Business strategy 57 4.1 Effects of the PZU 2.0 strategy 58 4.2 Projected external situation 59 4.3. Implementation of the PZU Strategy 2.0 for the years 2012 – 2014 61 2MANAGEMENT’S REPORT OF THE PZU CAPITAL GROUP FOR 2014
Ranked 1st in Lithuania and Latvia in terms of gross written premium in non-life insurance
The level of gross written premium grew in 2014 by 2.5% from the previous year to PLN 16,884.6 million.
included among others Link4 and the largest insurance entities on the Lithuanian and Latvian markets.
The past 12 months were the final stage of PZU 2.0 strategy assumed for the years 2012-2014, and crowned with success. I am convinced that the established foundations will allow for the effective realisation of the new PZU 3.0 strategy.
PZU’s customers have access to the largest sales and postsale service system among Polish insurers. It includes
PZU strives to preserve the highest service standards, which covers regular and advanced surveys concerning customer satisfaction. In 2014, they showed that 91.5% of customers are satisfied with the claims handling process. The NPS (Net
Group also exceeded the average values of the big European insurance companies. The decrease in the ratio resulted from the implementation of the capital and dividend policy.
December Health insurance premiums at PZU exceeded PLN 100 million. As at the year-end, 0.5 million insured had PZU healthcare products.
October 300 hybrid Toyota cars now available in PZU car rentals in Poland. Thus, we have created the first such fleet of replacement cars in the country.
Leader on the Polish non-life insurance market with share of 31.4%, on the motor insurance market (after three quarters of 2014) - 34,7%. Visible growing tendency of market shares following the second and third quarters of 2014.
Net asset value of PLN 25.5 billion at the end of 2014 – annual increase of PLN 3.3 billion. External clients’ assets value of PLN 6.0 billion, annual net increase of PLN 1.7 billion.
Third place on the market with a share of 13.1% by net asset value.
Purchase of four logistics parks located in Łódź, Gdańsk, and Wrocław for EUR 140 million.
• #6 PZU Ukraine – 7.3% market share in life insurance
Net inflation (CPI excluding food and energy prices) declined to an annual average of 0.6% compared with 1.2% in 2013.
especially in the second half of the year with the escalation of the Russian-Ukrainian conflict. The inflation index was also considerably lower than commonly expected. Additionally, the operating changes of open pension funds entailed the reduction of stock price support from pension funds.
There is also ongoing work on the draft of the Act on
Guarantee Fund – 0.3% of the net asset value of OFE is transferred to the Guarantee Fund administered by CSDP
The Act dated 30 May 2014 concerning consumer rights (valid from 25 December 2014)
The Act dated 29 August 2014 on amending the Act on corporate income tax, the Act on personal income tax, and several other acts.
January 2015. Tax does not apply to income from endowment insurance for which a technical rate is applied to establish the technical provision in the life insurance category. The Act simplifies the calculation of taxable income from insurance premium investment as the difference between the benefit amount and the premium paid to the insurance company.
GLOSSARY the closest relative is entitled to compensation from the TPL insurance of motor vehicle owners for damage resulting from the pain and suffering if the casualty died before 3rd August 2008 and if there was actual relation between the casualty and the claimant, a mental and emotional bond.
Latvia followed in the footsteps of Estonia and introduced the euro currency in 2014. The euro introduction was calm and successful, it only raised inflation by 0.1-0.2 p.p.
In 2014, the regulative community focused on the preparations for the implementation of the Solvency II
2.6 Macroeconomic factors, which can affect the operations of the Polish insurance sector and PZU Group’s activities in 2015
Contents: 1. Structure of PZU Group 2. PZU and Link4 – operations on the Polish non-life insurance market 3. PZU Życie – activities on the life insurance market in Poland 4. PTE PZU – activities on the pension fund market 5. TFI PZU – activities on the investment fund market 6. Foreign operations of PZU Group in 2015 7. PZU Zdrowie – activities on the health care market 8. Other areas of activity
Motor insurance is the most important group of products offered by Link4, both in terms of the number of binding insurance contracts, as well as the premium share in the total gross written premiums.
