PZU Group’s asset and liability structure

As at 31 December 2017, the PZU Group’s total assets were PLN 317,405 million, up PLN 192,109 million compared to the end of 2016. This increase was driven predominantly by the commencement of Pekao’s consolidation.

Assets

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 PLN 169,457 million, up by PLN 124,459 million from the end of 2016 (the share in total assets rose from 35.9% at the end of 2016 to 53.4% at the end of 2017).

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.

Non-current assets consisting of intangible assets, goodwill and property, plant and equipment were recognized in the statement of financial position in the amount of PLN 10,521 million. They accounted for 3.3% of the assets. The balance increased in 2017 by PLN 6,008 million as compared to 2016, mainly because of the commencement of Pekao’s consolidation, including recognition of goodwill related to the bank’s acquisition in the amount of PLN 1,586 million and intangible assets identified as a result of PZU’s acquisition of the equity stake in Bank Pekao.

As at 31 December 2017, the PZU Group held PLN 8,239 million of cash and cash equivalents (2.6% of assets). At yearend 2016, this value was PLN 2,973 million and the movement occurred mainly in the cash accumulated by Bank Pekao.

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. 

PZU Group’s asset structure (%)

Liabilities and equity

At yearend 2017, consolidated equity hit PLN 37,601 million, up from the end of 2016 (120.1% growth). The growth in consolidated equity pertained mainly to non-controlling interests that in connection with commencement of Pekao’s consolidation in June 2017, among other factors, reached PLN 22,979 million, increasing more than five-fold from the end of 2016. Equity attributable to the parent company’s shareholders rose by PLN 1,624 million compared to the end of the previous year – as an effect of the net result attributable to the parent company generated in 2017, partially offset by of the distribution of profit for 2016, including the allocation of PLN 1,209 million as a dividend.

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 PLN 9,567 million, including:
• PLN 3,821 million on bonds, of which EUR 850 million are Eurobonds issued via the wholly-owned subsidiary 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 Pekao.
• 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 October 2017 for the amount of PLN 600 million. SECTION 8.3 DEBT FINANCING

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 movement in this item resulted in particular from:

• higher provision for unearned premiums in non-life insurance and resulting mainly from increased sales of motor insurance in Poland;
• higher provisions for unit-linked life insurance products if the policyholder bears the investment risk because of sales exceeding surrenders and a high positive investment result;
• higher mathematical provisions in continued business associated with the indexation of sums insured and the higher average age of the insureds.

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 1,772 million.

Structure of PZU Group’s liabilities and equity (%)

Cash flow statement

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.

Material off-balance sheet items

At the end of 2017, the value of contingent liabilities stood at PLN 58,978 million. This major increase compared to the previous year resulted from business development in the banking segment, including the commencement of Pekao’s consolidation. The value of contingent liabilities granted to the clients of Alior Bank and Bank Pekao was PLN 57,836 million. The balance of the PZU Group’s contingent liabilities consisted in particular of PLN 14,536 million in contingent liabilities by virtue of overdraft limits and credit cards, PLN 29,586 million in tranche-based loans and PLN 7,574 million in awarded guarantees and sureties.

Moreover, the balance of contingent liabilities included guarantees for the underwriting of securities in the amount of PLN 3,492 million (bonds covered by Pekao’s underwriting).