and honestly, accurately and clearly reflect the PZU Group’s and the Issuer’s assets and financial position as well as their financial result. To the best knowledge of the PZU Management Board, the report on the activities of the PZU Group and PZU SA contains a true picture of the development, achievements and situation of the PZU Group and the Issuer, including a description of basic threats and risks.
Cooperation with international public institutions Under Solvency II, PZU has the ability to consult the European Insurance and Occupational Pensions Authority (EIOPA).
In 2020, Bank Pekao signed an annex to the portfolio guarantee agreement with the European Investment Fund. It extended the ability to use the EFI COSME guarantee under the existing conditions, in the period from 1 January 2021 to 30 June 2021. Alior Bank also provides guarantees to commercial undertakings under the COSME program and the European Fund for Strategic Investments (“EFSI”).
As at 31 December 2020, Alior Bank was a party to an agreement entered into with the European Investment Fund (EIF) and the European Investment Bank (EIB) as a counterguarantor for synthetic securitization of its business loan portfolio up to PLN 1.5 billion.
Information about significant executed agreements On 4 February 2020, the PZU Management Board adopted a resolution to select an offer in the proceeding to lease premises for the PZU Head Office and sign a letter of intent with Bitra Enterprise 1 sp. z o.o., a member of the Skanska Group. According to the resolution in question, the PZU Management Board accepted a scenario on how to proceed in the selection of headquarters for the PZU Head Office involving the conclusion of a lease agreement for office and storage space and parking spaces with Bitra Enterprise 1 sp. z o.o., with its registered office at Al. Solidarności 173, 00-877 Warsaw (“Lessor”) and approved the selection of building “Y”; it is under construction in the Generation Park complex situated at Rondo Daszyńskiego 4 in Warsaw (“Building”) as the new headquarters of the PZU Head Office.
On 30 June 2020, the PZU Management Board adopted a resolution on the execution of a lease agreement for the PZU Head Office with the Lessor. On the same date, an agreement was signed to lease office space, commercial and service space, storage space and parking spaces in the Building (“Lease Agreement”). The lease agreement contains clauses contemplating contractual penalties regarding the Lessor’s liability for delays in handing over the leased facility, hindrances and impediments to usage of the leased area and violations of the non-compete clause.
The total estimated gross value of the Lease Agreement to lease the Building over the 10 years of its duration is approximately PLN 787 million, while the gross incremental costs related to relocation are approximately PLN 65 million. The amounts stated above may vary as a result of specific arrangements concerning the final layout, the final scope of adaptation work, the costs of fit-out and the date of translating some of the costs and financial incentives between EUR and PLN. The total value of the Lease Agreement as at 30 June 2020 should not change by more than 5% of the specified amount.
In 2020, no other significant contracts were executed in respect of the Issuer’s operations.
On 2 November 2020 PZU entered into Annex no. 1 to the Mandate Agreement to Provide Unfunded Credit Protection from Time to Time with Alior Bank. In addition, PZU entered into Annex no. 1 to the Master Agreement to Provide Counter Guarantees from Time to Time.
PLN 4,000 million. The limit is in force for a period of 3 years and is a revolving limit, meaning that the expiry of a guarantee makes the “freed up” amount available within the limit minus any possible disbursements under a guarantee.
The maximum term of the guarantees issued under Annex no. 1 to the Mandate Agreement to Provide Unfunded Credit Protection from Time to Time is 5 years. Alior Bank’s share of the due and payable receivables by virtue of the accounts receivable is 10%.
Disputes In 2020 and up to the date of preparation of this report on the activity of the PZU Group and PZU, there were no pending proceedings before court, a body competent to hear arbitration proceedings or a public authority body concerning liabilities or receivables of PZU or a direct or indirect subsidiary thereof whose unit value would be material except for the issues described in the PZU Group’s consolidated financial statements and PZU’s financial statements for 2020.
This Report on the Activity of the PZU Group and PZU for 2018 has 275 consecutively numbered pages.
We break the mold without twisting our tongues. We took to the streets with the authors of a youthful satirical YouTube channel “The Maturity Exam is a Scam” to check how well Poles speak Polish. The question we asked them was akin to the English dilemma of “saying ‘accept’ or ‘except’ a proposal”? Half of the persons responded wrongly, like many English speakers confuse “except” with “accept”, amply proving that there is still a lot of work to be done when it comes to speaking well... outside PZU.