In particular, high premiums (and higher than the level of the benefits paid) contributed to an increase of the unit-linked net assets (increase of 8.0% to PLN 53.8 billion).
Factors, including threats and risks, which will affect the activities of investment funds in 2015
EUR 119.5 million, 0.8% higher than in 2013. The growth of the written premiums resulted mainly from increased insurance sales in the individual client segment (by 3.7%
It should also be noted that the written premium in the reporting currency for both companies was lower than last year under the conditions of strong currency depreciation. In 2014, the premium of PZU Group was PLN 173.6 million and was lower by 14,8%.
Both in 2014 and early 2015, the Ukrainian Companies realised their sales plans approved by the Supervisory Board.
The core activities of PZU Pomoc SA (PZU Pomoc) are, in particular: • organizing assistance services involving the customer help; • renting and leasing motor vehicles; • conducting on-line auctions and e-commerce; • managing loyalty programmes; • managing post-accident property; • activities in medical support.
This will result from the growth of corporate tangible assets, the growing wealth of individual clients, and the greater interest in additional insurances; ◦ Life insurance market. It will develop at a slower pace than the non-life insurance market with annual average of 1.3%. The 1.3% growth of regular insurance is assumed to cover a stable growth of group insurance
Profitable maintenance of the leadership position in life insurance (in Poland)
1. The number of club members rose to 2.6 million (from over 2.0 million as at the end of 2011).
5. Expansion of health care service access channels by a mobile application.
2. PLN 4,663.0 million of PZU’s 2013 net profit paid as dividend. 3. Continuation of the work aimed at preparing PZU Group to comply with the regulatory requirements related to the Solvency II Directive.
Everest platform was used to issue 27 thousand policies daily. 5. Establishment of the Organizatorzy Pomocy Poszkodowanym w Wypadkach team
6. The “PZU. Przyciągamy najlepszych” (PZU, We Attract the Best) campaign was conducted to help the company acquire the best candidates. The message was for both experienced experts and academic students and graduates.
The main strategic objective for the period until 2020 is to transform the institution from an insurance company into the
compensation pay-outs); • introducing product and process innovations thanks to the application of new technologies, including digital technologies, and the Everest system.
The objective of the capital and dividend policy is to focus on the rate of return for the shareholders by optimising the capital level while ensuring high solvency ratio and maintaining funds for strategic development through acquisitions.
In early 2015 PZU shifted the products offered to individual clients and SME to the Everest platform. Products for corporate customers will be introduced into the system in the second half of 2015.
PZU Group will strengthen its relations with this segment by offering a complex life and non-life offer, i.e. property, life, and health insurance. With the development of these companies and growth of their insurance awareness, the
PZU Group will also expand its cooperation with trading partners with large customer bases or supporting mass payments. In particular, the Group aims to acquire new partners in the energy, fuel and telecommunications industries.
PZU Repair Network or the PZU Pomoc mobile office; • in writing (sent by post, e-mail or fax).
The people who were dismissed or who did not accept the changes in the terms and conditions of employment (just as during all stages of employment restructuring, namely in 2010–2013) were offered more favourable conditions of leaving than those provided for by law in similar situations.
Employment at PZU Group per education 2014 data includes employment in newly acquired entities in Baltic states and Poland
Employment in PZU Group is related to stability of employment and, simultaneously, to substantial development opportunities within the Company.
Język” [Simple Language] project. For an average Pole, the majority of insurance documents, sales materials or even advertisements are too specialised, difficult and confusing.
family. This was followed by the positioning of the brands on individual markets and campaigns introducing new branding strategies.
80MANAGEMENT’S REPORT OF THE PZU CAPITAL GROUP FOR 2014 6.1 Key factors affecting the achieved financial results
Within particular item of the operating result, PZU Group recorded: • increase in the gross written premium to the level of PLN
In 2013 there was a one-off event amounting to PLN 172.7 million regarding consolidation of investment funds, mostly for the property sector.
After excluding from the segment’s result the one-off effect related to the lower effect of conversion of long-term contracts into renewable contracts in type P, the segment’s operating profit amounted to PLN 1,692.0 million in 2014, compared with PLN 1,476.3 million in 2013 (a 14.6% increase). The main reason was an increase of the portfolio and a simultaneous fall in the loss ratio of protection products.
