PZU Group’s operations 35 3.1 Structure of the PZU Group 36 3.2 Non-life insurance (PZU, LINK4 and TUW PZUW) 37 3.3 Life insurance (PZU Życie) 43 3.4 Banking (Bank Pekao, Alior Bank) 47 3.5 Mutual funds (TFI PZU) 53 3.6 International operations 54 3.7 Medical services (Health Area) 56 3.8 Pension funds (PTE PZU) 59 3.9 Other operating areas 60
PZU 2020 - More Than Insurance 63 4.1 Recap of Group Strategy “The New PZU – More Than Insurance” 64 4.2 New operating model 65 4.3. Main business objectives 69 4.4 Strategy operationalization 72 4.5 Support for strategy implementation 79 4.6 Pursuit of key projects and initiatives in 2017 80 4.7 Key financial indicators of the PZU Group’s Strategy 2020 84
PZU to become the largest financial group in Poland and Central and Eastern Europe.
Investments in foundations to guarantee PZU’s growth, taking care of its client base and maintaining cost discipline mean that we are capable of effectively managing our capital and generating a high level of earnings while offering the highest standards of service. In 2017 we once again posted an above average, doubledigit increase in gross written premium (+13.0%) totaling
Taking advantage of the conducive environment and the very strong economic standing, we secured PLN 2.25 billion in a private subordinated bond issue. It was the largest issue of this type of bonds in the history of the Polish financial sector and at the same time the first issue in Poland complying with Solvency II
Equity Partners undertook to open an office in Poland (on top of the offices they already have in Switzerland and New York).
Alior banks is also an important issue whereby we will be able to devise comprehensive financial solutions responding to the needs of clients and in various areas and at various life stages.
In conjunction with the ongoing pursuit of these strategic avenues, PZU will retain its position as one of the most stable and profitable financial groups in Europe that will be able to generate an ROE in excess of 22% and pay an attractive dividend while keeping its Solvency II solvency ratio at a minimum level of 200%.
Such a great expression of trust in PZU’s shares serves as confirmation for the directions we have taken and the initiatives we are pursuing. In 2017 we placed great emphasis on developing our insurance and banking business and on introducing innovative tools in client service and management. We have implemented important growth initiatives in health and investments. We have set the bar high for our competition, by setting trends and strengthening our position as the largest insurer in Poland, simultaneously contributing to greater stability and enhancing the financial standing of the Polish economy.
On behalf of the Management Boards of the PZU Group companies,
2017 was an exceptionally intensive period for the financial markets. Investors focused their attention on central banks which kept applying an accommodative monetary policy in an environment of weak inflation. In connection with moderate geopolitical risk, this contributed to growth in all asset classes on global markets.
Dear Investors, 2017 was a period of ambitious projects carried out by the
PZU Group, whose powerful influence as a national champion is taking on greater significance. The dynamic growth in the Group’s results posted in 2017 generates shareholders’
earnings and also contributes to the growth of other branches of the polish economy such as finance, trade, car repair, real estate and logistics.
PZU’s prospects for the upcoming years provide ample cause for satisfaction. I am convinced that the Management Board’s ongoing persistent actions in the context of the newly-adopted strategy will generate high added value for the shareholders, clients and employees.
Why do I run? Thousands of reasons “run” through my mind: because I like to compete, fatigue, the weight of a medal handing around my neck. I cannot live anymore without training, endorphins, the scent of mountains and forests. I will never resign from competing for the very best result, athletic friends and the taste of the pea soup they serve at the finish line of races.
PZU heads up the group and its traditions date back to 1803 when the first insurance company was established in Poland. Since 2010, PZU
has been listed on the Warsaw Stock Exchange where it has been one of the large cap blue chips offering the highest amount of liquidity from its floatation.
PZU Group has over PLN 300 billion of assets and it renders services in five countries. According to spontaneous brand recognition surveys,
Group companies are active not only in life and non-life insurance but also in investment, pension, health care and banking products. They cooperate with various industry leaders in the framework of strategic partnerships by creating tailor-made products for their clients. For instance, by collaborating with companies in the telecommunications industry and the power sector, PZU offers insurance of electronic equipment and assistance services to individuals and businesses. In addition, the Group has kicked off collaboration with LOT and Allegro in the framework of strategic partnerships in 2018.
It is the Group’s strategic ambition to pursue a new approach to building client relations, thereby leading to the integration of all operating areas with the client at the focal point. This will make it possible to deliver products that are well-matched to clients at the appropriate time and place and respond to other client needs on a comprehensive basis. This process will be supported by harnessing tools rooted in artificial intelligence, big data and mobile solutions that will contribute to building an entrenched technological advantage in integrated client service.
Our offer is transparent and satisfies our customers’ genuine expectations; we apply clearly-defined rules to our organization’s operation
We offer friendly and efficient service and competitive prices; we control our costs and ensure that we have efficient processes
Health care - offering health insurance and medical care services, prophylaxis, prevention, promoting a healthy lifestyle
Managing the level of financial, operational and regulatory security Protect the sustainable growth in the PZU Group’s value Protect the PZU Group’s values and reputation Ensure that the highest standards of conduct are observed in all operating areas
Effective asset and liability allocation Adequacy of technical provisions Procuring liquidity Procuring capital security
Contribution of the banks to the PZU Group’s operating result (PLN million)
PZU Group (excluding banks) Alior Bank Pekao * group and individually continued insurance
Net profit attributable to the equity holders of the parent company 2,910 1,935 2,343 2,968 3,293
Receivables from clients due to loans 169,457 44,998 30,254 - -
Equity attributable to the shareholders of the parent company 14,622 12,998 12,924 13,166 13,111
PZU: Institution of the Year (quality of service in branch offices and remote channels)
LINK4: Client’s Golden Laurel LINK4: Super brand Pekao: Best Corporate Bank in Poland 2017
LINK4: EFFIE AWARDS 2017 Alior Bank: Bank of the Year in Poland
PZU: The Best Annual Report (distinction for the annual report offering the highest user value)
LINK4: Best quality employer LINK4: Human Capital Investor Pekao: Top Employer 2017 Pekao: Stars of Banking
JUNE PZU raises PLN 2.25 billion in a private subordinated bond issue
In this chapter: 1. Main trends in the Polish economy 2. Situation on the financial markets 3. Regulations pertaining to the insurance market and the financial markets in Poland 4. External environment in the Baltic States and Ukraine 5. Macroeconomic factors that can affect the operations of the Polish insurance sector and the PZU Group’s activities in 2018
A surprisingly high real economic growth rate, an increase in real household income and an excellent situation on the labor market created favorable conditions for PZU’s business growth.
Office, in 2017 GDP increased by 4.6% in real terms, which was the strongest growth since 2011. The main driver of economic growth was the 4.8% boost in household consumption, the strongest figures since 2008. Consumption growth was supported by increasing employment, a decline in unemployment and an increase in real income. Investments in fixed assets increased by 5.2% after falling by 7.9% in 2016. Nevertheless, a strong double-digit investment growth rate was recorded only in the last quarter of 2017, when, apart from public investments co-funded by the EU, it was most likely enterprise investments that started to grow more noticeably. The unexpectedly good economic situation in the global economy, especially in the euro area, supported growth of Polish exports and Poland’s economic growth. Due to the dynamic growth of domestic demand, providing a strong driver of imports the impact of net exports on GDP growth was slightly negative in 2017. On the other hand, GDP growth in 2017 was supported by the accumulation of inventories.
in 2017, compared to 3.7% in the previous year. Despite an increase in inflation, this also allowed for a solid real increase in average salary in the economy (3.4%), even though it was slightly lower than in 2016 (4.3%). Employment growth resulted in a strong expansion of the payroll budget in the corporate sector. In December 2017 it was 12.2% higher than in the previous year.
In 2017, the consumer price index (CPI) increased on average by 2.0% after a three-year deflation period, compared with -0.6% in 2016. In December 2017 consumption prices were 2.1% higher than in the previous year. Top contributors to the 2017 inflation growth included: increasing food prices
(3.8%). In such a situation, the net inflation rate (CPI net of food and energy prices) rose in 2017 much more slowly than the general consumer price index – by an average annual rate of 0.7%, compared to a decline by 0.2% one year before, pointing to a moderate increase in inflationary pressure. The negative demand gap was only closed in 2017 and inflation was also suppressed by weak price increases abroad.
Policy Council decided not to change interest rates. They remained flat at the level set in March 2015 – the reference interest rate was 1.5%. According to the Monetary Policy
Council, the current level of interest rates is still conducive to keeping the Polish economy on a sustainable growth path and helps it preserve macroeconomic balance.
fell by more than 2 percentage points compared to the end of 2016 and is roughly 52%, compared to 54.1% of GDP a year earlier. In 2017 Poland had no problems whatsoever in obtaining market financing – 27% of its borrowing needs planned for 2018 had been pre-financed at yearend.
The good economic conditions on financial markets were supported by a synchronized global economic recovery and reduction in uncertainty. A series of elections in key European
Union countries brought outcomes suppressing the risk of disintegration of the EU and the euro area, and the last months of the year were also marked by a declining risk of a ‘hard Brexit’. Nor did the concerns about a significant increase in protectionist policies in the global economy materialize. The positive trends on the financial markets were not disturbed either by the temporary manifestation of other risks in 2017, such as the declaration of independence by
from the beginning of April to year-end (driven mainly by increased valuation of companies in the energy and banking sectors), the sWIG80 small cap index lost 10.90% in that period (even though it rebounded in mid-November).
to 3.51%. In the first half of 2017, the spread between Polish and German 10-year sovereign bonds narrowed down. After a slight rebound in July, the spread stabilized later in the year.
In 2017, the main currency markets showed a clear trend of the euro appreciating against the US dollar and the Swiss franc. Ultimately, the EUR/USD exchange rate rose by 13.8%
in 2017, while the EUR/CHF rose by 9.2%. In that period the
Over 2017, the USD/PLN exchange rate fell by as much as 16.7% to about 3.48, while the euro was worth about PLN
4.17 at the end of 2017 (down by 5.7% compared to the end of 2016). Additionally, the Polish zloty appreciated against the Swiss franc by 13.4% (the CHF/PLN exchange rate fell to roughly 3.57).
At the end of 2017, the consumer price index (CPI) was up 2.1% y/y in real terms and is convergent with the rapid estimate 4.6% y/y due to the high rate of growth in consumption and investments from the previous year decline y/y in the previous year
For the insurance business, 2017 was a year of adaptation to EU regulations, which increased protection of customers and equipped the regulator with powers and resources to effectively control and enforce compliance with the established rules: The Insurance Distribution Act of 15 December 2017 implements into Polish law the provisions of the Directive
Distribution Directive, or IDD). The act increases the protection of customers concluding insurance agreements, which entails imposing additional requirements on entities offering insurance, mainly reporting obligations. The new rules are supported by strict administrative sanctions applied in the event of breaches of sales obligations and rules.
The regulatory authority may impose fines on an insurance undertaking in the amount up to PLN 21,827,500 for specified violations or 5% of the gross written premium reported in the most recent financial statements for the financial year, or twice the amount of benefits obtained or twice the amount of losses avoided as a result of the violation, if they can be determined.
Implementation of MiFID II into the national legal system is proposed in the Bill amending the Financial Instruments
Trading Act of 29 July 2005 and certain other acts. The bill was submitted to the Council of Ministers for consideration in December 2017. The provisions implementing the MiFID II
The Act of 14 December 2017 amending the Insurance and Reinsurance Activity Act, which served the purpose of adapting the Polish law to the EU regulations relating to insurance and reinsurance business. The amendments concern in particular: the operations of internal insurance and reinsurance undertakings, large risks co-insurance contracts concluded by domestic insurance undertakings where the risks are located in the territory of other EU member states, and large risks co-insurance contracts concluded by foreign insurance undertakings where the risks are located in the territory of Poland.
Council for companies with State Treasury shareholding and state legal persons was established as an advisory body providing the Prime Minister with comprehensive and professional support in the area of coordination of corporate governance, which includes issuing opinions on candidates for members of corporate bodies of companies with State
The Act of 11 May 2017 on Statutory Auditors, Audit Firms and
Public Supervision, which aims to strengthen the objectivity and independence of audit firms and statutory auditors and to reduce conflicts of interest between statutory auditors and audit firms on the one hand and audited firms on the other.
The Act assumes, among other things, that audit firms will not be able to provide simultaneously tax advisory services to the same clients. At the same time, the Act has created a special list of Public Interest Units (JZP) which includes public companies and financial market institutions burdened with specific obligations. A new model of public supervision over audit firms has also been proposed.
Act of 8 December 2017 on the Supreme Court. Among the various legal solutions introduced by the Act, there is a new appeal measure: an extraordinary petition. The Act stipulates that in a situation where the conditions specified in the Act are satisfied, the filing of an extraordinary petition will be possible against a final non-appealable ruling terminating the proceedings in the case, provided that it is necessary to ensure the rule of law and social justice.
Acts, exemptions were removed regarding services forming an element of insurance and financial services. As a result of the amendments, services provided by third parties to insurance undertakings are no longer covered by the exemption. Among such services are claims handling services provided separately and not constituting an insurance service or an insurance brokerage service..
In connection with the entry into force of the Act of 9 June 2016 on the Rules for Setting the Compensation of Persons
External environment provisions of law will enter into force on 25 May 2018 and will apply to all entities involved in the processing of personal data as part of their business. The new regulations introduce a number of changes and broaden the scope of responsibility of data controllers and data processors. The purpose of these changes is to ensure transparency of information transmitted to the person providing the data and to govern issues related to the right to remove certain data from the database at the request of their provider. These new regulations are also intended to provide natural persons and regulatory authorities with effective tools to react properly to any breaches of the
Regulation. In the operations of insurance and reinsurance undertakings, the new regulations will affect processes involving the processing of personal data, both from the legal perspective and in terms of IT systems, and will cover the majority of processes and areas of insurance activity, most notably sales and client service, on-line services, cross-selling, underwriting, marketing, CRM, counteracting insurance fraud and IT systems supporting business processes.
In mid 2018, the government presented a bill for social consultation within the framework of planned pension reform.
(1.5%) and employees (2.0%). The state is supposed to make an additional contribution to ECAPS in the form of a welcome contribution of PLN 250 plus an annual subsidy of PLN 240.
In addition, employees and employers will also have the opportunity to remit an additional contribution. Employees will be able to pay an additional 2%, while employers will be able to pay an additional 2.5%. ECAP assets will be managed by
Mutual Fund Investment Companies (TFI) with which a given employer will enter an agreement to run an ECAP. In the PZU
Latvian goods and services were on the increase. During the first ten months of 2017, exports grew by 9.6% y/y. The continuous improvement in the financial standing of Latvian trading partners and increasing prices throughout the world were the main factors driving the value of exports.
Estonia, GDP growth in 2017 will surpass 4%, which will be the highest rate of growth in the last six years.
The consumer price index (CPI) moved up 3.4% in 20175, compared to the previous year. The annual shift in this indicator was again driven largely by food prices and was heavily affected by price changes in the external environment.
External environment 2.5 Macroeconomic factors that can affect the operations of the Polish insurance sector and the PZU Group’s activities in 2018
In 2018, the rapid GDP growth in Poland should be continued with maintenance of a robust consumption and a significantly higher rate of growth in investment vis-à-vis 2017. At the turn of 2017 and 2018, projections of economic growth in the euro area were revised upwards. This also improved GDP
As the infrastructural projects co-funded by the EU move to the execution stage, investments will be clearly on the increase. At the end of 2017, corporate investments also started to grow more noticeably and this trend should continue well into 2018. However, their rate of growth may be under pressure due to problems with finding properly qualified staff.
NBP rates at the current level for the rest of 2018. A possible temporary decrease in inflation at the end of next year may help the Monetary Policy Council make this decision.
Among the internal factors that may push down GDP growth in Poland, there are problems with hiring properly qualified staff, a possible prolongation of stagnation in private investment or a higher than expected increase in inflation eroding real household incomes. However, the likelihood of a major slowdown in GDP growth in 2018 is not high. Fiscal risk in 2018 also seems to be on the low side due to the continued robust GDP growth and the structure of this growth conducive to higher tax receipts.
The prospect of a higher inflation rate and the continuation of above-average economic growth (also around the Polish economy) should drive an increase in government bond yields, which in the long term will be beneficial to the PZU Group, although in the short term may adversely affect the net result on investing activity. The risk of volatility in equity prices has increased significantly. In addition to growing valuations and prospects of a dwindling GDP growth rate after 2018, this is also affected by the risk of a significant correction in the U.S.
where the current recovery is already very mature. Despite the high likelihood, as declared by the Monetary Policy Council, that the current levels of interest rates will be maintained, the forecasting of the NBP’s monetary policy in 2018 is also a matter of uncertainty. The NBP’s inflation projection published in November 2017 points to a risk of stronger inflation after 2018.
NBP base rate in % (end of period) 1.50 1.50 1.50 1.50 2.00 * Estimate as of 2nd March 2018 Source: Macroeconomic Analysis Office PZU
In this chapter: 1. Structure of the PZU Group 2. Non-life insurance (PZU, LINK4 and TUW PZUW)
1 Armatura Group included the following entities: Armatura Kraków SA, Aquaform SA, Aquaform Badprodukte GmbH, Aquaform Ukraine TOW, Aquaform Romania SRL 2 Centrum Medyczne Medica Group includes the following entities: Centrum Medyczne Medica Sp. z o.o., Sanatorium Uzdrowiskowe „Krystynka” Sp. z o.o. 3 Alior Bank Group includes the following entities i.a.: Alior Bank SA, Alior Services sp. z o.o. , Centrum Obrotu Wierzytelnościami sp. z o.o., Alior Leasing sp. z o.o., Meritum Services ICB SA , Money Makers TFI SA , New Commerce Services sp. z o.o., Absource Sp. z o. o. 4 within PZU Zdrowie 3 branches are operating: CM Nasze Zdrowie, CM Cordis and CM Medicus 5 within Pekao Bank Group includes the following entities i.a: Pekao Bank Hipoteczny SA, Centalny Dom Maklerski Pekao SA, Pekao Leasing sp. z o.o., Pekao Investment Banking SA, Pekao Faktoring sp. z o.o., Pekao PTE SA, Centrum Kart SA, Pekao Financial Services sp. z o.o., Centrum Bankowości Bezpośredniej sp. z o.o., Pekao Property SA, Dom Inwestycyjny Xelion Sp. z o.o., Pekao Investment Management SA, Pekao TFI SA, CPF Management The structure does not cover investment funds and entities in liquidation.
Tower Inwestycje Warsaw - Poland PZU – 27.4696% PZU Życie – 72.5304%
Armatura Group 1 Cracow - Poland PZU FIZ AN BIS 2 – 100.00%
PZU Ukraine Life Kiev - Ukraine PZU – 53.4723% PZU Życie – 0.0053% PZU Ukraine – 46.5224%
Bank Pekao 5 Warsaw - Poland PZU – 20.00% PZU Akcji Spółek Dywidendowych – 0.0152%
At the beginning of 2018, PZU Zdrowie acquired shares in Centrum Św. Łukasza sp. z o.o. SECTION 3.7 MEDICAL
Corporate Member Limited, entitling it to 100% of votes at the shareholder meeting. SECTION 3.9 OTHER OPERATING
Gross written premium of non-life insurance undertakings in Poland (PLN million)
* including growth in written premium in the AXA Group by PLN 835 million, partly as a result of the transfer, in October 2016, of the business of Liberty Seguros Compania de Seguros y Reaseguros S.A. Poland Branch and the insurance portfolio of Avanssur S.A. Poland Branch to AXA Ubezpieczenia TUiR S.A.