Basic amounts of the consolidated profit and loss account (PLN million) 2016 2017 2018 2019 2020
Basic and diluted PZU Group’s profit per ordinary Issuer’s share (in PLN) 2.24 3.35 3.72 3.82 2.21
Entities measured using the equity method 37 20 17 11 72
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One-off events in PZU Group (PLN million) 2016 2017 2018 2019 2020
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Reinsurance commission and share in profits 21 27 39 43 47
Reinsurance commission and share in profits (14) (9) (6) 3 -
Acquisition costs ratio (including reinsurance commission)* 20.0% 18.4% 18.6% 19.3% 19.7%
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Insurance profit margin (excl. conversion effect) 25.8% 20.6% 22.1% 21.3% 19.7%
Data from the profit and loss account – individual insurance (PLN million) 2016 2017 2018 2019 2020
Data from the profit and loss account – investment contracts (PLN million) 2016 2017 2018 2019 2020
Data from the profit and loss account – banking activity (PLN million) 2016 2017 2018 2019 2020
Data from the profit and loss account – pension segment (PLN million) 2016 2017 2018 2019 2020
Data from the profit and loss account – Ukraine segment (PLN million) 2016 2017 2018 2019 2020 * ratios calculated with net premium earned
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Exchange rate EUR in PLN 4.3757 4.2447 4.2669 4.3018 4.4742 * ratios calculated with net premium earned
Measures insurance agent – commercial undertaking conducting agency activity pursuant to an agreement executed with an insurance undertaking. The activity of agents focuses on acquiring customers, entering into insurance contracts, participating in the administration and performance of insurance agreements and organizing and supervising agency activity assurbanking – distribution of banking products by insurance companies bancassurance – distribution of insurance products by banks insurance broker – entity holding a permit to conduct brokerage activity. Performs activities on behalf or in favor of an entity seeking insurance cover cross-selling – sales strategy for selling an insurance product in combination with a complementary insurance product or an insurer’s partner’s product, e.g. a bank’s product. Bancassurance products such as credit insurance may serve as an example
Civil Code – Act of 23 April 1964 entitled Civil Code
technical provisions – provisions that should ensure full coverage of current and future liabilities that may result from executed insurance contracts. The following, in particular, are included in technical provisions: provision for unearned premiums, provision for outstanding claims and benefits, provision for unexpired risks, provision for investment risk borne by policyholders and provision for bonuses and discounts for insureds
RODO – Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/ EC
CRR – Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential
Glossary requirements for credit institutions and investment firms (Capital Requirements Regulation)
Regulation on Current and Periodic Information – Finance Minister’s Regulation of 29 March 2018 on Current and Periodic Information Transmitted by Securities Issuers and the Conditions for Recognizing the Information Required by the Regulations of a Non-Member State as Equivalent (Journal of Laws of 2018, item 757)
credit scoring – method for assessing the credibility of an entity (usually a natural person or a business) applying for a bank loan. The result of credit scoring is ordinarily presented in the form of a score – the higher the number of points, the greater the credibility of a prospective borrower.
sell side – part of the financial sector involved in creating, promoting and selling equities, bonds, foreign currencies and other financial instruments; it includes investment bankers who act as intermediaries between securities issuers and investors as well as market makers who provide liquidity on the market. Sell-side analysts release research reports with investment recommendations and daily comments for the buy side, i.e. for asset managers gross written premium – the amounts of gross written premiums (net of the reinsurer’s share) due by virtue of the insurance contracts executed in the reporting period, notwithstanding the term of liability stemming from these agreements net earned premium – the gross written premium in a given period giving consideration to the settlement of revenues (premiums) over time through movement in the provisions for unearned premiums and the reinsurers’ share spread – the difference between the purchase and sale price of a financial instrument risk-free rate – rate of return on financial instruments with zero risk. In PZU the risk-free rate is based on the yield curves for treasuries and it is the basis for determining transfer prices in settlements between operating segments.
Unit-linked – Unit-linked insurance fund, a separate fund consisting of assets constituting a provision consisting of insurance premiums invested in the manner specified in the insurance agreement, a constituent part of unit-linked life insurance also referred to as an investment policy
UOKiK – Office of Competition and Consumer Protection, the Polish anti-trust authority, acting to ensure the development of competition, protect businesses exposed to monopolistic practices and protect consumer interests, www.uokik.gov.pl
UX (User Experience) – area related to the experiences of users of the respective tool (or, more broadly, of a process, or interacting with the brand in general). It is associated directly with web usability, which is an empirical field of knowledge dealing with the design and testing of tools (in this case: online tools) in consideration of the needs and preferences of target users. In the context of websites, it involves broadly construed usefulness and effectiveness in attaining specific goals
Solvency II – solvency system for European insurance undertakings taking the risk profile into account. These requirements have been in force since 1 January 2016 prudent person principle – principle expressed in article 129 of the Solvency II Directive of the European Parliament and of the Council on the Taking-up and Pursuit of the Business of Insurance and Reinsurance that imposes on insurance undertakings and reinsurance undertakings the requirement of investing assets in the policyholders’ best interest, properly matching investments to liabilities and duly incorporating the various types of financial risk, such as liquidity risk and concentration risk
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COR combined operating ratio, calculated for the non-life insurance sector (section II). This is the ratio of insurance expenses related to insurance administration and the payment of claims (e.g. claims, acquisition and administrative expenses) to the net earned premium for a given period; a decrease in the value of this indicator signifies an improvement in efficiency
Operating margin in group and individually continued insurance – profitability of the segment of group and individually continued insurance, calculated as the ratio of the result on operating activity without the conversion effect to gross written premium; an increase in the value of this indicator signifies an improvement in efficiency
Gross loss ratio – the quotient of the sum of gross claims and benefits and movement in the provision for outstanding gross claims and benefits and gross written premium; it shows what portion of the premium was allocated to indemnification costs; a decrease in the value of this indicator signifies an improvement in efficiency
Net loss ratio – the quotient of net insurance claims and benefits and net earned premium; it shows what portion of the premium was allocated to indemnification costs; a decrease in the value of this indicator signifies an improvement in efficiency
Cost/Income ratio, C/I ratio (banking sector) – the quotient of administrative expenses and the sum of operating income, excluding: the BFG charge, the levy on other financial institutions and the net result on realization and impairment losses on investments; a decrease in the value of this indicator signifies an improvement in efficiency
Net result on asset management by TFI PZU and PTE PZU – the sum of two values: TFI PZU’s result on external distribution (i.e. operating result established as the difference between revenues and direct expenses allocated to external distribution, other than the PZU Group’s Assets, and indirect expenses allocated to external distribution based on the
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PZU does not undertake to publish any updates, changes, or adjustments to information, data or statements contained in these Management Board’s report on the activity of the PZU Group and PZU if the strategic operations or plans of PZU shall change, or in the case of facts or events that shall affect such operations or plans of PZU, unless such an obligation to inform resulted from applicable provisions of the law.