(expenses lower by PLN 9.4 million) as a result of the lack of the Prevention Fund charges in the current year
In 2014, the operating profit in the pension insurance segment amounted to PLN 203.5 million, i.e. it increased by 48.1%
PZU Group generated an operating loss in the amount of PLN
One of the basic efficiency and operating measure of an insurance company is the combined ratio (COR), which is calculated for the non-life sector because of its specific nature.
Two levels are distinguished in the risk management process: • PZU Group’s level – It ensures that PZU Group implements its business objectives in a safe way which is adequate to the scale of risk involved. This level engages the monitoring of limits and specific types of risk occurring in business lines, e.g. catastrophe risk, entire exposure of PZU Group to financial risk or counterparty risk. PZU Group ensures support in the application of coherent risk management standards and monitors their implementation. Dedicated employees from PZU Group cooperate with Management
Re, Munich Re, Scor and Lloyd’s. PZU’s reinsurance partners have high S&P/AM Best ratings, which gives the Company the certainty of the reinsurer’s good financial standing.
PZU’s activity in the area of inward reinsurance includes foreign companies of PZU Group. As a result of the new acquisitions, in 2014 years the commitment to the protection of subsidiaries increased, and so did the related written premium. In addition, PZU obtains a gross written premium from inward reinsurance from activity on the domestic and foreign market, mainly through facultative reinsurance.
PZU Group’s solvency margin coverage with own funds 291.2% 351.8% 405.8% 352.9% 367.9%
Amount of PZU Życie ’s own funds (in PLN million) 3,996 4,185 6,551 5,704 6,233
Key events affecting the PZU’s share price in 2014 year 8.3 Debt financing
From 22nd December 2014 bonds have also been traded on the Warsaw Stock Exchange Catalyst ASO/Bondspot market.
Europe, who have increased their holdings to 42.3 million shares (an increase of 8.5% y/y).
Relations in Poland; ◦ PZU was ranked first in the category of IR Professional
The following are the main IR aims in 2015: • building understanding and approval for the PZU 3.0 strategy among the investors; • providing a broad market for PZU shares – by continuing pro-investors activities aiming to create a diversified
In 2014, recommendations for PZU stock were issued by 20 domestic and foreign financial institutions. In total, the sell side analysts issued 34 recommendations. Positive recommendations, that is, buy, accumulate and overweight, slightly outweighed the negative ones (about 35% of all recommendations). The median of target prices from the
Maintain PZU Group’s own funds net of subordinated debt at no less than 250% of PZU Group’s solvency margin
Dividend from 2013 profit of PLN 2.9 bn, i.e. PLN 34 per share
Lowest coupon in the history of the corporate bond market in the CEE region
II stage of the implementation: 2014-2015 year 120MANAGEMENT’S REPORT OF THE PZU CAPITAL GROUP FOR 2014
PZU Group’s consolidated net profit (PLN million) 2,967.6 3,295.0 3,253.8 2,343.9 2,439.2
Dividend paid from the profit for the financial year (PLN million) n/a *** 4,663.0 2,564.7 1,936.9 2,245.2
Group, the Management Board had not adopted a resolution concerning distribution of profit for 2014.
Credit rating (long-term in foreign currency) A - / positive /
Work Placements) certificate for the second time. This is the first initiative in Poland which aims to establish the highest standards in implementation of internship and work placement programmes in companies. The certificate confirmed the high quality of internships and work placements organised by PZU.