The sales growth in motor TPL insurance (up PLN 3,174 million, +37.1%) and motor own damage insurance (up
22 million pertains to indirect activity) and accident and sickness insurance (up PLN 127 million, 7.9%) made a positive motor non-motor
Reaseguros S.A. Poland Branch and the insurance portfolio of Avanssur S.A. Poland Branch to AXA Ubezpieczenia TUiR
S.A., the whole market grew, partly as a result of the inclusion of the premium generated by Liberty Seguros Compania de
PZU* Market Market net of PZU PZU Market Market net of PZU
The spike in the technical result in the class of motor TPL
PLN 2,530 million, +43.2%) on the back of the changes made last year to the average premium forming a response to the market’s deteriorating results, outpacing growth in claims paid
The largest decrease in technical result was recorded in the class of insurance against fire and other damage to property
compared to the rate of growth in claims and benefits (up PLN
Non-life insurance undertakings - percentage of gross written premium in Q1 - Q3 2017 (%)
* PZU Group – PZU, LINK4, TUW PZUW ** The share of PZU Group in the non-life insurance market from direct business at the end of Q3
PZU Group’s share in the motor insurance market (direct business) is 38.5% at the end of Q3 2017
PZU Życie delivered more than of the technical result and of the net result generated by the overall life insurance market in Poland in periodic premiums at the end of Q3 2017
(by forming a mutual insurer), thereby steadily growing its market share.
After the first three quarters of 2017, the PZU Group had a 36.8% share in the non-life insurance market, compared to 35.6% after the first three quarters of 2016 (35.8% and 35.4% from direct business, respectively), thus recording growth, despite significant changes in the structure of the nonlife insurance market affecting the year-on-year comparability of premium levels (including the transfer, in October 2016, of the business of Liberty Seguros Compania de Seguros y
After the first three quarters of 2017, the PZU Group’s technical result (PZU together with Link4 and TUW PZUW) stated as a percentage of the overall market’s technical result was 56.6%
(the PZU Group’s technical result was PLN 853 million while the overall market’s technical result was PLN 1,507 million), illustrating its insurance portfolio’s high level of profitability.
The total value of the investments made by non-life insurance undertakings at the end of Q3 2017 (net of the investments made by subordinated entities) was PLN 52,623 million, up 1.9% compared to the end of 2016.
The non-life insurance undertakings in total estimated their net technical provisions at PLN 47,850 million, signifying 7.3%
As the PZU Group’s parent company, PZU offers an extensive array of non-life insurance products, including motor insurance, property insurance, casualty insurance, agricultural insurance and third party liability insurance. At yearend 2017, motor insurance was the most important group of products offered by PZU, both in terms of the number of insurance agreements and its premium stated as a percentage of total gross written premium.
Against the background of changing market conditions, in 2017 PZU aligned its offering with clients’ new interests and needs by rolling out new solutions and products, often with a touch of innovation. In mass insurance, PZU did the following: • extended its offering to include health insurance products to supplement PZU Auto, PZU Dom and Wojażer travel insurance policies. Depending on the selected option, the client receives a bundle of health benefits in the event of an accident or sudden illness in the form of access to private medical care, including medical consultations, diagnostics and rehabilitation along with advice from a Medical Assistant who will help in planning a specific course of treatment. This offering stands out among its counterparts available on the market due to an efficient organization of the treatment and rehabilitation processes with a guarantee of accessibility owing to the broad network of medical centers, including PZU Zdrowie’s own centers; • introduced a new partnership option in its motor own damage PZU Auto insurance, having properly identified clients’ expectations in a market of changing motor insurance prices. Despite a lower premium, this option offers full insurance coverage and a high quality repairs in one of PZU’s partner workshops. Along with this option, the possibility of a lump-sum deductible (of PLN 500) has been introduced, significantly lowering the premium. The deductible is fixed and invariable regardless of the value of the loss. The selection of options available in the offering
(Optimal, Maintenance and Repair, Partner) along with the application of a deductible provides the opportunity to mold the premium and protection by aligning the insurance with the client’s current needs and price-sensitivity without having to forgo motor own damage insurance; • supplemented the bundle of PZU Dom’s residential insurance with a new type of insurance, namely Remote
Assistance by an IT Specialist, providing assistance to clients experiencing problems with their computers. In such a situation, the client, over the Internet or using a dedicated application, obtains support from an IT
PZU established cooperation with the PZU Group’s member banks, namely Alior Bank S.A. and Pekao S.A., launching the roll-out of a comprehensive offering via its distribution network. PZU’s cooperation with Pekao S.A. and Alior Bank
It offers an extensive range of non-life insurance products, including motor insurance, property insurance, personal insurance and third party liability insurance.
By applying such a style, Link4’s clients may have part of their premium, up to 30 percent of it, refunded. As of 26
Zdrowie; • launch of sales of travel insurance through an insurance policy vending machine which is currently the most innovative channel for sales of insurance policies – the insurance policy vending machine at the Modlin airport near
In 2017, the primary emphasis was placed on organizational development, expansion of the team of professionals offering better insurance service to the mutual’s members and aligning its offering to its clients’ needs.
The most important activities associated with modifying its product offering in 2017 were as follows: • jointly marketing with PGE Obrót a new product called
“Health of PGE Energy” offering a guaranteed fixed price for energy coupled with an assistance service such as that from an electrician; • crafting new general terms and conditions of insurance, including directors and officers insurance (D&O); • extending the offer to include products focusing on another pillar: local governments.
Poland’s life insurance market in Poland measured by gross written premium was worth PLN 18,293 million in the first three quarters of 2017 meaning that over the most recent 5 years it contracted on average by 7.6% per annum. At the same time, gross written premium in Q1-Q3 2017 was 2.7% higher than in the corresponding period of the previous year, signifying the first year-on-year increase after 4 consecutive years of a downturn in the life insurance market, spurred predominantly by single premiums in products of an investment nature.
The evolution in the level and the growth rate of the life insurance market premium in recent years has been prompted mostly by single premiums in investment products. Attention should be drawn to the fact that the premium expansion for the overall market year on year in the first three quarters of 2017 pertained to single premiums to a greater extent
The record-breaking low interest rates contributed to the declining profitability of what are known as term deposits packaged as insurance products (polisolokata in Polish), thereby stimulating greater interest in other investment products. Moreover, as of 1 January 2015, a tax was implemented on short-term endowment insurance products offering a fixed yield or a yield defined using an index; this also contributed to constricting client interest in these types of products and ultimately to their retraction, especially of the former, from the insurance undertakings’ offering.
In subsequent years the regulatory authority’s guidelines, including guidelines regarding the level of fees incurred by clients of unit-linked products led to insurance undertakings constricting their offering of these types of products. Last year’s improvement in the condition of the equity market facilitated higher sales of unit-linked products, especially ones
Source: KNF (www.knf.gov.pl). Quarterly Bulletin. Insurance market 3/2017, Insurance market 3/2016, PZU Życie’s data periodical single single periodical
PZU Group’s operations offering a single payment. This involves clients re-allocating funds among various products, thereby reducing the fees charged for surrenders. This upswing was observed primarily in the bancassurance channel.
The total technical result generated by the life insurance undertakings in Q1-Q3 2017 was up PLN 239 million (11.0%)
Source: KNF (www.knf.gov.pl). Quarterly Bulletin. Insurance market 3/2017, Insurance market 3/2016, PZU Życie’s data these positive investment results contributed to a higher net asset value of life insurance in which the policyholders bear the investment risk (up 4.4% to PLN 59,507 million).
PZU Życie SA (PZU Życie) does business on the Polish life insurance market on behalf of the PZU Group. The company offers an extensive range of life insurance products, which for management purposes are reported and analyzed broken down into the following three segments: group and individually continued insurance, individual insurance and investment contracts.
During Q1-Q3 2017, PZU Życie wrote 34.8% of the gross written premium of all life insurance undertakings, signifying further growth on top of last year’s market share (+1.1 p.p.).
The expansion of PZU Życie’s market share was driven by a higher rate of growth in gross written premium on a y/y basis than that of all its competitors combined, both payable periodically and in the form of a single premium.
PZU’s share in just the life insurance segment (class I) for
Life insurance undertakings - percentage of periodic gross written premium in the first three quarters of
Under group and individually continued (protection) insurance, the following major changes were made in 2017: • a new bundle of insurance products called PZU w Razie
My Choice, providing the insured with a significant degree of flexibility and a choice of riders within each of these 3 modules. Moreover, it is supported by a very user-friendly proposal system enabling the seller and the client to walk together through the process of creating an individual proposal tailored to the actual specificity and needs of the client. This product is targeted predominantly at companies operating in the SME sector; • work was continued on segmenting the insurance offering among the selected client groups by focusing on the creation of a simple modular offering tailored to a specific client segment and a specific distribution channel (in implementation of the strategic postulate of the ‘strategy of 10 simple products’); • further changes were deployed in the functionalities of the system for selling and proposing insurance products – the transfer of the PZU Ochrona Plus [PZU Protection Plus]
PZU Życie, a well-regarded company and the largest insurer on the Polish market, continuously expands its product offering by adding new products or modifying existing ones.
PZU Życie’s existing client portfolio, seeking unique market solutions and looking for new strategic partnerships on the market with a view to preparing specialized solutions for specific client groups. Among the solutions that were prepared, the following ones may be distinguished (in addition to the health insurance products described in Section 3.7
Wojażer travel insurance, accident insurance and a loyalty program; • supplementing the offering with two new health riders for group life insurance. These riders provide for healthcare services in the event of a critical illness or a traffic accident or an accident at work: ◦ PZU W Trosce o Zdrowie [PZU Care for Your Health] – in the event of a critical illness, access to private medical care is arranged (in privately owned medical centers)
during the first few days following the diagnosis. These healthcare services enable monitoring the progress of treatment and early prevention of recurrent illness as well as help the patient return to physical ability; ◦ PZU Powrót do Sprawności [PZU Return to Ability] – in the event of a traffic accident or an accident at work, the insured may benefit from healthcare services
(provided in privately owned medical centers). In such cases, the medical care is intended to help the patient return to physical ability after an accident; • developing the offering by adding a new rider to individually continued insurance – insurance against an orthopedic injury caused by an accident. These healthcare services enable the patient to receive rehabilitation treatment in privately owned medical centers; • continuing the pilot project of outpatient insurance for small businesses, the so-called SOHO (small office/home office) clients, either self-employed or having no more than one employee. This product provides access to medical consultations and diagnostic tests; • The client account functionality will enable an insured under group insurance to create his or her own account on the website through which the client will have access to his or her data and, additionally, to a number of features making it possible, for instance, to set up medical appointments, report benefits, display a calendar of events, etc. Ultimately, this will serve as the main tool for the client in managing his or her insurance portfolio at PZU.
Factors, including threats and risks, that may affect the operations of the life insurance sector in 2018
Regulations pertaining to the insurance market and the financial markets in Poland 3.4 Banking (Bank Pekao, Alior Bank)
Eastern Europe with assets worth more than PLN 1,782 billion. 35 domestic commercial banks, 553 cooperative banks and 29 branches of credit institutions operated at the end of
The sector’s net result was shaped predominantly by the improved result on banking operations (PLN 24.9 billion, up 4.1% from 2016), caused by significantly higher net interest income (up 12.1%) with a concurrent upswing in the result on fees and commissions (up 9.1%).
The record result on interest in the period from January to
The balance of impairment charges on financial assets in 2017 compared with the previous year went up 7.8% to PLN 8.2 billion.
1,782 billion, up 4.1% (or PLN 70.4 billion) with respect to yearend 2016.
Gross receivables from the non-financial sector increased 3.2% to PLN 1,045 billion as at the end of 2017 vis-à-vis the year before. Growth in this area was driven mainly by receivables from enterprises (+6.1% y/y) and receivables from households (+1.7% y/y).
September 2017 was 18.65% (up 1.1 p.p. compared to the end of September 2016), while the Tier I capital ratio at the end of this period was 17.22% (up 1.2 p.p. in comparison with the end of September 2016). This increase was driven by the upheld recommendation to keep a strong capital base or, for certain banks, to strengthen it even further.
As a result of the settlement, on 7 June 2017, of the transaction for PZU and PFR S.A. (PFR) to buy 86,090,172 shares in Bank Pekao from UniCredit S.p.A. (UniCredit)
December 2016 by PZU and PFR with UniCredit to acquire a 32.8% equity stake in Pekao for a total amount of PLN 10.6 billion. The price also included payment for the acquired right to the dividend for 2016, or PLN 456 million in total.
The price per share was PLN 123. It was one of the largest transactions in the European banking sector in recent years. The acquisition of shares in Bank Pekao was linked to PZU’s aspirations set forth in the Group’s strategy to 2020 in which the goal was to amass banking sector assets totaling at least PLN 140 billion and third party assets under management totaling PLN 50 billion. In accordance with the agreement entered into by PZU and PFR, these two entities will collaborate to procure the effective execution of the Bank
The essence of the agreement is to define the rules of cooperation between PZU and PFR following the acquisition of the equity stake in Bank Pekao from UniCredit and the rights and duties of the parties as bank shareholders, in particular pertaining to agreeing on the manner of jointly exercising voting rights on the shares and the implementation of a common long-term policy for the bank’s business to attain the objectives stated above. In particular, PZU and PFR have undertaken to each other to vote in favor of resolutions on the distribution of profit and the disbursement of dividends, in accordance with the rules and within the boundaries set by the applicable provisions of law and KNF’s recommendations and in accordance with the bank’s existing practice.
Pekao, Alior Bank and the PZU Group, current activities are divided into four areas: • Bancassurance: as part of PZU and PZU Życie, more than 6.1 thousand employees of Bank Pekao have been trained and certified at the OFWCA., and in 2017 Alior Bank was already selling.
• Assurbanking: PZU supports sales of the Pekao Account in several dozen branches, and on 5 March 2018 a pilotage was launched in three branches, where PZU employees actively offer the “Przekorzystne” Account to the Bank.
The bank offers competitive products and services, high-level customer service and developed network of branches and
ATMs, providing convenient access throughout Poland, as well as a professional call center and a competitive Internet and mobile banking platform for individual and corporate clients, and small and micro businesses.
segment; • Corporate Banking – client segmentation comprises medium-sized and big corporations (segmentation based on revenues), public sector entities, financial institutions and the commercial property industry. Clients are serviced by relationship managers supported by product specialists, which supports optimization of the level of services and service costs. Relationship managers focus on providing high quality services and efficient customer service, using the best practices and integrated sales management tools.
Pekao24, a new mobile service for mobile phone browsers, which apart from the design change, friendly navigation and intuitive operation, comprises functions known to clients from the Pekao24 application for tablets and from the Internet service: summary of expenditures by category, possibility of taking advantage of the “one click” credit offer and possibility of exchanging currencies at preferential rates. In 2017 the
Investment Fund (EIF) under the EaSI program (Employment and Social Innovation Program) for loans covered by EIF
guarantees for start-ups (companies operating in the market for less than 2 years). The agreements provide for EIF
The key events in 2017 included, primarily: • adoption of strategic directions for 2018-2020 on 8 November 2017, Bank Pekao announced adoption of an intelligent growth strategy which will make the bank the leader of profitability and efficiency in Poland. Bank
Return on Equity ratio of 14% – one of the highest Poland’s banking sector. The Bank intends to generate over
Alior Bank is one of the most modern and innovative financial institutions in Poland. It is a place for people who have ideas and business courage to set new banking standards.
The bank’s offering includes products and services both for individual and business clients, including small and medium enterprises and institutional clients. The bank’s offer combines the principles of traditional banking with innovative solutions.
The share held by the branch of Lietuvos Draudimas in the Estonian non-life insurance market was in 2017
In terms of accumulated assets Pekao was number on the market, while Alior Bank was number
Clients have access to more than centers in the PZU Group’s health insurance and medical care services segment of the gross written premium on the Ukrainian non-life insurance sector, while PZU Ukraine Life attracted
The Bank’s operations are conducted by various divisions that offer specific products and services earmarked for specific market segments. At present, the Bank does business in the following segments: • Individual client (retail segment)
The key events in 2017 included, primarily: • On 13 March 2017 Alior Bank published its strategy for 2017-2020 entitled “Digital Disruptor”. By implementing this strategy, the Bank will be able to maintain the highest net interest margin on the market (4.5%), reduce its C/I
Bank’s digital transformation, in which motivated employees will guide the individual and corporate customers to the digital world, in a safe and friendly manner, which will also be profitable for the shareholders.
259 billion at the end of the year before, representing an increase by more than 7,7%.
As a result of good market climate, an increase in assets of over PLN 4 billion was recorded by equity funds, despite clients withdrawals of nearly PLN 1 billion. This was a difficult year for non-public funds – their assets shrank by over PLN 3 billion.
Within the PZU Group, there are 3 Mutual Fund Companies operating in the market: Pekao TFI, Money Makers from the
Plans (CIPs), and Group Pension Plans (GPPs) which additionally offer Individual Retirement Security Accounts
At the end of 2017, TFI PZU had 30 funds and sub-funds in its portfolio, of which 23 were also offered to clients from outside the Group.
According to the Bank of Lithuania, in 2017, the gross written premium of non-life insurance companies was EUR 561 million and increased by 21.2% compared with the previous year.
The market growth rate was largely generated by motor insurance (62.1% of the market) whose sale increased by 29.8%. TPL insurance increased by 38.3% whereas MOD
Lietuvos Draudimas continues to be the largest insurance company in Lithuania in terms of total gross written premiums for non-life insurance. The company’s share in the market at the end of 2017 was 31.0%. Considering the recent acquisition transactions, the total shares of top four players in the non-life insurance market was 80.5%.
Gross premiums accumulated by Lithuanian life insurance companies was EUR 231 million in 2017, decrease of 6.2%
insurance accounted for 24.2% of the market and TPL for 23.7%. Also health insurance (19.3% market share) and property insurance (18.3% market share) had an important position in the product structure.
The structure of non-life insurance in 2017 was dominated by motor insurance, which accounted for 61.2%, including MOD
As at the end of 2017, there were 12 companies operating in the country’s non-life insurance sector (including 4 branches of foreign insurance companies) among which the biggest 4 companies held 70.1% of the market.
As of November 2014, the PZU Group has been operating in the Lithuanian non-life insurance market through Lietuvos
Balta, which became part of the Group in June 2014, and then
company registered in 2012 and the Estonian branch acquired in 2014, which conducted operations under the Codan brand.
The Ukrainian insurance market after the first three quarters of 2017 recorded an increase in gross written premium by 26.4%, reaching hryvnia 31 billion. The premium accumulated in nonlife insurance was hryvnia 29 billion, signifying 28.5% growth
Energia Medycyna Ekologia, as well as withdrawals made by external clients.
recorded an increase in the value of external clients’ assets which resulted predominantly from: • active sales of funds and subfunds – with a particular focus on increase of the assets in the PZU FIZ Akord fund based on the Global Macro strategy,
• further increase in the distribution and efficiency of cooperation with distributors,
On the Ukrainian market, the PZU Group operates insurance business via two companies: PrJSC IC PZU Ukraine (a non-life insurance company), referred to as “PZU Ukraine”, and PrJSC
(down by 0.4 percentage points compared to the first three quarters of 2016) of the gross written premium on the
Ukrainian non-life insurance sector, which gave it fifth1 place on the market. On the life insurance market, in turn, after three quarters of 2017, PZU Ukraine Life ranked fourth 2 with a market share of 10.4% (up 1.9 percentage points from the previous period).
