Truthfulness and accuracy of the presented financial statements
To the best knowledge of the PZU Management Board, the PZU Group’s consolidated financial statements, PZU’s financial statements and comparative data have been prepared in line with the prevailing accounting principles, and honestly, accurately and clearly reflect the PZU Group’s and the Issuer’s assets and financial position as well as their financial result, and that the Management Board’s report on the PZU Group’s and PZU’s activity shows a true picture of the PZU Group’s and the Issuer’s development, results and position, including a description of the major threats and risks.
Selection of the entity authorized to audit financial statements
The PZU Management Board represents that the entity authorized to audit financial statements – KPMG Audyt Sp. z o.o. sp. k. – auditing the consolidated financial statements and PZU’s financial statements, has been selected in compliance with the law and that this entity as well as the statutory auditors performing the audit of these statements have fulfilled the conditions for expressing an impartial and independent opinion on the audited consolidated financial statements and PZU’s financial statements in accordance with the laws and professional standards in force.
Cooperation with international public institutions
PZU Group companies cooperate among others with the European Bank for Reconstruction and Development (EBRD) and the European Investment Fund. EBRD acquired PLN 300 million in securities under the subordinated bond issue referred to below.
In 2017 Bank Pekao signed two agreements with the European Investment Fund under the European Employment and Social Innovation Program CHAPTER 3.4 BANKING (PEKAO, ALIOR BANK).
Information about significant agreements executed between shareholders
The PZU Management Board does not have any information about agreements executed until the date of this Report on the activity of the PZU Group and PZU among shareholders as a result of which changes may transpire in the future in the percentages of shares held by its shareholders to date.
Information about significant executed agreements
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 Pekao S.A. for a total amount of PLN 10.6 billion. CHAPTER 3.4 BANKING (PEKAO, ALIOR BANK).
Granted and received guarantees and sureties
On 8 November 2017, PZU executed a mandate contract with Alior Bank on periodic granting of insurance guarantees constituting unfunded credit protection and a framework mandate agreement on the periodic granting of counter- guarantees (Current Report No. 64/2017). The maximum exposure limit for guarantees is PLN 5 billion (say: five billion 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 STRUCTURE.
Credits and loans incurred
Companies in the PZU Group extend loans to one another. Below is a list of the loans extended in 2017 to the issuer’s related entities:
|Amount||date granted||maturity date||borrower||lender|
|PLN 60 m||2017-03-20||2019-03-15||PORTFEL2 PH5 sp. z o.o.||PZU|
|PLN 20 m||2017-03-20||2019-03-15||2 PB 4 Sp. z o.o.||PZU|
|PLN 20 m||2017-03-20||2019-03-15||2 PM 1 sp. z o.o.||PZU|
|PLN 500 m||2017-06-02||2017-06-27||PZU||PZU Życie|
|GBP 2.5 m||2017-11-29||2021-11-30||PZU Corporate Member Limited||PZU|
On 25 September 2014, a Tax Group agreement was signed between PZU Group companies: PZU, PZU Życie, LINK4 Towarzystwo Ubezpieczeń SA, PZU Centrum Operacji SA, PZU Pomoc SA, Ogrodowa-Inwestycje Sp. z o.o., Ipsilon Sp. z o.o., 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 January 2015 to 31 December 2017.
Under the tax group agreement, PZU is the parent company representing the tax group. Pursuant to art. 25 sec. 1 of the CIT Act, the Tax Group performs settlements with the Tax Office on a monthly basis. PZU makes advance payments to the Tax Office for the CIT tax due from PZU’s overall Tax Group, while the member companies transfer the amount they owe in advance payments to PZU’s specified bank account.
The tax group agreement for fiscal years 2018-2020 was signed on 20 September 2017. According to the agreement, the tax group will be formed by PZU, PZU Życie, LINK4, PZU CO, PZU Pomoc SA, Ogrodowa-Inwestycje sp. z o.o., PZU 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 Investments SA.
According to the agreement, the new tax group will not include TFI PZU and Ardea Alba SA in liquidation, which previously comprised the Tax Group established for the period of 2015 to 2017.
In 2017 and up to the date of preparation of this report on the activity of the PZU Group and PZU, there were no pending proceedings before court, a body competent to hear arbitration proceedings or a public authority body concerning liabilities or receivables of PZU or a direct or indirect subsidiary thereof whose unit value is at least 10% of PZU’s equity. A 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.
As at 31 December 2017, the total value of all the 214,133 cases pending before courts, competent bodies for arbitral proceedings or public administration authorities to which PZU Group entities are a party was PLN 6,722 million (of which PZU was a party to 145,931 cases with a total value of PLN 3,474 million). PLN 3,979 million of this amount pertains to liabilities while PLN 2,743 million pertains to the accounts receivable of PZU Group companies, representing 29.3% and 20.2% of PZU’s equity, respectively, according to PAS (PLN 3,071 of this amount pertains to liabilities and PLN 403 million of this amount pertains to the Issuer’s accounts receivable, representing 22.6% and 3.0% of its equity, respectively, according to PAS).
Assessment of the management of financial resources, including the capacity to satisfy the assumed liabilities and specification of possible threats and actions taken or to be taken by the Issuer to counter these threats
PZU is in very good financial standing and satisfies all the security criteria imposed on it by the Insurance and Reinsurance Activity Act and the Polish Financial Supervision Authority. The Issuer’s stable rating outlook confirms that PZU has a strong business position, has a high level of equity and continues to be a competitive player on the insurance market.
Purchase of treasury shares in the financial year
Within its trading activity Bank Pekao enters into transactions on PZU shares and futures. As at 31 December 2017 Bank Pekao held 100 PZU shares.
PZU did not hold any treasury shares as at 31 December 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.
Seasonal or cyclical business
PZU’s business is not seasonal or cyclical to an extent that would justify application of the suggestions set forth in the International Financial Reporting Standards.
The PZU Group has not published any forecasts of its financial results.