After the last survey in 2013, in various business units employees together with their superiors came up with more than 600 ideas how to turn PZU into even friendlier place to work – all on the basis of the surveys’ results. It was possible to provide (locally) for example: • allowance for people commuting to work using Polish State
Respect for an individual is demonstrated in the form of fair, non-discriminating remuneration. We want our employees to be paid on a level comparable to other entities operating in the industry. The issue of remuneration and additional benefits was presented in chapter titled HUMAN RESOURCES
Children), funding a programme offering help to 200 exceptionally talented children and teenagers annually; • Fundacja Edukacyjnej Przedsiębiorczości (Educational
In November 2014, PZU Group won the main prize in the 8th edition of Charity Leaders contest as the company who spent most funds for social purposes. PZU won another award in a row, taking the first place with the record donated amount exceeding PLN 33 million.
meetings applicable in PZU allow for exercising rights from shares and protect interests of all shareholders. The communication regarding non-compliance with the principle included in Section VI.10 was submitted by the Issuer on 29th
Principles, which states that in the composition of the supervisory body there should be a separate function of a chairperson who manages the works of the supervisory body and that the choice of the chairperson of the supervisory body should be made based on the experience and team leadership skills, taking into account the criterion of independence; it must be emphasized that, in accordance with the Code of Commercial Companies
Number of shares / rights to shares as of the date of submitting this annual report (i.e. 5 March 2015)
Supervisory Board; • acquisition or disposal by the issuer Real property, perpetual usufruct or share in Real property or in perpetual usufruct with a value exceeding the equivalent of a gross amount of
Composition of the Supervisory Board of PZU as at 1st January 2014: • Waldemar Maj – Chairman of the Board; • Zbigniew Ćwiąkalski – Vice-Chairman of the Board; • Tomasz Zganiacz – Secretary of the Board; • Dariusz Daniluk – Member of the Board; • Zbigniew Derdziuk – Member of the Board; • Dariusz Filar – Member of the Board; • Włodzimierz Kiciński – Member of the Board; • Alojzy Zbigniew Nowak – Member of the Board; • Maciej Piotrowski – Member of the Board.
She took part in the setting-up of Polskie Huty Stali S.A., Kompania Węglowa S.A. and the IPO of
He also publishes articles and comments on economic matters in Rzeczpospolita and Gazeta
Board were adopted by its Resolution of 9th October 2012 and specify its composition and the way in which its members are appointed, the tasks and the scope of its activities and the manner of calling the Supervisory Board and conducting debates.
The Statue stipulate that the Supervisory Board should meet at least once every quarter. The Supervisory Board may delegate its members to fulfil specific supervising activities on their own and to this effect appoint temporary committees.
Supervisory Board are elected in a vote in groups and its rights are then taken by the entire Supervisory Board.
On 6th October 2014, Barbara Smalska resigned from the position of Member of the Management Board of PZU as at 31st December 2014.
Department and the Deputy Chairman of the Management Board in charge of investments. He has held the position of a Member of the Management Board of PZU and PZU Życie since July 2011. He is in charge of the Investment Division.
As at 1st January 2014, Group Directors of PZU Capital Group were the following: • Rafał Grodzicki; • Przemysław Henschke; • Sławomir Niemierka.
The Management Board of PZU declares that to the best of their knowledge, the consolidated financial statements and comparable data of PZU Group have been prepared in accordance with the applicable accounting principles and provide a true, fair and clear view of the economic and financial position and the financial profit or loss of PZU Group and that the Management’s Report of the PZU Capital Group
Liabilities directly associated with assets qualified as held for sale 252,014 x x x x
14. Deferred acquisition expenses compliant with the principles of determining provision for unearned premium in section I of the attachment to the Act and in compliance with the unearned premium reserve calculation in section II
Appendix: Financial data 186MANAGEMENT’S REPORT OF THE PZU CAPITAL GROUP FOR 2014
Investment result – investment segment (PLN thousands) 2014 2013 2012 2011 % change 2014/2013
ATI (Accounting and Tax Institute)– the task of the Institute is to improve the professional qualifications of financial, accounting and management personnel, setting the standards of financial reporting, creating changes in tax and accounting law, disseminating good practices in business, and thus better preparing Polish good practices.
European (CEE) region. Consist of companies fulfilling criteria related to social and ecological matters.
STOXX® Europe 600 Insurance – the index representing 39 companies engaged in insurance activities of the selected 600 companies from 18 European countries.
PZU does not undertake to publish any updates, amendments or adjustments to the information, data or statements included in this Management’s Report of PZU Group in the event of modification of PZU strategy or intentions or the occurrence of facts or events affecting PZU strategy or intentions unless such a reporting duty stems from the prevailing legal regulations.