1 Insurance TOP, Ukrainian insurance quarterly, #4(60)2017 2 Insurance TOP, Ukrainian insurance quarterly, #4(60)2017 3.7 Medical services (Health Area)
In accordance with PMR3 data: at the end of 2016, private health care offered under fee-for-service products was worth
PLN 3.62 billion, and the value of private health insurance reached PLN 0.55 billion.
The Health Area deals with the following: • sales of health products in the form of insurance (life and health insurance and non-life health insurance) and non-insurance products (occupational medicine, medical subscriptions, partnerships and prevention programs); • development of the medical infrastructure for the public in
Poland to ensure the best availability of provided services and execution of revenue targets.
3 PMR Report „The health private market in Poland in 2017”, August 2017
The offer is addressed both to corporate clients and to the
In the Health Area the company offers a broad range of health products adapted to the segment and clients’
access to medical services comprising among others: consultations of as many as 35 specialties, up to 400 types of diagnostic tests and outpatient procedures, rehabilitation, dentistry, pregnancy care, with the possibility to expand the offer to include nonstandard services to fit the client’s needs (e.g. medical transport, spa treatment, assistance of a nurse at home)
180 hospital procedures in 7 specializations (surgery, urology, ophthalmology, laryngology, gynecology, cardiology, orthopedics)
access to comprehensive medical care in the event of an accident or sudden illness during travel abroad (among others outpatient care, rehabilitation, surgical procedures, medical transport, support of a medical assistant)
Coverage access to outpatient medical care for the driver and passengers in the event of a road accident arranging for and covering the costs of treatment after an accident or sudden illness access to medical care for women and children in the event of a sudden illness or an accident specific medical services if an event under the basic policy occurs.
co-funding for covered medications on prescription purchased in any pharmacy in Poland (including in over 7,000 partner pharmacies providing cash-free Pharmaceutical Card service)
Under individual protection insurance the following rider is offered: Rider Coverage
medical care, rehabilitation, psychological counseling and assistance in the event of critical illness (infarction, stroke, malignant neoplasm and non-malignant brain tumor).
Product outpatient care available in the form of a group offer, with the possibility of using medical services in a partner and proprietary network in over 500 Polish cities and as part of individual services and packages in specific proprietary PZU Zdrowie clinics
Occupational Medicine preliminary, periodic, check-up and final examinations, review of workstations, participation of an occupational medicine physician in company occupational safety and health commissions, supplemented by training on first aid and prevention programs aimed at prevention and diagnostic of occupational diseases
• the medical offer in cooperating clinics has been extended to include ad hoc outpatient care, medical transport, home visits, and mono-specialist clinics have been acquired to offer resonance, tomography and rehabilitation services; • the service provider network has been extended to include further 260 medical center, which means that PZU already has over 2,000 centers; • a new hotline operation model has been developed for servicing clients with health products, including life insurance and non-life insurance with a health rider. The hotline structures have been located in PZU Zdrowie as the Medical Service Management Center (CZUM), which allows for integrated management of client experience and improvement of the service quality; • a tool has been developed for making on-line appointments through a direct connection with the timetables of cooperating medical centers. In 2017, connection with 57 medical centers located throughout Poland was established.
During a single telephone call the client obtains complete information about the appointment made: time, place, clinic.
The PZU Złota Jesień Open-End Pension Fund managed by PTE PZU (PTE PZU) is one of the largest players on the pension fund market in Poland. At the end of 2017, OFE
OFE PZU PLN 315 million in premiums, which was 5% more than in the previous year.
At the end of 2017, PZU’s Voluntary Pension Fund kept 59 thousand individual pension security accounts (IKZEs) in which nearly PLN 46 million worth of assets was accumulated. As a result, the fund maintained a leading position in the voluntary pension funds segment. The rate of return generated in 2017 was 14.7%.
Factors, including threats and risks, which will affect the pension funds’ operations in 2018
The main challenges facing the pension fund market in 2018 are the following: • the economic climate on the capital market and, in particular on the Warsaw Stock Exchange, affecting the value of assets of the funds and the level of fees collected by pension fund companies for management; • pension system reform and results of the statutory review of the pension system and associated legal risk, in particular the assumed transfer of 75% of the funds from
OFE to newly created IRA/IRSA and 25% of the funds from
• active participation in work on the adoption of solutions enhancing the performance of the third pillar and making it more attractive, and influencing the need in public awareness for accumulating additional savings for future retirement.
PZU Pomoc provides auxiliary services to PZU Group companies, including: • management of the PZU repair network – at the end of 2017 the company cooperated with 890 repair shops,
(Sweden). The company’s core business is to raise debt financing through the issue of bonds or other debt instruments and provide financing to PZU Group companies.
On 16 October 2015 PZU Finance AB issued 5-year Eurobonds for EUR 350 million.These bonds have been assimilated and now form a single series with the “tap” bonds with the nominal value of EUR 500 m issued by PZU Finance AB (publ)
Currently, the company conducts works associated with the office and commercial investment project located in a prestigious location in Wrocław, at ul. Oławska 35 (Plac
Dominikański), in the place occupied for the past several decades by an office building owned by PZU. The investment project is designed partly for PZU Group’s needs and partly for lease.
PZU Finanse Sp. z o.o. is a service company established for the purpose of keeping accounting ledgers for subsidiaries of the PZU Group (excluding PZU and PZU Życie).
Ogrodowa-Inwestycje Sp. z o.o. (Ogrodowa-Inwestycje) is the owner of the City-Gate office building (located at ul. Ogrodowa 58 in Warsaw) and leases office space to external clients and
Limited. This agency deals with ongoing activities of the syndicates, invests their funds and employs underwriters.
The PZU Group has held an equity stake in Armatura Kraków
FIZ AN BIS 2 is the sole owner of Armatura Kraków.
Aquaform Ukraine, Aquaform Romania, Morehome.pl. The business of the Armatura Group lies outside the domain of financial and insurance services. The group is a leading manufacturer in the sanitary and heating industry in Poland.
Sometimes, I have the impression that I was born in a bicycle saddle. A bicycle is a part of me. I rest and relax when I’m on a bike. And it’s of no consequence whether I’m on an ordinary trip around the neighborhood or participating in a race during which the physical expenditure is sometimes enormous.
2. New operating model 3. Main business objectives 4. Strategy operationalization 5. Support for strategy implementation 6. Pursuit of key projects and initiatives in 2017 7. Key financial indicators
Our client relationships, and our knowledge of our clients, are becoming our main value defined in strategy – “New PZU”, while our chief product is our acumen in addressing client needs to build a stable future.
The main vector of change became the new approach to building client relations, leading to the integration of all the company’s areas around clients. The transformation in the direction of an advisory and service company will make it possible to care for the clients’ future and satisfy their needs comprehensively when it comes to life, health and property insurance and savings and finance. This will also contribute to achieving ambitious financial targets and building its position as the most innovative institution in the financial industry.
This approach has defined its operating philosophy under its new strategy. As a result, greater potential than posited to date has been identified in the utilization of new technology to analyze and use data. A high capacity for integrated client service and new opportunities and threats related to regulatory and demographic changes were also identified.
This strategic investment has enabled PZU to become the largest financial group in Poland and Central and Eastern
PZU has new growth opportunities, especially in terms of integrating and focusing its services on clients at every stage of their personal and professional development.
“This transaction is a milestone for PZU. This deal has changed us, it has opened up new horizons, it has made us the largest financial company in Central and Eastern Europe.”–
PZU faced the challenge of adapting to new conditions in a fashion that will not only enable it to achieve its ambitious objectives within the next several years but build a rocksolid foundation to construct an entrenched technological advantage over the long-run.
“We do not want to defend the market positions we have taken as has been the case till now; rather, we want to develop in new areas. We have to define anew our mission and our client relations.” – Paweł Surówka, CEO of PZU,
(operating on the basis of technological know-how). This will enable clients to optimize their decisions at all stages of their lives. This will ultimately translate into growing trust and loyalty placed in the brand of first choice which PZU
“PZU will be a company predicated on working on data. An advisory and consulting company that specializes in risk management pertaining to its clients. (...) A partner for their entire lifetime that will advise clients on all their most important decisions.” – Paweł Surówka, CEO of PZU in Forbes,
Insurance” is also our response to the ongoing social and technological changes that are diametrically affecting the insurance industry. PZU’s goal is to take advantage of the opportunities ensuing from the transformation of the insurance market, address our current clients’ needs better and enhance their satisfaction as well as reach those segments that value digital solutions.
The new approach relies on the technological transformation that will affect almost all the Group’s functional areas. At the same time, it will form the basis for integrating all the services offered by Group companies.
“We want to become the most innovative financial company across Europe. We are betting on cooperation with entities that are engaged in innovation. We attempt to support startups and funds investing in new technologies. Our new strategy will show how we intend to tap into new technologies to pursue our “legacy insurance business.” – Paweł Surówka,
Unleashing the PZU Group’s full potential aims to use the capital entrusted by shareholders as best as possible, in a manner that will ensure value growth and sustaining an attractive dividend stream. That is why the PZU Management
The ambitious growth targets that have been defined, focus on ramping up cost effectiveness and harnessing the potential of all operating areas will lead to rapid growth in net profit demonstrated by its ROE surpassing 22% (up to 2020).
“We would like for investors to esteem PZU for its discipline and how predictable it is in sharing its profits, and also for them to perceive the element of growth that flows from all the initiatives listed above. PZU will continue to be one of the most stable and profitable financial groups in the world.”
When it comes to international expansion PZU is betting on organic growth. The Group’s ambition is to generate by 2020 8% of its total gross written premium on international markets and to be the leader on every market where it operates. Its approach to acquisitions will be opportunistic. PZU will monitor the market with an eye to attractive acquisition targets.
Insurance companies will its main targets under the condition of satisfying the following criteria: the company should be in the TOP3 on a given market, it should operate in Central and
Eastern Europe and it should generate satisfactory targets concerning the level of profitability. PZU also allows for the acquisition of entities from outside the insurance sector (e.g.
asset management companies, banks, health care entities and intermediaries in financial services).
The magnitude and variety of operations paint the larger picture of what PZU is. It is a powerful financial institution, but above all it is a group of service companies whose operating foundation is the trust of its clients.
“By defining the PZU Group’s mission anew, we have drawn conclusions from our own experience on one hand while pointing to the direction in which the entire industry will move on the other hand. We would like to do something different from the classical client relation model insurers follow in which the only contact clients have with their insurer after buying a policy is when a claim occurs. We want to do considerably more and effectively help clients solve their problems in many areas and during every stage of life. PZU’s new approach to building client relations are in the heart of this change.
(...) PZU’s clients make many important decisions that greatly influence their future security on top of their attempts to afford themselves, their loved ones, their firms and their employees insurance cover in their daily lives. The PZU Group wants to be part of all that – we want to help our clients make wise choices to protect their lives, health, assets, savings and finances. We
The philosophy of how sales networks operate will also change. The PZU Group calls for abandoning “product centricity” in favor of an ecosystem whose overriding objective is to manage client relations skillfully by offering solutions in all venues available to clients. Accurately anticipating the future, understanding client needs and building every better methods of becoming part of their daily lives are the logical grounds underpinning other initiatives in PZU’s new strategy.
Among others, these initiatives include radically simplifying our product offering and poising our sales network to offer all our products and services, investing in database integration to procure a full picture of our clients, cross selling, offering a loyalty program and reducing the age of our client base.
Tightening cooperation with the Alior and Pekao SA banks is also an important issue whereby we will be able to devise comprehensive financial solutions responding to the needs of retail clients and small and medium-sized companies. (more: CHAPTER 4.4. STRATEGY OPERATIONALIZATION)
Ultimately, PZU intends to unite all the company’s areas under a client focus so as to be able to address client needs comprehensively. Achieving a high degree of quality and number of client interactions has required the creation of a new model in which the core is client knowledge and the skill of building long-term relations. Special emphasis will be placed on analyzing the information the PZU Group has to grasp and use it better. To this end, areas in which tools rooted in artificial intelligence, big data and mobile solutions will be used have been defined.
Values by which we are guided in our actions are conducted while taking into account the principles of sustainable development and the best practices adopted by the Group.
“The New PZU – More Than Insurance” strategy stands on three fundamental principles: knowledge, accessibility and simplicity. They represent a material qualitative change related to our client approach. This change, however, also has a very specific economic and financial dimension.
PZU’s long-term ambitious is to gain a leadership position on every one of the markets enumerated below.
Market growth correlated to GDP growth and the increasing affluence of the general public
Forecasted growth rate of deposits nearly twice as high as the pace of GDP growth
Continuation of the double digit pace of growth in the private health insurance market
We will develop all lines of business, while retaining our ability to generate an above average level of profitability 1 Taking into account the investment activity in our own portfolio and net of the health insurance presented by PZU Zdrowie 2 Pertains to third party asset management (giving consideration to all PZU Group entities)
By consolidating the asset management market and growing our clients’ savings, we will more than double the value of our portfolio, thereby reaching the watermark of 65 bn PLN in assets under management.” – Tomasz Kulik, CFO of the PZU
Growth in the banking segment’s contribution as the banks generate a higher net result and deliver synergy effects with PZU
Utilization of artificial intelligence in all processes related to setting retail tariffs Data collection and management 2 products per client Number of products per client
PZU 2020 - More Than Insurance 4.4 Strategy operationalization 12 key initiatives form the foundation of the New PZU. The key operational performance indicators and the initiatives to support their execution have been described below.
Conversion of the sales network into multi-product sales network 10 core products in broad distribution 50% of salespersons sell multiple products in proprietary networks 1 bn in revenues of PZU Health 12% EBITDA margin Development of sales in PZU Health7
Development of the direct offering10 11 Implementation of a loyalty program at the PZU Group level 3 m participants 12 Integrated service model for SMEs 70% growth of new sales in group insurance to SME clients in PZU Życie 20% growth in the gross written premium generated by non-life insurance dedicated to the SME segment
(customer relationship management) system will make it possible to customize the offer to client needs more effectively in terms of quality and costs alike. This will also accelerate the purchase process while streamlining service-related processes.
Clients will be able to manage their products in the entire PZU
Group quickly and easily (on their own or by using the support of advisors).
PZU to adapt its tariffs every 6 months (previously once a year). In 2017 this process was truncated to approximately 6 weeks. By the end of 2019 tariffs will be subject to optimization in real time, while the models themselves will undergo adjustment once every 1-2 weeks. This will open the path to the more extensive utilization of artificial intelligence models in tariff processes in 2020.
Better matched price to risk and price optimisation (Tariff setting 3.0)
Percentage of marketing consents and client contact data obtained in PZU and PZU Życie
In 2018 PZU was the first insurer in Europe to introduce PZU GO – an innovative telematic solution designed to improve driver safety. A mobile application combined with a small beacon device will automatically call for assistance in the event of a collision or accident.
PZU is betting on the utilization of pioneering solutions in patient services and telemedicine, too. A medical diagnostics service employing artificial intelligence is slated to be launched under the name of symptom checker to facilitate rapid diagnosis of a disorder and putting the patient in question on the right treatment. The technology used by PZU is being developed by a team of experts based on recognized Polish and international medical sources.
It taps into knowledge concerning specific medical cases and it combines this knowledge with medical data and a given patient’s symptoms to find the most probable solution. This system is constantly learning and is undergoing improvement. It is subject to close supervision by a group of experts. Even so, its initial diagnosis is accurate in 90% of the cases it handles.
PZU to build lasting client relations. Its ambitious targets entail the sales of insurance to the clients of Bank Pekao and Alior
Boost sales by utilizing bank channels in line with client preferences
Dedicated product offering for various segments, including retail clients and SMEs
Availability of insurance products linked to bank products (insurance for loans and borrowings, personal bank account)
The PZU Group’s long-term strategic objective is to retain its leading position in the banking sector in Poland. By 2020 the Group will have at least 300 bn PLN in assets, while the banking segment’s net financial result will form a contribution to the PZU Group’s result of at least 900 m PLN.
Cooperation under a banking model, its strong market position, brand recognition and its strategic objective of creating an ecosystem in which the overriding objective is to manage client relations skillfully by offering clients solutions in all venues accessible to clients will contribute to intensifying activities in strategic partnerships with companies operating on the Polish market.
The first one is for PZU to furnish a full spectrum of insurance and services customized to the needs and expectations of
This will make it possible for general sales people (#6 below)
to sell effectively while helping clients choose the right product. Our offer (also available in the Internet) will consist of 10 widely distributed products.
A general salesperson will offer at least 3 of the 5 lines of business (life insurance, non-life insurance, medical care, investment products, banking products).
In Health the PZU Group intends to grow sales by developing new health insurance products and expanding its “traditional”
offering to include unique riders. Additional support will be provided by making the sales network more active and tapping into the full potential of the of the PZU Group’s client base.
The plan is for PZU to administer 4 million health insurance agreements in 2020; this area’s revenues will hit the
PLN 1 billion, while its EBITDA margin will be equal to 12%.
We will build a lasting competitive edge by employing modern patient service processes giving consideration to the best-inclass market practices, innovative technological and medical solutions and high quality of service standards, including
PZU will build a new patient care model providing for optimum quality and the utilization of new technology. Patients will have their symptoms checked quickly, their diagnosis will be confirmed along with their treatment plan. Mobile solutions and artificial intelligence (symptom checker) will offer convenience while immediately solving problems. PZU
However, in many cases such a discussion with a patient may come to an end with advice being given or a prescription being sent, without needing to leave home.
On top of a rapid diagnosis, PZU will give a guarantee of there being no waiting lines to see a physician. The waiting time to see a primary care physician should be no longer than 2 days, while the waiting time to see a specialist should be no longer than 5 days. This will be possible, among other things, thanks to our expanded medical network consisting of proprietary and partnership centers – a total of 2,000 centers in 500 cities. PZU also offers the possibility of being treated by a physician outside the network, and of having tests on the basis of a booking given by physicians from outside PZU
PZU will roll out a uniform asset management structure in the PZU Group making it possible, among others, to achieve
We will offer unparalleled solutions blending insurance cover with medical care
The program is supposed to make it possible to share points with family members and hold auctions among the participants. This program will make it possible to grow the number of client interactions while expanding its range and reach to find new target client groups (also the possibility of attracting young clients) and customizing its offering better. This is also tantamount to building client relations that do not always have to end in the form of a sale. Club members will be encouraged to get involved in activities to benefit the local communities in which they live. They will have the possibility, for example, of voting for projects under the program entitled “Helping is Power” - a nationwide prevention campaign addressed to local communities. PZU will get involved in particular in those initiatives that obtain extensive endorsement among club members.
This new approach will facilitate 70% growth of new sales in group insurance to SME clients in PZU Życie and 20% growth of gross written premium on property insurance dedicated to the SME segment.
PZU will radically change client interactions with its current client portfolio (11 m clients in life insurance and 6 m clients in non-life insurance) by integrating all its services under a single portal called “moje.pzu.pl”. It will be a one-of-a-kind dashboard enabling clients to familiarize themselves with their insurance cover at any given moment in time, manage their health cover and appointments and manage their investments - also to include banking in the future. 5 million clients will open an account in the „moje.pzu.pl” portal by 2020.
The ability to enter into an agreement through the online channel will mean that this portal / application will ultimately be used by all PZU clients.
Reaching clients who prefer digital channels 4.5 Support for strategy implementation
Support for the execution of the New PZU strategy will come not only from unleashing data potential and utilizing data analysis tools to a greater extent but also from augmenting the effectiveness of cooperation between business and IT, thereby truncating implementation processes. In 2020 the overall time-to-market (GLOSSARY) in IT for large priority changes (such as for instance a new product) should not surpass 6 months, while for small priority changes (e.g.
PZU will maintain the highest level of quality of claims and benefits handling whereby it will shorten the time to perform processes. The key will be as follows: (i) understandable service processes enabling clients to participate in the process of handling insurable events (online access to case status, arranging for inspections in line with expectations); (ii)
implemented and tested procedures for emergency claims handling in crisis situations (e.g. storms); (iii) the ability to align resources rapidly (human and technical resources) to the magnitude of need expressed by the number of contacts.
Strong cost discipline and the future benefits ensuing from deploying innovative solutions should contribute to cutting costs up to 2020 by at least 1.5 p.p. (compared to 2016) and retaining PZU’s profitability advantage.
Administrative expense ratio - the ratio of administrative expenses to net earned premium in PZU and PZU Życie
2. LINK4’s non-life insurance market share was 2.9% at the end of Q3 2017 (up 0.6 p.p. y/y; direct business).
5. Completion of work to deploy the policy administration system (the Everest Project) translating into improvement in PZU’s competitiveness.
6. Development of TUW PZUW’s operations confirmed by its market share of 0.9% at the end of Q3 2017 (up 0.4 p.p. y/y).
10. Commencement of implementation of advanced risk management consulting services through PZU Lab.
3. TFI PZU is the market leader in the employee pension plan segment among domestic mutual fund companies. At the end of 2017 TFI PZU had PLN PLN 4.2 billion in assets under management (PPE, GPE, PPO, ZPI) – 13.1% growth of AUM compared to the end of 2016.
4. Implementation of a tool to manage the proprietary medical center network and the centers cooperating with PZU Zdrowie and to manage client traffic on the medical hotline.
6. Providing by PZU Zdrowie a new service supporting remote medical consultations by phone and the Internet. Clients will be able to discuss their test results, discuss disquieting troubles and the medicine they are taking, learn about preventively caring for their health, receive a booking for tests and a prescription for medicines they take on a long-term basis, all in comfortable conditions by phone, chat or video chat.
7. PZU Zdrowie won the prestigious Polish Compass 2017 award as a distinction for persons and institutions that have made a special contribution to the development of the national economy in recent years.
3. The banking segment’s contribution to the PZU Group’s operating result was PLN 2,487 m at the end of 2017.
• social campaigns and prevention campaigns (prevention campaigns to enhance safety in road traffic: television programs concerning safety, nationwide projects promoting safe conduct on the road).
Health - area referring to activity in life and health insurance and health services. Promoting a healthy and active lifestyle best illustrated by supporting large-scale running events (PZU Warsaw Marathon, PZU Warsaw Half-Marathon, PZU Cracovia Marathon, PZU Cracovia Half-Maraton, among others). This also involves caring about Poles’ health and lives, i.e. supporting organizations focused on a health agenda (helping hospitals and health care centers, hospices, foundations and other entities involved in rescuing life and health).
PZU continues to be a patron of Polish culture by pursuing actions to protect national heritage and instill modern patriotism. Above all, this means patronage of the most outstanding institutions of culture in Poland: the National Museum in Warsaw, the National Museum in Kraków, the Warsaw Uprising Museum, the Royal Lazienki Park Museum, the National Theater and the Great Theater – the National Opera. It also means undertaking nationwide campaigns to disseminate national culture and arts. Another dimension of our activity involves supporting modern patriotism and building national identity.
1. 82% of the PZU Group’s clients are satisfied with the claims and benefits handling process (satisfaction survey on a sample of 4.4 thousand clients conducted in Q4 2017).
2. The administrative expense ratio in the underwriting segments in Poland improved 1.1 p.p. at the end of 2017 to 7.0%.
1 ROE attributable to the parent company 2 Direct business 3 PZU jointly with TUW PZUW and LINK4 4 Data at the end of Q3 2017 5 Administrative expenses in PZU and PZU Życie 6 Own funds after subtracting anticipated dividends and asset taxes 7 PZU Investments’ consolidated net result
I like traveling and the possibility of combining pleasure with utility. India was the adventure of my life. I will never forget the scent of seasons or the depth of color. I will always remember the amazing people I met there and the children I managed to help. I am elated that I had the chance to make even just a small contribution to improving their lot in life by building homes and schools for them. Spending time with them has altered my worldview.
In this chapter: 1. PZU Group 2. Insurance 3. Banking 4. Health 5. Management of the PZU Group’s brands
Group’s business model from being an insurer’s model (chiefly involved in the valuation and transfer of risk) to being a service company’s model. More information about the Group’s new business is provided in REPORT ON NON-FINANCIAL
Lietuvos Draudimas’ PZU Estonia branch, respectively, while on the life insurance market it is active through PZU Lietuva
1,200 agents, while in Ukraine (where PZU is active on the non-life insurance market and on the life insurance market through PZU Ukraine and PZU Ukraine Life, respectively) it had approx. 800 agents.
Group cooperates with 3,149 multiagencies (of which PZU: 3,149). They perform sales operations targeted mainly at the mass market (insurance of all types is sold through this channel, especially motor insurance and non-life insurance as well as individual life insurance). In turn, in the Baltic states the Group companies cooperate with 10 multiagencies and in Ukraine with 11 multiagencies.
PZU’s Corporate Client Division, cooperated with almost 1,200 insurance brokers (of which PZU: 1 100). In the case of the Baltic states, where the brokerage channel a major insurance distribution channel, the Group companies cooperated with over 350 brokers, whereas in the Ukrainian companies cooperated with approx. 40 brokers.
In the Baltic states, PZU cooperated with 3 banks and 14 strategic partners. In Ukraine, the respective numbers were 7 banks and 6 strategic partners.
In Poland, claims and benefits handling is carried out in 6 competence centers operating across the country. It is founded predominantly on electronic information and is not tied to the insured’s place of residence or the insurable event.
The competence centers handle specific types of damage, which is conducive to stricter specialization and boosts client satisfaction. These units specialize, without limitation, in handling claims arising from property, motor or personal damage, claims reported by corporate clients, benefits, damage involving in the theft of personal vehicles or claims handled as part of the direct claims handling (DCH) service.
PZU was the pioneer of DCH on the Polish insurance market.
DCH is provided by entities accounting for nearly 70% of the motor TPL insurance market, as measured by gross written premium. The said agreement, which is based on a lump-sum approach, has dramatically simplified the settlement of claim payments between insurers. PZU also maintained its own DCH
solution previously introduced for clients injured by insureds in establishments that did not sign the agreement. On the
Ukraine paid out the first claim in this form in December 2016.
The DCH agreement worked out by the Ukrainian motoring association currently covers 17 insurance undertakings. They account for almost 80% of the TPL insurance market, as measured by gross written premium. In Estonia, direct claims handling has been regulated by the provisions of the TPL
PZU has built Poland’s largest network of centers that arrange replacement vehicle rental services, roadside assistance services and parking services. A network of centers offering similar services is also being developed in the Baltic states.
continues to develop its proposal to assist clients in managing damage remains by selling them on the Online Assistance platform. Clients are presented with a proposal to sell their damage remains for the highest purchase offer obtained from reliable entities that cooperate regularly with the platform administrator (a similar solution is also available to clients of the Estonian Lietuvos Draudimas branch).
clients reveal the fact that insureds are of a very favorable opinion about this service. Similar improvements are being introduced by the PZU companies in the Baltic states.
An innovative solution that supports the handling of personal injuries under TPL insurance is the Team to Organize
In 2017, pre-claims handling was introduced, involving the initiation of contacts with the client even prior to reporting a claim. The process was received with appreciation by clients who were favorably surprised by the insurer’s interest almost immediately after the event. For instance, clients were offered the possibility of covering the costs of replacement housing in situations where they had to leave their home due to an explosion or fire or the possibility of using specialists as part of the Assistance service.
The results have shown that especially in damages caused in hardly accessible places or large-scale damages PZU may improve the safety of employees and obtain a detailed 3D model of the damage site. In 2018, this technology will be used for the first time in specific damage cases.
keeps improving the solutions that curtail the payment of undue benefits, hinder the practices of clients counterfeiting documentation filed during the submission of a claim or statements regarding their health status and simplify a number of processes.
In recent years, the PZU Group has been very active in implementing innovative solutions. Activities in this area are supported by the Innovation Laboratory – a unit created with a view to verifying the latest technological trends and testing new solutions across the organization. Modern solutions are being created both internally and in cooperation with the best start-up companies in the respective fields. The first few of them have already been recognized in the international arena
Project enabling the provision of comprehensive remote services to deaf and hearing-impaired clients). Moreover, a portal called Idea Generator has been launched to enable the exchange of ideas and inspirations between employees.
The purpose of the Strategy is to help pursue the PZU
Group’s mission and strategy and maintain the high level of competitiveness in the new technological environment. The
Strategy points to three specific areas in which PZU should be especially active while seeking innovation: the use of
In the Baltic States the agent network numbered approximately while in Ukraine there were roughly multi-agencies collaborate with the PZU Group on the
In Poland the PZU Group cooperated with banks. In turn, in the Baltic States PZU cooperated with banks, and with 7 in Ukraine
Operating model - distribution, innovation commenced by PZU back in 2014. The full roll-out process in all channels was completed in Q1 2017. Currently, the Everest
In January 2018 when the Strategy 2017-2020 was announced, PZU was the first insurer in Europe to introduce
PZU GO, an innovative telematics solution designed to improve driver safety. A mobile application combined with a small beacon device will automatically call for assistance in the event of a collision or accident. Additionally, under partnership programs, PZU GO will also provide a benefit package for drivers with a PZU policy and in the future also cheaper motor insurance policies for the best of them.
At the end of December 2017, Pekao had 851 own branches and 1,745 own ATMs.
What makes PeoPay different is, among others, that it offers login, authorization of Internet transfers and payments all with a fingerprint, support for multiple currencies, i.e. the ability to pay abroad in a foreign currency or payments made by phone without having to give codes or log into the web banking system.
Connect, the integration service between the PekaoBiznes24 transaction platform and the company’s financial and accounting systems.
To implement the strategy of acquiring young customers, the bank focused on expanding long-term cooperation with the largest institutions of higher learning in Poland and various educational initiatives throughout Poland.
Alior Bank’s traditional branches are located in the largest cities throughout Poland, offering the full range of the Bank’s products and services and constituting their main distribution channel. Partner outlets on the other hand are located in smaller towns and in selected locations in Poland’s major cities, offering a broad range of services and deposit and credit products for retail and business customers.
Bank in respect to the distribution of products. These services are provided in locations owned or leased by agents approved by the Bank.
The bank’s products were also offered in financial intermediary chains, such as Expander, Open Finance, Sales Group, Dom
Kredytowy Notus, Fines, DFQS, GTF and others. The range of products available from financial intermediaries varies depending on the partner, mainly cash loans, consolidation and mortgage loans and instalment loans.
On 31 October 2017, the Bank terminated the cooperation agreement with the TESCO retail chain concerning the “TESCO
During the next four years, in addition to the previously planned expenditures for ongoing IT development and maintenance work, Alior Bank will invest the additional
In early 2017, Alior Bank was the first bank in Poland to offer its partners mobiRATY – a mobile app to enter loan applications and sign loan agreements fully electronically. This innovative solution was recognized internationally and was awarded the main prize in the Banking Technology competition in the Best Use of IT
The Alior Bank’s new Innovation Management Model will support the use of modern technologies to bridge customer needs with the bank’s strategy. This will make life easier for clients while ensuring high profitability for the bank.
PZU Zdrowie cooperates with 2,000 partner outlets in more than 500 towns and cities in Poland.
At the same time, it has been consistently developing its own network of 60 outlets, among others Warsaw, Gdańsk,
Poznań, Katowice, Częstochowa, Radom, Płock and Opole, which in aggregate employ more than 1,200 doctors.
Wide medical infrastructure guarantees rapid appointments; in the case of basic medical care (POZ) a visit is offered within a maximum of 2 business days, and in the case of specialists within a maximum of 5 business days.
In 2017, PZU Zdrowie implemented projects consisting of the following: • development and implementation of patient service standards in Medical Centers owned by PZU Zdrowie,
PZU Zdrowie conducts a pilot of patient handling using new technologies and telemedicine. Symptom checker – is a platform developed in cooperation with a Polish technology start-up, which is available on the patient portal, in an app and also in the form of a dedicated solution for medical hotline employees. The purpose of the platform is to conduct an interview with a patient, which is very similar to a 24h call centre
We guarantee time limit for medical appointments – the availability deadlines are stated in the general terms and conditions of insurance; Our patients can benefit from services throughout Poland; We are a medical guide for our patients – our 24-hour hotline serves as a medical guide in many cases and coordinates the treatment of patients; We provide remote medical care – our patients can use a phone, chat or video chat to consult an internist, pediatrician, endocrinologist, diabetologist, cardiologist or a midwife. During remote consultation they can discuss their ailments, test results and receive prescriptions for medicines taken permanently and referrals to examinations; We do not require referrals to visit specialists and we also honor referrals from doctors from outside the network; We also allow our patients to get treatment from doctors from outside our network: through the reimbursement option clients may use medical services included in the coverage outside of our network.
PZU is the most recognizable brand in Poland. According to spontaneous awareness studies, recognition of the PZU brand reaches 88%, while prompted brand awareness is 100%.1
In the PZU Group’s architecture there is also a group of socalled PZU family brands. The family consists of companies whose names do not refer to the dominant brand, such as
PLN 5,526 million compared with PLN 2,988 million in the previous year (up 84.9%). Net profit reached PLN 4,233 million and was PLN 1,859 million more than in 2016. Net profit attributable to the parent company’s shareholders was
• better performance in the banking segment: Alior Bank in connection with the high sales level of credit products supported by good business climate; • higher investment income on equity portfolios due to an upswing on the Warsaw Stock Exchange, including a higher valuation of the stake held in the Azoty Group.
This transaction transformed the PZU Group from being an insurance group into a financial group. The commencement of consolidating Pekao in June 2017 materially affected the comparability of the results and the total balance sheet value. The total balance sheet value jumped on this account by roughly PLN 192 billion compared to the previous year, while non-controlling interests totaled PLN 23.0 billion (as at 31 December 2017). Since the consolidation of Pekao commenced in June 2017, it contributed PLN 1,502 million and
In the individual operating result items, the PZU Group posted: • increase in gross written premium to PLN 22,847 million.
PLN 21,354 million and was 14.7% higher than in 2016; • higher net result on investing activity, including an increase in investment income earned on the banking activity following the commencement of consolidation of Pekao SA, but also a higher net result on investing activity excluding banking activity.
The net result on investing activity was PLN 8,502 million, up 142.2% compared to 2016. Investment income excluding banking activity rose mainly because of the better performance posted on listed equity instruments, in particular due to the improved market conditions on the Warsaw Stock Exchange. A positive change was also recorded in comparison to the corresponding period of the previous year due to the improved valuation of the equity stake in Azoty Group in the long-term asset portfolio; • increase in interest expenses to PLN 1,365 million vs. PLN
Share in net profit (loss) of entities measured by the equity method 16 (3) 4 (2) 1
Net profit (loss) attributable to equity holders of the parent company 2,910 1,935 2,343 2,968 3,293 * restated data for the period 2013 - 2016 million lower compared to the previous year. The change resulted from lower expenses of project activity partially offset by the higher expenses incurred in bancassurance products following a change in the rules of settlements with banks under bancassurance agreements; • higher negative balance of other operating income and expenses of PLN 1,559 million. This change was caused mainly by the higher level of levy on financial institutions.
The total burden incurred by the PZU Group on account of this tax (in insurance and banking activity) in 2017 was PLN
PLN 537 million from 2016 (net of intersegment gross written premium), mainly in motor insurance due to the higher average premium and number of insurance policies, insurance against fire and other damage to property following the execution of several contracts with high unit values; • sales increased by PLN 80 million in the group and individually continued insurance segment – the additional premium was received from health insurance concluded as group insurance; • the premium in the individual insurance segment also rose by PLN 490 million, driven mainly by higher sales of unitlinked products in the bancassurance channel; • gross premium written by foreign companies also increased as compared to 2016 by PLN 234 million, chiefly in motor insurance, driven by higher tariffs in the Baltic States.
PLN 1,784 million to the PZU Group’s result, or were PLN
1,240 million higher than in the previous year, mainly caused by the commencement of Pekao’s consolidation.
They included mainly: • net revenues from commissions and fees in the banking segment of PLN 1,605 million, including mainly: brokers’
Operating result of the PZU Group in 2017 (PLN million) Insurance segments (PLN millions), local GAAP
Group and individually continued insurance – Poland 6,855 6,775 6,689 6,539 6,415
This higher result was caused largely by the commencement of Pekao’s consolidation.
The net investment result (after factoring in interest expenses and precluding the impact exerted by banking activity) in 2017 was PLN 1,855 million. It was higher than last year’s result by PLN 638 million, which was primarily due to the following drivers: • higher result earned on listed equity instruments in particular due to improved market conditions on the
in 2017 compared to 11.4% the year before, including a better performance of the stake in the Azoty Group; • better performance on interest-bearing financial instruments driven chiefly by: ◦ better performance of non-treasury debt market instruments due to the acquisition of high-margin exposures for the portfolio,
◦ purchase of high-yield government bonds on the primary market for PLN 2 billion for the held-to-maturity bond portfolio,
◦ positive impact exerted by the foreign exchange differences on own debt securities in conjunction with the appreciation of the PLN versus EUR following depreciation in the comparable period, partially offset by weaker performance of investments denominated in
As at the end of 2017, the value of the PZU Group’s investment portfolio2, excluding the impact of banking activity, was PLN 46,164 million compared to PLN 50,488 million as at the end of 2016. The drop in the balance of deposits was driven in particular by the funding of PZU’s acquisition of the equity stake in Bank Pekao.
The Group runs its investment operations in compliance with statutory requirements while maintaining appropriate levels of safety, liquidity and profitability. Debt treasury securities accounted for over 60% of the investment portfolio, net of the impact of banking activity, both as at 31 December 2017 and 31 December 2016. The increase in the volume of non-treasury debt market instruments resulted from the persistently implemented investment policy aimed at achieving a greater diversification of the investment portfolio. The lower level of monetary market instruments is associated with funding the acquisition of the equity stake in Pekao.
in 2017 was PLN 822 million compared to PLN 395 million in the corresponding period of the previous year. The increase in the liability was caused by the commencement of Pekao’s consolidation in June 2017 and the introduction of the tax in February of last year; • costs of amortization of intangible assets identified as a result of the acquisition transaction up by PLN 188 million
• lower level of other operating income associated with last year’s recognition of a gain on the bargain acquisition of a spun-off portion of BPH in the amount of PLN 465 million; • recognition in 2016 of the cost of the restructuring provision associated with the merger of Alior Bank with the spun-off portion of BPH in the amount of PLN 268 million.
In te re st -b ea rin g fin an ci al as se ts , i nc lu di ng h ed gi ng in st ru m en ts
N et in ve st m en t re su lt an d in te re st e xp en se (e xc lu di ng b an ki ng a ct iv ity
Investment properties Equity instruments – unquoted Equity instruments – quoted Monetary market instruments Non-treasury debt securities Treasury debt securities
Net claims and benefits (including the movement in technical provisions) reached PLN 14,941 million and were 17.3% more than in the corresponding period of the previous year. The following factors contributed to the increase in the net claims and benefits category: • higher claims and benefits in motor insurance in the corporate and mass client segments as a result of the development of the insurance portfolio; • the higher level of the loss ratio in insurance for losses caused by calamities in the mass client and corporate client segments due to the occurrence of an above-average number of claims resulting from weather phenomena
for the entire population. In the subsequent quarters of 2017, the loss ratios returned to the levels observed in the corresponding period of the previous year; • non-recurring effect of updating the assumptions as to future disbursements applied to the calculation of provisions recognized in 2016 in the continued insurance class.
On the other hand, the decline in this category of net claims and benefits was caused by the lower level of claims in the group of insurance for other losses to property in the mass client segment, mostly for subsidized crop insurance – in the corresponding period of 2016 there were many losses caused by the forces of nature.
went up 83.5% over the previous year. This growth resulted largely from the commencement of Pekao’s consolidation and the merger of Alior Bank with BPH’s spun-off operations on 4 November 2016. Administrative expenses of the banking segment rose by PLN 2,464 million. At the same time, the administrative expenses of the insurance segments in Poland were PLN 10 million lower compared to the previous year. The change resulted from the lower expenses of project activity offset by higher expenses incurred in bancassurance products following a change in the rules of settlements with banks under bancassurance agreements.
As at 31 December 2017, the PZU Group’s total assets were
The Group’s main assets are investments (financial assets and commercial property). They totaled PLN 284,208 million and were PLN 177,184 million higher than at the end of the previous year. They represented 89.5% of the Group’s balance sheet compared with 85.4% at the end of 2016. The increase in the value of investments was associated mainly with the banking activity due to the commencement of Pekao’s consolidation. The balance of loan receivables from clients was
The PZU Group’s receivables, including receivables under insurance contracts and current income tax were PLN 9,096 million, which represented 2.9% of its assets. For the sake of
comparison, at the end of 2016 they amounted to PLN 5,664 million (4.5% of the Group’s assets) and their increase was caused mainly by the outstanding transactions on financial instruments and security deposits.
The balance of the assets held for sale item, which stood at
PLN 317 million, decreased by PLN 872 million compared to the previous year due to changes in the classification of a portion of the investment property portfolio.
The largest component of liabilities and equity as at the end of 2017 was financial liabilities, which increased significantly compared to the end of 2016 from 47.9% to 70.7%, primarily due to the commencement of Pekao’s consolidation. The value of this item reached PLN 224,507 million and included in particular: • liabilities to clients of PLN 198,163 million (predominantly by virtue of deposits held by Pekao SA and Alior Bank; an increase in current and term deposits by PLN 149,458 million compared to December 2016); • liabilities under sell-buy-back transactions of PLN 1,167 million in 2017 compared to PLN 178 million in 2016; • liabilities on the issue of own debt securities amounting to
PZU Finance AB; ◦ PLN 4,498 million on deposit certificates issued by Bank
Pekao and Alior Bank; ◦ PLN 1,248 million on covered bonds issued by Bank
• subordinated debt of PLN 5,319 million. The value of this item increased compared to the end of 2016 due to the issue of subordinated debt by PZU on 30 June 2017 for the total amount of PLN 2.25 billion, by Pekao in October 2017 for the amount of PLN 1.25 billion and by Alior Bank in
As at the end of 2017, the value of technical provisions was
PLN 44,558 million, which accounted for 14.0% of liabilities and equity (PLN +2,364 million compared to the end of 2016).
The balance of other liabilities and provisions at the end of 2017 was PLN 10,739 million compared to PLN 5,988 million at the end of 2016. The contributors to this increase included, among others, liabilities toward banks on account of payment documents settled in interbank clearing systems in the amount of PLN 2,125 million and liabilities on account of outstanding transactions on financial instruments in the amount of PLN
At the end of 2017, net cash flow reached PLN 5,343 million,
PLN 4,863 million more than in the previous year. This growth was caused, in particular, by net cash flows on operating activity.
Moreover, the balance of contingent liabilities included guarantees for the underwriting of securities in the amount of
The following industry segments were identified in order to facilitate management of the PZU Group: • corporate insurance (non-life insurance) – this segment covers a broad scope of property insurance products, liability and motor insurance customized to a client’s needs entailing individual underwriting offered by PZU, TUW
PZUW to large businesses; • mass insurance (non-life insurance) – this segment consists of property, accident, liability and motor insurance products. PZU and LINK4 provide insurance to individuals and entities from the SME sector; • life insurance: group and individually insurance – PZU Życie offers it to employee groups and other formal groups.
• individual life insurance – PZU Życie provides those products to retail clients. The insurance agreement applies to a specific insured who is subject to individual underwriting. These products include protection, investment (which are not investment contracts) and health insurance; • investments – reporting according to Polish GAAP – the revenues of the investments segment comprise the investments of the PZU Group’s own funds, understood as the surplus of investments over technical provisions in the
Latvia and Estonia; • investment contracts – include PZU Życie products that do not transfer material insurance risk and do not satisfy the definition of insurance contract. They include some products with a guaranteed rate of return and some products in the form of a unit-linked insurance product; • other – include consolidated companies that are not classified in any of the above segments.
PZUW) generated an insurance profit of PLN 191 million in 2017, i.e. 16.6% less than in the corresponding period of the previous year.
The following factors had a key impact on this segment’s performance in 2017: • a 22.2% increase in net earned premium combined with a 25.9% increase in gross written premium, both in comparison to 2016. The following movements were observed in sales: ◦ higher premiums from motor insurance, both fleetbased and offered to leasing companies, as a result of an increase in the average premium and the number of insurance policies; ◦ sales growth in fire insurance and other property claims and other TPL insurance as the offshoot of signing several high unit value agreements, including enrollment of two large entities from the coal and power industries in TUW PZUW; ◦ development of the assistance and accident insurance portfolio as a result of expanding cooperation with strategic partners; • net claims and benefits surged 24.6% compared to the corresponding period of 2016, which, together with a 22.2% increase in net earned premium, means that the loss ratio increase by 1.3 p.p. to 66.0%. The higher loss ratio in the class of insurance against losses caused by the forces of nature and TPL was attributable largely to numerous damages caused by the forces of nature in
and the reporting of several large claims. This effect was partly offset by the improved profitability of the motor insurance portfolio.
• income from investments allocated to this segment fell 26.1% to PLN 85 million, which was caused in particular by the declining EUR exchange rate vs. PLN; • the PLN 64 million, or 17.7%, upswing in acquisition expenses (net of reinsurance fees) compared to 2016 stemming primarily from the considerably higher sales growth rate (+25.9%); • growth in administrative expenses to PLN 137 million, or 9.6%, compared with the previous year. Higher expenses were recorded mainly in the IT and third party services, which was related to implementing products dedicated to corporate clients to be administered and sold in the Everest system. This effect was partially offset by a decline in project-related expenses. 59.4 59.4
• income from investments allocated to the mass insurance segment according to transfer prices amounted to PLN
608 million, down by PLN 26 million, or 4.1% less, than the year before, driven primarily by the cost discipline both in current activity and in project activity.
(+101.4%). The following factors drove this segment’s performance in 2017: • a 21.4% increase in net earned premium to PLN 9,513 million combined with a PLN 1,235 million (+14.0% y/y)
rise in gross written premium in comparison to 2016, driven by a combination of the following: ◦ rising motor insurance sales (+21.1%) as an effect of the gradually introduced in 2016 increases in the average premium on the coattails of price hikes forming a response to deteriorating results of the whole market in Poland in recent years; ◦ higher premium from insurance against fire and other damage to property (+14.3% of gross written premium y/y), including PZU DOM household insurance and agricultural insurance despite the extensive competition on the market (chiefly subsidized crop insurance), and
• higher net insurance claims and benefits in 2017 by 15.1%, which when coupled with net earned premium being up 21.4%, translated into the loss ratio improving by 3.5 percentage points compared to 2016. This change resulted mainly from: Insurance result in the mass insurance segment
the outset of the year as the data published by the Central
Statistical Office depict. In subsequent quarters the loss ratios returned to the levels observed in the corresponding periods of last year. This effect was partly offset by reversal of mathematical provisions in individually continued products after the insured’s death; • incremental growth in the costs of benefits in health insurance as an effect of the rapid expansion of this contract portfolio; • slightly slower pace of converting long-term insurance policies into yearly-renewable term business in type P
Acquisition expenses in the group and individually continued insurance segment in 2017 were PLN 332 million, increasing by PLN 3 million (0.9%) compared to the corresponding period of last year. The factor determining the increase in these expenses was the expanding portfolio of group protection and health products with a concurrent increase in the share of revenues generated in this portfolio by high-commission brokerage channels. This effect was simultaneously offset as a result of the signing of a new agency agreement in the bancassurance channel in Q2 2016 as a result of which the fee for performing agency activities involving participation in the administration of protection insurance agreements is treated as an administrative expense, unlike to the agreement previously in force that treated it as an acquisition expense.
Insurance result in the group and individually continued insurance amounted to PLN 1,450 million and was PLN 335 million, or 18.8%, lower than in the previous year. Individual constituent elements of the insurance result were as follows.
Gross written premium was higher than in the corresponding period of the previous year by PLN 80 million (1.2%), which was mainly the result of the following: • attracting more premium income in group health insurance products or individually continued products (new clients in outpatient insurance and sales of different options of the medicine product); • growth in group protection insurance (higher average premium and average number of riders taken out by each insured); • active up-selling of riders in individually continued products, including, in particular, along with offering basic agreements in PZU branches, and raising sums insured during the term of the existing agreements.
The investment result consists of income allocated using transfer prices and income on investment products. In the group and individually continued insurance segment, investment income rose PLN 40 million mainly due to the higher income on unit-linked products (principally employee pension schemes) as a result of better conditions on the equity market – the WIG index surged up by 23.2% compared to 11.4% in the corresponding period of last year. Income allocated by transfer prices remained at a similar level as in the comparable period of last year.
Ad m in ist ra tiv e ex pe ns es
group insurance, the segment’s insurance result amounted to PLN 1,415 million in 2017, compared with PLN 1,745 million in 2016 (a 18.9% decline). As a result of excluding a non-recurring factor from the end of 2016, update of the assumptions regarding expected future disbursements on account of permanent dismemberment used in the calculation of provisions in individual continuation, the result in 2017 dropped y/y by PLN 114 million, or 7.5%, driven mainly by the increase in the number of deaths and as a consequence the number of benefits paid in Q1 for that reason compared to previous year. This uptick was justified by the higher number of deaths in the overall population of Poland at the outset of the year as the data published by the Central Statistical Office depict. In subsequent quarters the loss ratios returned to the levels observed in the corresponding periods of last year.
(41.7%) to PLN 1,664 million compared to 2016 was the result of the following: • higher contributions to the unit-linked insurance accounts offered jointly with Bank Millennium; • sales launch of a new unit-linked product with Alior Bank at the outset of 2017; • higher contributions to the unit-linked insurance accounts offered by PZU branches, especially IRA and the Goal for the Future products; • constantly rising level of premiums on protection products in endowments and term insurance – the volume of sales is greater than the number of instances of reaching the endowment age, surrenders, lapses and deaths in the existing portfolio.
The investment result consists of income allocated using transfer prices and income on investment products. They rose PLN 131 million y/y in the individual insurance segment, mostly on account of the growth in the result on investment products – this was predominantly the effect of higher yields of funds in unit-linked products, in particular in the bancassurance channel, and better performance recorded in the IRA individual retirement account product. Income allocated by transfer prices remained at a similar level as in the comparable period of last year.
Additionally, in 2017 the level of reversals of provisions for the restatement of benefits and litigation in the old annuity portfolio in its run-off phase was lower than in the year before.
The main factor contributing to the decline in the segment’s operating result is still the increase in commissions for unitlinked products in the bancassurance channel and increase of the share of investment products generating a much lower margin in the segment’s revenues.
The revenues of the Investments segment comprise the investments of the PZU Group’s own funds, understood as the surplus of investments over technical provisions in the PZU
Group insurance companies seated in Poland (PZU, LINK4 and PZU Życie) plus the surplus of income earned over the risk-free rate on investments reflecting the value of technical provisions of PZU, LINK4 and PZU Życie in insurance products, i.e. surplus of investment income of PZU, LINK4 and PZU
In 2017, the banking activity segment generated PLN 2,487 million in operating profit (without amortization of intangible assets acquired as part of the bank acquisition transactions), representing an increase by PLN 1,839 million compared to 2016. Taking into consideration the commencement of consolidation of Pekao, one of the largest banks in Central and Eastern Europe, all items of the statement of profit or loss and items of the statement of financial position for 2017 are significantly higher compared to the previous year.
Interest income comprises the following components: interest income, dividend income, trading result and result of impairment losses.
In 2017 very high sales of credit products were recorded in
BPH and organic growth in the volume of loans granted to clients coupled with the accompanying increase in client deposits. As at the end of 2017, the size of the net client loan portfolio in Alior Bank grew 10.9% y/y and deposits from nonfinancial clients rose 12.2%.
Profitability of the banks in the PZU Group measured by the net interest margin amounted to 2.8% in Pekao (for the whole year) and 4.6% in Alior Bank (up 0.5 p.p. y/y). The difference in the level of the indicators results in particular from the structure of the loan receivables portfolio (Pekao Bank – over
The net fee and commission income in the banking activity segment amounted to PLN 1,605 million and was PLN 1,254 million higher y/y. As in the case of the net interest income, the increase in loan sales contributed to improvement of the above figures.
3,754 million and comprised Pekao’s expenses in the amount of PLN 1,917 million (for 7 months) and Alior Bank’s expenses
In addition, other contributors to the operating result included other operating income and expenses, where the main components are the BFG fees (PLN 101 million) and tax from other financial institutions (PLN 513 million).
As part of consolidation adjustments pertaining to the banking segment, the following items should be highlighted in 2017: • elimination of PLN 414 million on account of fair value restatement of previously owned shares, associated with acquisition of the remaining shares in Pekao TFI (formerly: PPIM) and Dom Inwestycyjny Xelion.
• the effect of reversal of the positive result on sales of NPL
loans by Bank Pekao in the amount of PLN 143 million.
In 2017, the operating profit in the pension insurance segment amounted to PLN 87 million, i.e. it increased by 17.5%
compared with 2016. The major drivers of the operating result included the following: • commission and fee income shot up 16.0% compared to the previous year and stood at PLN 128 million. This change was the result of: ◦ management fee up by PLN 18 million as a result of the higher average net asset value in OFE PZU; ◦ revenues down by PLN 3 million on reimbursements from the Indemnity Fund; ◦ increase in income on withdrawal of funds from the reserve account by PLN 2 million.
This resulted from OFE’s information activities in 2016; • administrative expenses hit PLN 44 million, i.e. they were up 8.2% from the previous year. This change resulted mainly from increased costs: ◦ due to the payment of contributions to the Indemnity
PLN 3 million due to the business events that took place in 2016, i.e.: receipt of the incentive bonus (PLN 2 million), restatement of the provision for refund of contributions overpaid by ZUS and reversal of the provision for mailing the annual fund information for 2015 (PLN 1 million).
In 2017, the PZU Group’s business in the Baltic states generated a positive insurance result of PLN 109 million compared to PLN 72 million in the previous year. This result was shaped mainly by the following factors: • increase in gross written premium. It amounted to PLN
1,404 million compared to 1,183 in the year before. The premium in non-life insurance increased by PLN 214 million y/y (or 18.9%). Such a dynamic increase was possible among others thanks to increase in the motor insurance premiums in the region, increase in the sale of property insurance – both in Lithuania and in Latvia, where the entities intensified their sales, and significant increase in the premium written in health insurance in Latvia.
773 million and were higher by PLN 79 million compared to the year before. At the same time the loss ratio in non-life insurance stood at 61.2%, down 0.8 p.p. from the previous year. In life insurance the value of benefits stood at PLN 45 million and was 9.8% higher than in the previous year; • higher acquisition expenses. They segment’s expenditures for this purpose were at PLN 275 million. The acquisition expenses growth rate was lower than the premium growth rate and stood at 9.6% y/y. The acquisition expense ratio calculated on the basis of net earned premium dropped by 0.7 p.p. and stood at 22.0%; • slight increase in administrative expenses. They were PLN
Despite an increase in incurred expenses, a decrease in the administrative expense ratio was recorded, standing at 8.9%, down 1.1 p.p. relative to 2016. The lowering of administrative expenses was possible due to the maintenance of cost discipline, notably in the IT area.
The Ukraine Segment closed 2017 with a positive insurance result of PLN 11 million, compared to PLN 15 million last year.
N et c la im s an d be ne fit s
certain unit-linked products). This result in 2017 was driven by the following factors: • gross written premium generated on investment contracts in 2017 decreased by PLN 42 million (-48.8%) compared to the corresponding period in 2016 to PLN 44 million. The changes in gross written premium were caused mainly by the withdrawal of short-term endowment insurance products (term deposits packaged as insurance products)
from own channel offering in June 2016; • result on investing activity in the investment contracts segment remained on an unchanged level vis-à-vis the previous year, i.e. at PLN 18 million; • the cost of insurance claims and benefits together with the movement in other net technical provisions decreased PLN
39 million y/y to PLN 50 million due to the withdrawal, in mid-2016, of short-term endowment products from the range of products offered in the own channel (the absence of written premium as opposed the previous year does not generate any growth in technical provisions, while the value of benefits paid to persons reaching the endowment age is offset by a commensurate movement in technical provisions); • the decrease in acquisition expenses vis-à-vis the previous year was an effect of the lack of new sales and declining value of assets in unit-linked products in the bancassurance channel (a portion of the bank’s fee depends on the level of assets) and additionally also a declining involvement of the company’s own network in selling short-term investment endowment products following the withdrawal of products of this type from the offering in June 2016; • administrative expenses totaled PLN 7 million, down 22.2%
Summing up, the increase in the segment’s operating result was driven mainly by the lower operating expenses allocated to the products of this segment.
this purpose in life insurance increased by PLN 6 million (or 31.6%). The segment’s acquisition expense ratio went up compared to the previous year by 1.1 p.p. to 56.1%; • decrease in administrative expenses. They amounted to PLN 23 million, down PLN 1 million compared to the previous year. The administrative expense ratio calculated on the basis of the net earned premium decreased by 3.3 p.p. and stood at 18.7%.
The results of the investment contracts segment are presented according to Polish Accounting Standards, which means that they include, among other things, gross written premium, claims paid and movement in technical provisions. The above categories are eliminated at the consolidated level.
(increase of 100.0%) on investment contracts, i.e. PZU Życie’s products which do not generate a material insurance risk and which do not meet the definition of an insurance contract
(such as some products with a guaranteed rate of return and
Ratio – calculated, due to its specific nature, for the non-life insurance sector (Section II).
Basic performance ratios of the PZU Group 2017 2016 2015 2014 2013
Return on equity (ROE) – consolidated (annualized net profit/average equity) x 100% 15.5% 14.7% 16.6% 22.6% 24.1%
Return on assets (ROA) (annualized net profit/average assets) x 100% 1.9% 2.1% 2.7% 4.6% 5.6%
Acquisition expense ratio in the insurance segments (acquisition expenses/net earned premium) x 100% 14.0% 14.3% 14.1% 13.4% 12.3%
8. Cost/Income ratio - banking operations 47.7% 44.4% - - 6. 7 Issuer’s financial results – PZU (Polish GAAP)
In 2017, PZU’s investment activity focused on the continuation of strategic assumptions, in particular on the optimization of profitability of investment operations through greater diversification of the investment portfolio, as well as ensuring financing for the transaction of purchase of shares in Bank
Otwarty Universum) in the amount of PLN 764 million, which until redemption of the units was captured through a change of the revaluation reserve.
In 2017, net claims and benefits and the incremental growth in PZU’s provisions totaled PLN 7,169 million, i.e. 16.6%
The following factors contributed to the change in the net value of claims and benefits: • higher claims and benefits in motor insurance resulting from development of the insurance portfolio and higher frequency of motor TPL losses with simultaneous increase of the average claims; • the higher loss ratio in the group of insurance caused by the forces of nature and TPL insurance attributable largely to numerous losses caused by the forces of nature in August (Hurricane Xavier) and December (Hurricane
Greg) and reporting of several large claims (inter alia under inward reinsurance with the Group companies); • the lower level of claim in the group of insurance for property, damage including lower level of claims under crop insurance – in the corresponding period of 2016 there were numerous losses caused by frost and winterkill; During the year, acquisition expenses (excluding reinsurance commissions) amounted to PLN 2,138 million and increased by 15.2% compared with the year before. This increase resulted predominantly from an increase in direct acquisition expenses
350 million in October 2015). In 2017 revenues on account of foreign exchange differences on the loan received from PZU
Finance AB (publ.) amounted to PLN 217 million compared to the 2016 cost amounting to PLN 138 million. Additionally, the level of other operating expenses was significantly impacted by the tax on assets – the resulting charge in 2017 was PLN
On 31 December 2017, PZU’s total balance sheet value amounted to PLN 42,388 million and was 13.6% higher as at the end of 2016.
As at the end of 2016, equity amounted to PLN 13,583 million and accounted for 32.0% of equity and liabilities (down 0.5 p.p.).
The balance of contingent liabilities dropped by PLN 145 million compared to the year before. The decline was recorded mainly in the granted guarantees and sureties line item (which shows, among others, the guarantee granted to a subsidiary
PZU Finance AB) and other liabilities, which show mainly liabilities on account of unpaid loan tranches.
COR (combined ratio) was one of the fundamental measures of productivity and operating efficiency of an insurance company; in PZU SA it has been maintained at a level confirming its high operating profitability in recent years.
2. Net claims and benefits ratio (net claims and benefits/net earned premium) x 100% 64.1% 66.7% 63.8% 66.2% 62.2%
Return on equity (ROE) (annualized net profit/average equity) x 100% 18.9% 12.8% 18.2% 21.4% 39.7%
Return on assets (ROA) (annualized net profit/average assets) x 100% 6.1% 4.3% 6.3% 8.1% 17.0%
In addition, the PZU Group has processes to ensure the effectiveness of risk management at the PZU Group level.
The risk management rules applicable to the PZU Group’s subsidiaries include a recommendation issued by PZU (the parent) regarding the organization of the risk management system in insurance sector and banking sector subsidiaries.
designates its representatives to the Supervisory Boards of its subsidiaries, including in particular Alior Bank and Bank Pekao.
The risk management system in the PZU Group is based on the following: • organizational structure – comprising a split of duties and tasks performed by statutory bodies, committees and individual organizational units and cells in the risk management process; • risk management process, including risk identification, measurement and assessment, monitoring and control methods, risk reporting and undertaking management actions.
Risk measurement and assessment Risk measurement and assessment are performed depending on the characteristics of the given risk type and the level o its relevance. The risk assessment is performed by specialised units. In every company, the risk unit is responsible for development of risk assessment tools and risk assessment process to the extent which specifies risk appetite, risk profile and risk tolerance levels.
The process of determining the risk appetite and risk limits for each risk category consistent with the Group’s process has been implemented in all the insurance companies in the PZU
Committee with a view to ensuring consistency between the activities carried out by the banks and the strategic plans and objectives of the PZU Group as a whole as well as ensuring the effectiveness of the risk management system at the Group level. Once agreed, the level of risk appetite is then approved by the banking entities’ supervisory boards.
Specialized units – risk identification, measurement and assessment, monitoring and reporting * At the end of June 2017 the Credit Risk Committee’s powers were divided between the Investment Risk Committee and the Investment Committee. The powers to set the market risk limits were shifted to the Investment Risk Committee.
(in particular in the reinsurance area) and the security management system in the PZU Group, and also monitors their ongoing application. The PZU Group dedicated personnel cooperates with the Management Boards of companies and managers of such areas as finance, risk, actuarial services, reinsurance, investments and compliance on the basis of pertinent cooperation agreements; • the entity level – ensuring that the PZU Group entity attains its business objectives in a safe manner appropriate to fit the extent of the risk incurred by that entity. Monitored at this level are the limits and risk categories specific to the company and also, as part of the integrated risk management system, implemented are the mechanisms, standards and organization of an efficient operation of the internal control system (with particular emphasis on the compliance function), the risk management system
Monitoring and controlling actuarial risk involves the regular analysis of the level of risk and determining the degree of utilization of the established borderline values of risk tolerance and the limits set forth in the Risk Management Strategy in the PZU Group.
specific terms and conditions of insurance or other model agreements in financial insurance; • reinsurance actions; • adequate tariff policy; • application of the appropriate methodology for computing provisions; • relevant underwriting procedure; • relevant benefits handling procedure; • decisions and sales plans; • prevention.
The market risk in the PZU Group originates from three major sources: • operations associated with asset and liability matching
A number of documents approved by supervisory boards, management boards and dedicated committees govern investment activity in the PZU Group’s companies.
Market risk is measured using the following risk measures: • VaR, value at risk, forming a measure of risk quantifying a potential economic loss that will not be exceeded within a period of one year under normal conditions with a probability of 99.5%; • standard formula; • exposure and sensitivity measures; • cumulative monthly loss.
Management actions in respect of market risk involve in particular: • execution of transactions serving the purpose of mitigation of market risk, i.e. selling a financial instrument, closing a position on a derivative, purchasing a derivative to hedge a position; • diversification of the asset portfolio, in particular having regard for the category of market risk, the maturities of instruments, the concentration of exposure in a single entity, geographic concentration; • application of market risk limitations and limits.
Credit risk is the risk of a loss or an unfavorable change in the financial standing resulting from fluctuations in the trustworthiness and creditworthiness of the issuers of securities, counterparties and all debtors, materializing by the counterparty’s default on a liability or an increase in credit spread. The following risk categories are distinguished in terms of credit risk: • credit spread risk; • counterparty default risk; • credit risk in financial insurance.
Credit risk and concentration risk are identified at the stage of making a decision on an investment in a new type of financial instrument or on accepting credit exposure to a new entity. Such identification involves an analysis of whether the contemplated investment entails credit risk or concentration risk, what its level depends on and what its volatility over time is. Both actual and potential sources of credit risk and concentration risk should be identified.
Monitoring and control of credit risk and concentration risk involves an analysis of the current risk level, assessment of creditworthiness and calculation of the degree of utilization of existing limits. Such monitoring is performed, without limitation, on a daily and monthly basis.
Reporting involves communicating the levels of credit risk and concentration risk and the effects of monitoring and control to various decision-making levels. The frequency of each report and the scope of information provided are tailored to the information needs of each decision-making level.
The structure of credit risk limits and concentration risk limits for each issuer is established by a dedicated committee in such a manner that the limits are consistent with the adopted risk tolerance and in such a manner that they enable to minimize the risk of ‘infection’ between concentrated exposures.
In banking activity the provision of credit products is accomplished in accordance with loan granting methodologies appropriate for a given client segment and type of product.
The assessment of a client’s creditworthiness preceding a decision on granting a credit product to the client is performed using a system devised to support the credit process, scoring or rating tools, external information (for instance, CBD
DZ, CBD BR, BIK and BIG databases) and bank’s internal databases. The granting of credit products is performed in accordance with the binding operating procedures whose purpose is to indicate the proper activities to be carried out in the credit process, the units responsible for those activities and the tools to be applied.
In turn, credit scoring is used as a tool supporting the decision-making process regarding loans for retail clients and micro-enterprises, while credit rating has the same role in the segment of small, medium-sized and large enterprises.
Operational risk is identified in particular by: • accumulation and analysis of information on operational risk incidents; • self-assessment of operational risk; • scenario analyses.
Operational risk is assessed and measured by: • calculating the effects of the occurrence of operational risk incidents; • estimating the effects of potential operational risk incidents that may occur in the business.
Monitoring and control of operational risk is performed mainly through an established system of operational risk indicators enabling assessment of changes in the level of operational risk over time and assessment of factors that affect the level of this risk in the business.
Reporting involves communicating the level of operational risk and the effects of monitoring and control to various decisionmaking levels. The frequency of each report and the scope of information provided are tailored to the information needs of each decision-making level.
The business continuity plans in PZU Group companies are kept up to date and tested regularly.
Compliance risk is the risk that PZU Group entities or persons related to PZU Group entities may fail to adhere to or violate the applicable provisions of law, internal regulations or standards of conduct, including ethical standards, adopted by PZU Group entities, which will or may result in the PZU
PZU Życie level covers both systemic activities carried out by the Compliance Department and ongoing compliance risk management activities which are the responsibility of the heads of organizational units or cells in the Companies.
Department identifies compliance risk on the basis of information obtained from the legislative process, from notifications to the register of conflicts of interest, gifts and irregularities, and from inquiries received by the Department.
The provision of full information on compliance risk in each member of the Group is the responsibility of compliance units.
PZU Życie. In turn, the tasks of the Compliance Department include the following: • analysis of monthly and quarterly reports received from compliance units of each member of the Group; • assessment of the impact of compliance risk on the PZU
Group as a whole; • analysis of the implementation of recommendations issued to companies pertaining to the fulfillment of the compliance function; • provision of support to compliance units in various PZU
Group entities in assessing their own compliance risk; • preparation of reports for the PZU Management Board and
Group’s trustworthiness on the market (resulting in a possible financial loss).
Group’s entities is performed for each internal process of these companies by the heads of organizational units, in accordance with the allocation of responsibility for reporting. Moreover, compliance units in PZU Group entities identify compliance risk on the basis of information obtained from notifications to the register of conflicts of interest, gifts and irregularities, and from inquiries sent to them.
Group entities; • participation in legislative work aimed at amending the existing laws of general application; • performing diverse activities in industry organizations; • coordination of external control processes; • coordination of the fulfillment of reporting duties imposed by the stock exchange (in respect of PZU) and by statute; • increasing the level of knowledge among PZU Group staff in the field of competition law and consumer protection, tailored to the specific business areas; • monitoring of anti-monopoly jurisprudence and proceedings conducted by the President of Office of Competition and
Consumer Protection (UOKiK); • reviews of the implementation of recommendations issued by the PZU Group’s compliance unit; • ensuring a consistent implementation of the compliance function within the PZU Group.
As part of efforts aimed at reducing compliance risk 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 function in the management system of
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; • execution of implementation projects for new regulations; • training of staff in PZU Group entities in new regulations, standards of conduct and recommended management actions; • issuing opinions on internal regulations of PZU Group entities 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; • anticipating adjustment of documentation to upcoming changes in legal requirements; • systemic supervision exercised by PZU over the execution of the compliance function in PZU Group entities.
Risk management sensitivity of reserves Impact of changes in assumptions on the net financial result and equity
Changes in the assumptions to the net capitalized annuities in non-life insurance (in PLN m)
Changes in the assumptions for annuities in life insurance (in PLN m)
Changes in the assumptions for reserves in life insurance, excluding annuity insurance (in PLN m)
This analysis does not take into account the impact of changes in the valuation of deposits taken into consideration in the calculation of the provision on the net financial result and equity.
Interest rate risk is defined as the risk of the level of market interest rates exerting an adverse impact on the current result or the net present value of the Bank’s capital. When managing the interest rate risk in banking book, banks endeavor to secure the economic value of their capital while achieving their intended interest result target within the accepted limits.
according to the Standard & Poor’s / AM Best rating 7.7 Reinsurance operations
Reinsurance protection in the PZU Group secures insurance activity, limiting the consequences of the occurrence of catastrophic phenomena that could adversely affect the financial standing of insurance undertakings. This task was performed through obligatory reinsurance contracts supplemented by facutaltive reinsurance.
On the base of the reinsurance treaties it has entered into PZU
Munich Re, Hannover Re, Lloyd’s and VIG Re are among the major partners extending obligatory reinsurance cover to PZU
AAS Balta, Link4 and TUW PZUW have reinsurance cover aligned to the profile of their operations and their financial standing. Every material insurance portfolio is secured with the appropriate obligatory treaty. Reinsurance cover is provided for the most part by PZU, which transfers a portion of the accepted risk outside the Group.
September 2015 and the expiration of the PZU Group’s Capital and Dividend Policy for 2013-2015 updated in May 2014.
PZU Group, PZU and PZU Życie (according to Solvency II); • maintain the PZU Group’s financial leverage ratio at a level no higher than 0.35; • ensure funds for growth and acquisitions in the coming years; • PZU will not issue any new shares for the duration of this
As at the end of Q3 2017, the estimated solvency ratio
was 237.3% and remained above the average solvency ratio for European insurance groups.
As a result of the acquisition of Pekao, the PZU Group’s solvency ratio calculated for Tier 1 capital decreased as at the end of June 2017. To counteract this decrease, on 30 June 2017 PZU SA issued subordinated bonds with a nominal value of PLN 2.25 billion. Section 8.2 Debt financing of PZU, Bank
In Bank Pekao and Alior Bank, the capital adequacy ratio and the Tier 1 ratio were computed on the basis of Regulation
Council of 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
It didn’t take much to persuade me to become physically active because it allows me to test myself and clean my mind. On top of that, it gives a positive “kick” of endorphins. Based on a training regimen consisting of jogging, it is easy to switch to a bicycle, skis or ice skates or even start in a runmageddon or participate in Nordic Walking. At the end of the day, the people you meet thanks to your passions are the most important part of it all.
In this chapter: 1. Equity and bond market 2. PZU’s share price 3. Debt financing 4. Banking sector on the Warsaw Stock Exchange 5. PZU’s investor relations 6. Analysts’ recommendations regarding PZU’s shares 7. PZU Group’s Capital and Dividend Policy 8. Rating 9. Calendar of PZU’s major corporate events in 2018
During the 12 months of 2017, PZU’s market capitalization increased by PLN 7.7 billion.
Taking into account the PLN 1.2 billion dividend paid to the shareholders, the annual rate of return on the Company’s stock was 31.2%, i.e. 8.0 percentage points higher than the increase in the WIG index.
PZU on the capital and debt markets 8.1 Equity and bond market
Upward trends on the equity markets persisted in both developed and emerging markets. Most global markets more than made up for the losses suffered after the financial crunch of 2007-2008. In 2017, the MSCI ACWI (All Country World
Risk appetite was not weakened even by the Fed’s three interest rate hikes in 2017 (to 1.25-1.50%) or the announcement of three more hikes in 2018 of 25 basis points each, or the decision made by the Federal Open Market
The upturn on developed markets translated into higher valuations on emerging markets (including Poland). In 2017, the dollar-denominated MSCI Emerging Markets index
Source: www.msci.com, www.gpwinfostrefa.pl recording an increase by 34.3% y/y, or 7.9 percentage points higher than WIG20 (26.4% y/y).
In 2017, Poland was among the top beneficiaries of the growing confidence in emerging markets. WIG20 ranked in the top five fastest-growing European stock market indices. The growth in the valuations of Polish companies was supported by improving economic indicators, including the high rate of economic growth, current account balance, a very low deficit of the state budget (the lowest since 2007-08 in annual terms), increasing wages and the rate of employment, and appreciation of the Polish currency (in 2017, the exchange rate of the U.S. dollar expressed in the Polish zloty declined by 16.8% y/y to approx. PLN 3.48, and the exchange rate of the euro fell by 5.2% y/y to PLN 4.18).
on 12 May 2010. Since day one, it has been included in the following indices: WIG20, WIG, WIG30, WIG-Poland, WIGdiv,
WIG20TR and MSCI Poland. Since 2012, the PZU stock has also been taken into account in the sustainable development
index from reaching 67.8 thousand points, a record high, on a par with the level last recorded in 2007. Eventually, WIG
Exchange in terms of capitalization, having ranked two places higher than at yearend 2016. PZU’s share in the total WSE
The maximum price per share of PZU stock in 2017 was PLN
PLN 47.72 and thus having beaten the historic record of 2014 by over 13%.
At the beginning of 2017, PZU’s share price continued the strong upward trend it embarked on in Q4 2016, having increased by 36.2% q/q, which was much higher than the q/q increases in WIG20 and WIG of 13.9% and 9.9%, respectively.
In Q1 2017, the upward trend continued on both PZU and the market’s major indices. In Q2 2017, the PZU stock price again performed much better than WIG20, having grown 34.3%
PZU’s share price adjusted for dividends paid from May 2010 to 2017*
The reason behind this emotional market behavior was the unexpected dismissal of the then CEO Michał Krupiński.
Paweł Surówka to the position of CEO of PZU SA on 13 April 2017. The decision was met with approval by the market, as the PZU stock price expansion attested on heavy trading.
The stock exchange session of 7 June 2017, when PZU and
equity stake in Bank Pekao for a total amount of PLN 10.6 billion, proceeded without any turbulence. On 8 December 2016, which was the date when PZU announced the acquisition deal, the PZU stock price increased 2.6% and the trade volume exceeded 10.5 million shares during the session.
In 2017, the value of OTC block trades on PZU shares increased to PLN 581.3 million (from PLN 123.7 million in 2016), which represented approx. 3.1% of the trade value in 2017.
Average number of trades per session 3,942 4,169 3,329 2,495 2,369
Average trading volume per session (shares) 1,795,331 2,225,087 1,872,705 1,635,531 1,882,186
S&P Global Ratings raises PZU’s rating outlook from negative to stable
Last day offering the rights to dividend (according to the T+2 clearing cycle)
PZU raises PLN 2.25 bn in a private subordinated bond issue
UK triggers art. 50 of the Lisbon Treaty to exit the EU
The liabilities arising from the bonds are secured by a guarantee extended by PZU. The bonds bear interest at a fixed rate of 1.375% per annum. The coupon is paid once a year. The date of maturity is 3 July 2019.
The Eurobond issue implemented PZU Group’s investment strategy to manage the matching of assets and liabilities in
The PZU Group’s debt ratio was 27.6%1 as at 31 December 2017.
As at the end of 2017, PZU’s shares had a high value of the P/
BV ratio of 2.49 i.e. twice the average for European insurance companies. According to analysts, this resulted from the high
The issue was effected with a view to supplementing PZU’s equity, following the acquisition of a 20% stake in Bank
Pekao, in order to maintain the Solvency II ratio at a level not lower than 200%, as defined in the PZU Group’s Capital and
In order to secure a safe level of capital adequacy ratios, Alior
On 23 August 2017, the Supervisory Board of Alior Bank, in accordance with a motion submitted by the Bank’s
Under the Second Public Bond Issue Program, Alior Bank issued series P2A bonds with a nominal value of PLN 150 million in a public issue of subordinated bonds. The bonds are unsecured and bear interest at a fixed rate of 4.55% in the first interest period, to be followed by a floating rate in the subsequent interest periods, calculated as the WIBOR 6M rate plus a fixed margin of 2.7%. The final maturity of the bonds will be 29 December 2025.
Pekao, acting through its subsidiary Pekao Bank Hipoteczny, issues long-term debt securities secured on its loan portfolio.
Hipoteczny’s covered bonds have been rated by Fitch at A with a negative outlook. As at the end of 2017, 14 series of Pekao
Bank Hipoteczny’s securities were listed on Catalyst, including six series denominated in EUR. In addition, the Pekao Group has subordinated liabilities resulting from Pekao Leasing bonds in the amount of PLN 99 million.
In 2017, banks in Poland found themselves at a very fortunate point in the business cycle. On the one hand, the overall economic situation, corporate profits and employment kept improving. On the other hand, the Fed announced three hikes in interest rates and declared future hikes. As a consequence, banks operated in an environment of a low cost of risk and * PZU’s share price adjusted for dividends (PLN 8.68 per share)
PZU on the capital and debt markets an outlook for growing interest margins, which translated into both higher profits and across-the-board improvement in analysts’ recommendations.
The WIG Banki2 index jumped up 35.4% y/y, beating WIG by 12 p.p., with only three banks (Pekao, Bank Handlowy and BZ
WBK) distributing dividends of PLN 3.5 billion, which was the lowest result since 2009. The dividend yield was 6.7%, 5.5%
In 2017, the share prices of the banks controlled by PZU, i.e.
Pekao (a member of the PZU Group since 7 June 2017) and
Alior Bank (a member of the PZU Group since 18 December 2015), went up by 2.9% and 46.7%, respectively.
Meeting stringent information governance requirements for public companies and fulfilling information needs of different groups of stakeholders, the Management Board of PZU
As at 31 December 2017, the only shareholder with a stake in
In the structure of Polish investors, a significant change took place in the share of retail investors, which increased by 2.2 p.p. up to 8.2% (70.8 million shares). It was a record high comparable to that of PZU’s IPO at which retail investors subscribed for more than 70 million shares. This structural change largely reflected the general trend on the WSE. In H1 2017, the share of retail investors in trading on the regulated market increased to 18% (+5 p.p.), the highest level in 5
y/y and stood at 12.9%. A structural change also occurred in this subgroup where investors from the United States strengthened their dominance, accounting for 94.5% of all investors as at the end of the year (+2.5% y/y).
Additionally, in 2017 PZU actively met with investors and analysts at the company’s headquarters. Approximately 80 meetings and conference calls were held with more than 200 institutional investors and nearly 100 meetings and conference calls with analysts issuing recommendations concerning PZU’s shares.
In 2017, PZU once again presented its key events, achievements and plans in the form of an online Annual
Report at Users were provided with tools that enabled a multi-faceted analysis of corporate and macroeconomic events. The report includes interactive infographics, animations and video materials, which offer a succinct presentation of PZU Group’s activity in 2016.
In 2017, PZU representatives participated in the following: • 3 non-deal roadshows in New York, London and Edinburgh
(2 in 2016); • 12 international finance conferences attended by global institutional investors (15 in 2016); • 4 conferences for institutional investors held in Warsaw
P/E ratio (Price to Earnings) for PZU’s shares at the end of 2017 12.51 P/BV (Price to Book Value)
S&P Financial strength and Credit rating for PZU and PZU Życie at since 2014 the rating is one notch above foreign currency sovereign rating on PolandPLN 55.4
Share of foreign investors in PZU’s shareholder base at the end of 2017 non deal roadshows in London, New York and
PZU Group’s Finance Division each time after publication of quarterly financial results
The main objectives of PZU’s investor relations function in 2018: • strengthen good relations between the PZU Management
In 2017, PZU stock recommendations were issued by 13 domestic and international financial institutions. In total, sell side analysts GLOSSARY issued 22 recommendations. The greatest percentage of issued recommendations were positive
55.4 and was 14.0% higher than the maximum target price at the beginning of January 2017. At the end of 2017, analysts perceived PZU’s shares as highly undervalued. Median target price provided by analysts was 21.1% higher than the price at the end of 2017.
Almost throughout 2016, the spread between the average target price in recommendations and the current share price was roughly 20% above the market price of PZU shares.
Following the rapid increase in PZU share prices at the end of 2016, the difference narrowed down to a few percent and only slightly differed from the current share price, also in Q1 2017.
PLN 44.5. In the last quarter of 2017, after a strong increase, the target price was again above the market valuation of PZU
shares. At the end of 2017, the average recommendation price was 16% above the market price of the shares at market closing on 31 December 2017.
PLN 60 jan feb mar apr may jun jul aug sep oct nov dec
PZU Group’s Dividend and Capital Policy 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 the parent company and the PZU Group following the declaration or payment of a dividend will remain at a level that will ensure fulfillment of the conditions specified in the capital policy; • when determining the dividend the regulatory authority’s recommendations concerning dividends will be taken into consideration.
PZU Group, PZU and PZU Życie (according to Solvency II); • maintain the PZU Group’s financial leverage ratio at a level no higher than 35%; • ensure funds for growth and acquisitions in the coming years; • PZU will not issue any new shares for the duration of this
Management Board which PZU pays for a given financial year is determined on the basis of the PZU Group’s
We are consistently pursuing the capital and dividend policy enacted in 2016
Capital possibly retained to cover the additional needs stemming from growth in the business
PZU’s earnings and dividend per share in 2010 - 2017 * in 2013 a dividend was paid from excess capital (PLN 2 per share) ** up to the date of preparing this Report on the activities of the PZU Group, the Management Board has not adopted a resolution concerning the proposed distribution of profit for 2017 Source: PZU
As it was the case in previous years, on 5 December 2017 the Polish Financial Supervisory Authority took a stance on the dividend policy of banks, insurance and reinsurance companies, universal pension fund companies, brokerage houses and mutual fund companies in 2018 (download).
PZU SA’s standalone profit (in PLN m) 2,434 1,573 2,249 2,637 5,106
Dividend per share on the date of record (PLN) 1.40 2.08 3.00 3.40 4.97
Dividend yield in the year ** 3.3% 6.3% 8.8% 7.0% 11.1%
Polish FSA permits dividend distributions equal to the entire profit earned in 2017 provided that the capital requirement coverage (after expected dividends are deducted from equity)
Consolidated earnings per share (EPS) attributable to the parent company (PLN)
Credit rating (short-term in local currency) A-2 2 December 2016 A-2 15 January 2016
On 27 October 2017, the S&P Global Ratings agency upgraded the rating outlook for PZU and its main subsidiaries from negative to stable. PZU’s financial strength and credit rating stayed at A-.
On 4 December 2017, S&P Global Ratings affirmed the financial strength and credit strength ratings for PZU and its main subsidiaries at “A-”. The outlook remained unchanged
EUR 500 m issued by PZU Finance AB (publ) on 3 July 2014.
Finance AB (publ.) was also downgraded to BBB+. That is still an “investment-grade rating”.
On 5 September 2013, Fitch Ratings Ltd. awarded an entity rating to Alior Bank S.A. at BB with a positive outlook. The rating was maintained at an unchanged level, in line with the agency’s decision of 16 February 2017.
Bank Pekao cooperates with three leading rating agencies: Fitch Ratings, S&P Global Ratings and Moody’s Investors
On 20 October 2017, Fitch downgraded Pekao’s long-term rating outlook from stable to negative and increased its support rating from 2 to 5. According to the agency’s release, the change of Pekao’s outlook reflects the expectations of a gradual decrease in capital ratios. The change in the support level is an effect of changes in the shareholder structure.
Those were the sole changes to Pekao’s ratings as presented below.
Insurance”, update and operationalization of the PZU Group strategy for 2017-2020
Mountains and rocks contain an unseen magnet that acts as a powerful force of attraction on me at every time of the day, season of the year and regardless of the distance to be covered. Conquering vertical walls involves not only physical difficulties. Above all, it involves overcoming your own weaknesses and fears. Every vertical path traversed and every rock conquered are a source of joy coming from a sense of fulfillment and accomplishment at having beaten what appeared to be impossible. On the other hand, a lack of success is a lesson in humility and gives hope for the future.
We appreciate that the leader’s role is to set the highest standards for the entire industry.
We discharge this function not only by observing a number of codes but also by working continuously on their improvement. We believe that this is part of the sagacious changes we can contribute to the world that surrounds us.
Corporate governance 10. Diversity policy applied to the issuer’s administrative, managing and supervising bodies
A document entitled “Best Practices of WSE Listed Companies 2016” adopted by a WSE Supervisory Board resolution on 13
defines the principles for how we mold relations with our stakeholders. This document is available on our website: On 22 July 2014 the Polish Financial Supervision Authority
The Corporate Governance Rules and information on how to apply them are available on PZU’s website: grupa-pzu/pzusa/zasady-ladu-korporacyjnego.
In 2017, PZU complied with the recommendations and principles set forth in Best Practices of WSE Listed Companies 2016, except for recommendation IV.R.2. which provides for a possibility for shareholders to participate in a shareholder meeting using means of electronic communication, in particular via the following: • real-time transmission of the shareholder meeting,
• real-time bilateral communication where shareholders may take the floor during a shareholder meeting from a location other than the shareholder meeting,
• exercising, in person or by proxy, voting rights during a shareholder meeting.
PZU’s organizational structure; • recommendation IV.R.3., concerning situations where securities issued by a company are traded in different countries (or in different markets) and in different legal systems, because PZU securities are traded only on the
The PZU Management Board and Supervisory Board have declared their readiness to apply the Rules to the objectively broadest extent while giving consideration to the rule of proportionality and the rule “comply or explain” stemming from their wording. These declarations were confirmed by the PZU Management Board and Supervisory Board in their respective resolutions.
Information on the application of the Rules was presented by the PZU Management Board and Supervisory Board during PZU’s Ordinary Shareholder Meeting held on 30 June 2015. The PZU Ordinary Shareholder Meeting declared that, acting within its powers, it will be guided by the Corporate
Published on PZU’s website is detailed information on the application of the Corporate Governance Rules by PZU, including those rules whose application will be partial, namely: • in respect of the rule laid down in § 8 section 4 of the
Company Code GLOSSARY and PZU’s Articles of Association, the function of chairperson has been established within the PZU Supervisory Board; the PZU Supervisory Board’s composition and the chairperson’s function are shaped in accordance with the criteria of independence stated in the Statutory Auditor Act GLOSSARY; the selection of the Supervisory Board Chairperson is accomplished on the basis of the criterion of knowledge, experience and skills that confirm the competences required to discharge duly the duties of supervision; applying the criterion of independence to the chairperson according to 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
– the waiving of this rule is due to the unfinished process of the Company’s privatization by the State Treasury; • the rule laid down in § 12 section 1 reading as follows: “Shareholders are responsible for recapitalizing without delay a regulated institution in a situation in which it is necessary to maintain the regulated institution’s equity at the level required by the legal regulations or oversight regulations as well as when the security of the regulated institution so requires.”
– the waiving of this rule is due to the unfinished process of the Company’s privatization by the State Treasury; • the rule laid down in § 28 section 4 reading as follows: “The decision-making body assesses whether the implemented compensation policy fosters the regulated institution’s development and operating security.”
Accounting Department) and central units operating based on the applicable regulations. The PZU Finance Division is supervised by a PZU Management Board Member.
Data are prepared in the source systems using formal operating and acceptance procedures which specify the powers of specific persons.
PZU monitors changes in external regulations concerning, without limitation, the accounting policy (procedures) and reporting requirements applicable to insurance undertakings and carries out appropriate adaptation processes in these areas.
PZU controls all its consolidated subsidiaries through these companies’ management boards and supervisory boards.
Statutory Auditors, Audit Firms and Public Supervision of 11 May 2017 (hereinafter: “Statutory Auditor Act”) and at least one Member has knowledge and skills in the fields of accounting or audit of financial statements in accordance with the requirements provided for in the Statutory Auditor Act.
The Audit Committee Members have knowledge and skills pertaining to the insurance industry, which is construed as at least one Audit Committee Member having knowledge and skills in the field of insurance or various Audit Committee
with its registered office in Warsaw, ul. Inflancka 4A, 00189 Warsaw, entered by the National Chamber of Statutory
9.6 Share capital and PZU shareholders; shares owned by members of its governing bodies
Resolution No. 789/15 on setting 30 November 2015 as the date of a split of 86,348,289 PZU shares with a par value of
The State Treasury holding 295,217,300 shares representing 34.19% of the Company’s share capital carrying the right to 295,217,300 votes at the Shareholder Meeting is the only PZU
For the purpose of limiting voting rights, the votes of shareholders among whom there is a parent or subsidiary
Fee charged by the entity authorized to audit PZU Group financial statements (PLN thousands)
audit of the financial statements 7,673 2,120 other certifying services, 3,568 3,440
The Articles of Association are available on PZU’s corporate website (www.pzu.pl) in the “Investor relations” section, under the “Company info” tab.
Meeting are adopted by an absolute majority of votes, except in cases provided for in the Commercial Company Code or the
The powers of the Shareholder Meeting, in addition to those specified in the Commercial Company Code or the Articles of
Association, include the adoption of resolutions concerning the following: • examination and approval of the Management Board’s report on the Company’s activity and the financial statements for the previous financial year and granting a discharge to individual members of the Company’s corporate bodies on the performance of their duties; • reviewing the Management Board’s report on representation expenditures and expenditures for legal, marketing, public relations and public communication services and management consulting services; • distribution of profits or coverage of losses; • decisions on claims to remedy damages incurred during the incorporation of the Company or in its administration or oversight; • selling or leasing a business or an organized part thereof or establishing a limited right in rem thereon; • redemption of shares or issue of bonds; • establishing reserve capital accounts and making decisions on their allocation or manner of allocation; • splitting the Company, merging the Company with another company, winding up or dissolving the Company; • appointing and dismissing members of the Supervisory
Supervisory Board; • purchase or sale of real estate, perpetual usufruct or a share in real estate or perpetual usufruct the gross value of which exceeds the equivalent of EUR 30.0 million
Meeting’s approval is required for: • disposal of non-current assets within the meaning of the
◦ 5% of total assets within the meaning of the Accounting
• disposal of shares in another company, with the value exceeding: ◦ PLN 100 million or
A Shareholder Meeting is held: • as an Ordinary Shareholder Meeting which should be held within six months from the end of each financial year; • as an Extraordinary Shareholder Meeting which is convened in cases specified in the generally applicable law and the
Shareholder Meetings are held in Warsaw and convened by placing an appropriate announcement on PZU’s website in accordance with the method for providing current information specified in the Act on Public Offerings, Conditions Governing the Introduction of Financial Instruments to Organized Trading and Public Companies of 19 July 2005, i.e. in the form of current reports.Such announcement should be made not later than twenty-six days before the date of the Shareholder
Meeting. From the date of convening the Shareholder Meeting, the announcement with materials presented to shareholders at the Shareholder Meeting are available on PZU’s corporate website (www.pzu.pl) in the “Investors relations” section under the “Shareholder Meeting” tab. A duly convened
Shareholder Meeting is deemed valid regardless of the number of attending shareholders. Resolutions are passed in an open ballot. A secret ballot is ordered in elections or on motions to dismiss members of the Issuer’s corporate bodies or liquidators, in matters concerning their personal liability to the Issuer as well as in other personal matters or, excluding cases when voting by open ballot ensues from a statute, at the request of at least one of the shareholders attending or represented at the Shareholder Meeting. The rights of the shareholders and the method of exercising thereof at the
The proxy document to participate in the Shareholder Meeting and exercise the voting right must be granted in writing or electronically. One PZU share gives the right to a single vote at the Shareholder Meeting, subject to restrictions with respect to exercising the voting rights described in the Company’s
Articles of Association. A shareholder may vote differently from each of the shares held by it.
In accordance with the Commercial Company Code, detailed procedures concerning participation in the Shareholder
Meeting and exercising the 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 (www.pzu.pl) in the “Investors relations”
Shareholder Meeting for a joint term of office which lasts three consecutive full financial years. At least one member of the audit committee appointed by the Supervisory Board must hold qualifications in accounting or financial audit within the meaning of the Act on Statutory Auditors, Audit Firms and Public Supervision. Furthermore, in accordance with the said Act, the majority of the audit committee members should meet the statutory independence criteria (independent member) concerning, without limitation, professional or family ties, especially to managers or supervisors of PZU or PZU
The independent member is required to present a written statement that he/she satisfies all the independence criteria provided for in the Articles of Association and is required to inform the Company if such criteria are no longer satisfied.
Treasury the right to appoint and dismiss one member of the
Treasury ceases to be a Company shareholder. A candidate for a Supervisory Board member named by the State Treasury should meet the requirements set forth in Article 19 of the Act of 16 December 2016 on Rules for Managing State Property.
On 14 March 2017, the PZU Supervisory Board entrusted the function of Chairman of the PZU Supervisory Board to
Member. At the same time, effective as of 12 April 2017, the
Supervisory Board made on 12 April 2017 and the changes in the composition of the presidium of the PZU Supervisory
On 8 January 2018, Aneta Fałek tendered her resignation from membership in the PZU Supervisory Board effective as of 8
January 2018. On 8 January 2018, effective as of 8 January 2018, pursuant to § 20 Section 7 of the Articles of Association, the Prime Minister appointed Maciej Łopiński to be a PZU
Supervisory Board Member. On 9 January 2018, due to his demise, the mandate of Bogusław Banaszak as a Supervisory
Graduate of the University of Gdańsk. Editor-in-Chief of Tygodnik Gdański, a journalist of Głos Wybrzeża and Tygodnik Czas, among others. A member of parliament in the 7th term of office. Secretary of State in the Office of President
University of Warsaw, a graduate of the Department of Foreign Trade of the
Statistics. Completed, among others, economics studies at the University of Illinois Urbana-
Republic of Poland, adviser to the Prime Minister. He has extensive experience in corporate governance, gained, among others, while serving as a member of the supervisory boards of PTE WARTA S.A.,
On 9 March 2018 PZU’s Extraordinary Shareholder Meeting appointed Robert Jastrzębski to the Supervisory Board as of 9
Polska S.A., in 2012-2013 she was a Project Coordinator at the Bank Zachodni WBK
Faculty of Law and Administration at the University of Warsaw for outstanding academic achievement. Employed since 2001 by the Faculty of Law and
Workshop on 20th century Polish law. Member among others of the program council of the magazine
School of Economics. Member of the International Institute for Strategic Studies.
School of Economics. From 1996 to 2017, an employee of the State Treasury Ministry where she gained extensive experience in exercising corporate governance in companies operating in the defense industry, operating in the coal mining industry, managing sea ports and exercising the
Studies, Leadership Academy for Poland. Advocate and professional mediator of the Mediation Center at the
Supervisory Board, except in cases where the decision in this respect is made by the Shareholder Meeting pursuant to § 18a of the Articles of Association; • seconding members of the Supervisory Board to perform temporarily the functions of members of the Management
Board who have been dismissed, resigned or cannot perform their functions for other reasons,
Moreover, one of the the Supervisory Board’s powers its to give consent to the following: • acquisition or disposal of real property, perpetual usufruct or share in real property or in perpetual usufruct with a value exceeding the equivalent of EUR 3.0 million; • executing a material agreement, as construed by the the Regulation on Current and Periodic Information, by the Company with its related party, except for standard agreements executed by the Company on an arm’s length basis as part of its operating activities; • executing an agreement with an underwriter of the kind referred to in Article 433 § 3 of the Commercial Company
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 member of the Supervisory Board and the committee is specified in a resolution of the Supervisory Board.
Board and for resolutions on appointing, suspending and dismissing the President, members of the Management Board or the entire Management Board as well and making decisions to stop such suspension, which are adopted in a secret ballot.
Moreover, a secret ballot may be held at the request of a member of the Supervisory Board.
Supervisory Board, apart from appointing the audit committee and the nomination and compensation committee, provided for in the Articles of Association to properly perform its supervision, the Supervisory Board may appoint other permanent advisory and consultative committees whose competencies, composition and manner of operation are laid down in the rules and regulations of the committee in question adopted by the Supervisory Board.
Supervisory Board and its appointed committees to use the services provided by experts and consulting firms.
Supervisory Board, may select no more than one advisor authorized to take part in the meetings of the Supervisory
Board devoted to reports and financial statements and give their advice, provided that such a person adheres to the rules of confidentiality and signs a confidentiality undertaking.
PZU Supervisory Board: • audit committee; • nomination and compensation committee; • strategy committee.
The Articles of Association provide for the appointment of an audit committee by the Supervisory Board. The committee is composed of three members. Pursuant to the Act of 21
Marcin Chludziński and Jerzy Paluchniak were indicated by the Supervisory Board as independent members within the meaning of Article 86 Section 4 of the Act on Statutory
Audit Financial Statements and Public Supervision, holding accounting or financial audit qualifications.
In connection with the changes in the PZU Supervisory Board, on 23 February 2017 the PZU Supervisory Board resolved that the audit committee will be composed of 3 persons and established the following composition of the committee: • Bogusław Banaszak – Committee Chairman; • Marcin Chludziński – Committee Member; • Jerzy Paluchniak – Committee Member.
On 13 April 2017, the PZU Supervisory Board supplemented the composition of the audit committee to include Robert
Bogusław Banaszak and Maciej Zaborowski were indicated as independent members within the meaning of Article 129
Supervisory Board, once PZU’s shares are listed on a regulated market within the meaning of the Financial Instruments
Trading Act of 29 July 2005, the Supervisory Board may appoint a nomination and compensation committee.
In accordance with the Articles of Association, detailed responsibilities and the method of appointing members of the nomination and compensation committee, the manner of its operation and remunerations are defined by a Supervisory
Board resolution. The committee should include at least one independent member. If the Supervisory Board includes five members elected in a vote, the nomination and compensation committee is not appointed and its tasks are carried out by the entire Supervisory Board.
According to the regulations of the nomination and compensation committee adopted by a resolution of the
Supervisory Board of 4 April 2013, the committee is an advisory and consultative body to the Supervisory Board and is appointed to improve the effectiveness of the Supervisory
On 13 March 2018 Maciej Łapiński joined to the nomination and compensation committee.
Supervisory Board are elected by group voting, following which its powers are taken over by the whole Supervisory
Board of 4 April 2013, the 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 related to issuing opinions on all strategic documents presented by the Management Board (in particular, the Company’s development strategy) and providing the
In connection with the changes in the PZU Supervisory Board, on 13 April 2017 the PZU Supervisory Board supplemented the composition of the strategy committee to include Robert
Management Board is composed of three to seven members appointed for a joint term of office of three consecutive full financial years.
Supervisory Board. Such appointment takes place following a recruitment procedure aimed at verifying and evaluating the qualifications of the candidates and selecting the best candidate, for a joint term of office of three consecutive full financial years. The President of the Management Board of the new term of office appointed before the current term elapses has the right to submit a motion to the Supervisory Board requesting appointment of the remaining Management Board members of the new term of office before the current term elapses.
• has at least 3 years of experience on managerial or independent positions or arising from conducting business activity on one’s own account,
• 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,
• his/her public or business activity raises conflict of interest with the Company’s business.
On 22 March 2017, effective as of 22 March 2017, the PZU
On 13 April 2017, effective as of 13 April 2017, the Supervisory
Management Board. At the same time, on 13 April 2017, effective as of 13 April 2017, the Supervisory Board appointed
Paweł Surówka to the Management Board and entrusted him with acting in the capacity of President of the Management
Accordingly, from 13 April 2017 the Management Board composition was as follows: • Paweł Surówka – President of the Management Board; • Roger Hodgkiss – Management Board Member; • Andrzej Jaworski – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member.
On 29 May 2017, Andrzej Jaworski tendered his resignation from the function of Management Board Member effective as
Accordingly, from 30 May 2017 the Management Board composition was as follows: • Paweł Surówka – President of the Management Board; • Roger Hodgkiss – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member.
Accordingly, from 13 June 2017 the Management Board composition was as follows: • Paweł Surówka – President of the Management Board; • Roger Hodgkiss – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member.
As at 31 December 2017, the Management Board composition was unchanged.
The current term of office of the PZU Management Board started on 1 July 2015 and will last until the end of three consecutive financial years. The mandates of the Management
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 with a commercial proxy are authorized to represent the Company. The Management Board adopts its bylaws which are subject to approval by the Supervisory Board. The Rules and Regulations of the Management Board were adopted by the Management Board on 2 October 2012, amended by
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 the President of the Management Board and other
Management Board, resolutions of the Management Board are especially required for: • adoption of a long-term plan for the Company’s development and operations; • adoption of an action and development plan for the PZU
Group; • adoption of an annual financial plan and a report on its implementation; • approval of the financial statements for the previous financial year and the Management Board’s report on the
In accordance with the Rules and Regulations, meetings of the Management Board are held at least once a fortnight. The
Management Board; • convening meetings of the Management Board; • setting the agenda of meetings of the Management Board; • applying to the Supervisory Board for appointing or dismissing members of the Management Board; • designating a person to administer the work of the
Management Board during the absence of the President of the Management Board.
Name and surname (composition of the Management Board at the end of 2017) In the PZU Group
PZU Management Board Member since 22 March 2016 / PZU Życie Management Board Member since 25 May 2016 risk management
PZU Management Board Member since 13 June 2017 / PZU Życie Management Board Member since 19 June 2017 bancassurance and strategic partnership programs, real estate, supervision over the PZU
Roman Pałac President of the PZU Życie Management Board since 26 April 2017 / PZU Group Director since 15 February 2016 life insurance (products and tariffs, management of sales and agency and corporate sales channels), management of the PZU Branch network, health insurance, claims handling, benefits and remote channels
Aleksandra Agatowska PZU Życie Management Board Member / PZU Group Director since 25 March 2016 procurement
Dorota Macieja PZU Życie Management Board Member / PZU Group Director since 15 March 2017 marketing, customer relationship management, corporate communication
President has the casting vote. The Management Board, with the consent of the President, may adopt resolutions in writing, on paper or in electronic form (i.e. using means of remote communication and a qualified electronic signature).
The President of the Management Board makes decisions in the form of orders and official instructions. Other members of the Management Board administer the operations of t he Company within the scope specified by the President.
PZU’s Articles of Association do not provide for any special rights of the Management Board concerning decisions on issuing or redeeming shares.
PZU Życie Management Board since 23 June 2016 to 13 April
Development Department and CEO of subsidiaries in the automotive sector. Until
Banking for Germany, he was responsible for opening the first international corporate branch of PKO Bank Polski as well as for advisory and financial services for PKO Bank
University and also qualified as a Chartered Accountant in the United Kingdom. From 1998 to 2007, he worked for
Intouch Insurance Group, the Joint Venture established by the RSA Group and DIFI
He graduated from the Faculty of Law and Administration at the University of Łódź and completed post-graduate studies in business insurance at the Kraków Academy of
Management Board, he served as the Director of the Planning and Controlling Department.
He prepared the PZU Group’s strategy for the years 20162020 and the PZU Group’s capital and dividend policy.
Management Board in charge of finance, risk, operations and IT. In his capacity as
Maria Curie-Skłodowska University in Lublin and completed a postgraduate course in Organization and Management. From 2002 to 2005, she was a Member of the Puławy County Board. From 2005 to 2015, she was a member of the Sejm of the Republic of Poland (of the 5th, 6th and 7th terms). She worked in the
Committee for changes in legal codes, where she acted as the deputy chairwoman of the
Committee for two terms of office. She was also member of the National Council of the
Graduated in Economics from the Warsaw School of Economics (SGH) and completed MBA studies at the London Business School.
Gained extensive experience working for Polish and foreign financial institutions. In 20032007, he worked as Project
Manager at the World Bank in charge of the preparation and coordination of loan programs aimed at implementing policies intended to improve energy efficiency in countries of Central and Eastern
Boston Consulting Group where he was responsible for the provision of insurance and banking advisory services related to motor insurance claims handling, business strategy development and sales activation. He also participated as an expert in several bank merger deals.
Market Research. She gained her professional experience working for ING Życie, ING
Group since 2016. As a director, she supervised prevention and sponsoring activities at PZU and PZU
Życie SA. In 2010-2016, she coordinated and managed publishing and film production projects. In 2008-2010, she served as deputy director and director of Channel 1 of
Extraordinary Committee of the Sejm for changes in legal codes. He has acquired experience in corporate governance serving as a member of supervisory bodies of commercial law companies.
The rules for compensating Management Board members are shaped by the Supervisory Board in accordance with resolution 4 adopted by PZU’s Extraordinary Shareholder Meeting of 8
Deferred variable compensation is subject to deferral for 3 years. 12, 24 and 36 months, respectively from the date of allocation, a Management Board member may acquire the right to 1/3 of the deferred variable compensation for a given year subsequent to satisfying the conditions defined in the Management Services Provision Agreement.
are at the same time employed as directors of the PZU Group at PZU and are in charge of the same business structures and areas at PZU and PZU Życie SA.
On 15 March 2017, Dorota Macieja was appointed to the position of Director of the PZU Group. On 31 October 2017,
The following persons served as directors of the PZU Group throughout 2017 or during part of the year: • Aleksandra Agatowska; • Tomasz Karusewicz; • Bartłomiej Litwińczuk; • Dorota Macieja; • Sławomir Niemierka; • Roman Pałac; • Paweł Surówka.
Salaries and other short-term employee benefits paid by PZU (in thousands)
including bonuses and special awards: including bonuses and special awards: High-level managers (PZU Group Directors), including: 3,030 706 2,332 107
PZU is a company in which the State Treasury has a shareholding. Accordingly, the persons who sit in its managing bodies are selected in accordance with the statutory regulations applicable to these types of entities.
policy when it comes to organizational culture. This involves counteracting mobbing and discrimination, offering equal opportunities to all employees regardless of their professional position in the PZU Group, sex, age, disability, race, religion, nationality, political convictions, union membership, ethnic origin, ethnic origin, denomination, sexual orientation, employment for a specified or unspecified term or on a fulltime or part-time basis while respecting the right of assembly and the right to strike.
PZU provides its employees equal opportunities for development to enhance their skills, being promoted and compensation, while having regard for employees’ individual potential, their accomplishments and work performance.
During my childhood the automotive industry was my passion - I had the largest collection of toy cars in my apartment building. Over time, my interests turned into a passion for renovating antique automobiles. Restoring automobiles older than myself to their finest period gives me the greatest amount of pleasure. I am now preparing to renovate my greatest love, a 1980 Ford Capri.
On 30 June 2017, PZU issued subordinated bonds with a nominal value of PLN 2.25 billion. The bond redemption date is 29 July 2027 with an early repayment option on 29 July 2022. CHAPTER 8.3 DEBT FINANCING
On 8 December 2016, PZU and PFR signed an agreement with UniCredit S.p.A. to acquire a 32.8% equity stake in Bank
Polish zloty) and is in force for a period of 3 years.
Information regarding the off-balance sheet items as at the end of 2017 is set forth in CHAPTER 6.5 ASSET AND LIABILITY
Ardea Alba SA in liquidation, TFI PZU SA, PZU Zdrowie SA,
PZU Finanse Sp. z o.o., PZU LAB SA, Omicron Bis SA. The Tax
Group has been established for a period of 3 years – from 1
Zdrowie SA, PZU Finanse sp. z o.o., PZU LAB SA, Ipsilon sp. z o.o., Omicron Bis SA, Tulare Investments Sp. z o.o, Battersby
description of litigation and proceedings before the President of the Office of Competition and Consumer Protection (UOKiK)
has been set forth in the PZU Group’s consolidated financial statements and PZU’s financial statements for 2017.
Related party transactions on terms other than based on the arm’s length principle
Within the framework of equity and business links, PZU Group member companies provide services to one another. With the exception of companies from the Tax Group, the transactions are executed according to the arm’s length principle.
PZU’s business is not seasonal or cyclical to an extent that would justify application of the suggestions set forth in the
Management Board’s Report on the Activity of the PZU Group and PZU SA for 2017 has 204 consecutively-numbered pages.
Share in net profit (loss) of entities measured using the equity method 16 (3) 4 (2) 1
Unearned premium and unexpired risk reserve 8,008 7,076 5,856 5,250 4,540
Provisions for bonuses and discounts for the insured 14 5 2 2 3
Liabilities directly associated with assets qualified as held for sale 3 33 - 252 -
"Gain on acquisition of the spun-off part of Bank BPH" - 465 - - -
2. Net claims and benefits ratio (net claims paid and benefits/net earned premium) × 100%
Operating expense ratio in the insurance segments (insurance activity expenses/net earned premium) x 100%
Acquisition expense ratio in the insurance segments (acquisition expenses/net earned premium) x 100%
6. Combined ratio in non-life insurance (net claims and benefits + insurance activity expenses)/net earned premium) x 100%
Acquisition costs ratio (including reinsurance commission)* 19.9% 20.7% 18.4% 19.8% 18.8%
Data from the profit and loss account – individual insurance (PLN million) 2017 2016 2015 2014 2013
Insurance claims and change in other technical provisions net (1,672) (1,043) (1,091) (1,250) (1,339)
Data from the profit and loss account – group and individually continued insurance (PLN million)
* ratios calculated with gross premium written ** ratio calculated with gross premium written, excl. One-off events
Data from the profit and loss account – pension segment (PLN million) 2017 2016 2015 2014 2013
Net revenue from commissions and fees 1,605 351 - - -
Exchange rate EUR/LTL in PLN 4.2447 4.3757 4.1848 1.2133 1.2196 * ratios calculated with net premium earned
Rafał Bebelski Communication and Business Event Team Swimrun is an extremely tough swimming and running race across land and water through lakes, seas, rocks, wetlands and forests on foot and just with the things you have on you. Only the team is of importance, and the wildness of your heart of nature. To me, sport is above all nature, open space and a competition to be first. In swimrun I will be the first Pole to conquer the legendary route in the Norwegian Rockman competition.
(e.g. claims, acquisition and administrative expenses) to the net earned premium for a given period cross-selling – a sales strategy for selling a given 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
DPS (ang. dividend per share) – market multiple specifying the dividend per share
free float – public company’s shares freely available to the investing public. This is the ratio of the number of shares not held by large investors to the total number of shares – in other words, all the freely-available shares that are publicly traded
IDD – Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution
Nadzoru Finansowego] supervises the banking sector and the capital, insurance and pension markets; it also supervises payment institutions and the offices of payment services, electronic money institutions and the savings and loans sector, www.knf.gov.pl profit margin in group and individually continued insurance (in PZU Życie) – indicator computed as the ratio of operating profit to the gross written premium of the group and individually continued insurance segment, net of non-recurring effects such as, for instance, the conversion effect, i.e. the conversion of long-term agreements into yearly renewable term agreements and the change of technical rates, i.e. the discount rate for technical provisions for accounting purposes
– the reinsurer – of all or part of the insured risk or class of risks along with the pertinent portion of the premiums. As a result of reinsurance, a secondary split of risks transpires to minimize the risks to the insurance market outward reinsurance – reinsurance activity whereby the insurer (cedent) transfers a portion of the concluded insurance to a reinsurer or reinsurers in the form of a reinsurance agreement inward reinsurance – reinsurance activity whereby a reinsurer or reinsurers accept a portion of insurance or a class of insurance transferred by a cedent technical provisions – provisions that should ensure full coverage of all current and future liabilities that may result from executed insurance agreements. The following, in particular, are for accounting purposes part of technical provisions: provision for unearned premiums, provision for outstanding claims, provision for unexpired risks, provision for investment risk borne by policyholders and provision for bonuses and discounts for insureds
(premiums) over time through movement in the provisions for unearned premiums and the reinsurers’ share
Solvency II – a solvency system for European insurance undertakings taking the risk profile into account. These requirements have been in force since 1 January 2016 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 sum insured – amount in cash for which an insured object is insured. In non-life insurance the sum insured ordinarily constitutes the upper limit of the insurer’s liability
This measure expresses the sum total of profit stemming from the movement in the share price of a given company and the dividends paid during the time when an investor holds its shares in relation to its share value at the beginning of a given year. It is expressed as a percentage on an annualized basis
Financial Statements and Public Supervision (Journal of Laws of 2009, Number 77, Item 649 as amended).
The shaping of anti-monopoly policy and consumer protection policy is one of the powers of the President of the Office of Competition and Consumer Protection, inter alia, by conducting anti-monopoly proceedings in cases of practices limiting competition and in cases of practices violating the collective interests of consumers, www.uokik.gov.pl
Item 1844, as amended), with most regulations in force as of 1 January 2016. This act introduced Solvency II requirements in the Polish legal system up-selling – commercial technique involving the offering and selling of additional higher-priced and higher standard services to a current client venture capital – medium and long-term investments in privately-held businesses in their early stage of development combined with managerial support, conducted by specialized entities (venture capital funds). The purpose of venture capital investments is to generate a profit ensuing from the incremental growth in the value of a business by selling its stock after the elapse of a specific period
Cost / Income Ratio (C/I; banking sector) – quotient of a bank’s operating expenses to its income: on interest, fees and commissions and tradingji
specifying the level of capital security for the operations conducted by an insurer; by law this multiple should be higher than 100%
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
These Financial Statements contain forward-looking statements concerning the strategic operations. Such forward-looking statements are exposed to both known and unknown types of risks, involve uncertainties and are subject to other significant factors which may cause that the actual results, operations, or achievements of PZU Group considerably differ from future results, operations, or achievements expressed or implied in the forwards-looking statements. The statements are based on a number of assumptions concerning the current and future business strategy of PZU Group and the external environment in which the Group will operate in the future. PZU expressly waives any and all obligations or commitments concerning distribution of any updates or adjustments to any of the assumptions contained in these Management Board’s report on the activity of the PZU Group and
Board’s report on the activity of the PZU Group and PZU if the strategic operations or plans of