Pursuit of key projects and initiatives in 2017
Highlights 2017
Strategy
Use of artificial intelligence, big data and mobile solutions
Increase in the volume of assets under management and potential synergies if PZU Group’s TFIs are merged
Above-average ROE until 2020 (>20%)
Uniform Management policies in strategic Group areas
Increasing contribution of the banking segment through a higher net result of banks and achievement of synergies with PZU
Presence in the RESPECT Index at the level of at least the financial industry average as the Group’s ambition for the CSR area
Reference Areas:
Health
Investments
Banking
Best Pratices in PZU
In 2017, the Group pursued the following goals in the individual business areas:
| Key areas | Recap of actions and achievements in 2017 |
| Insurance | 1. Maintaining PZU Group’s leadership position on the non-life insurance market. According to the Q3 2017 data published by the Polish Financial Supervision Authority, the PZU Group’s market share (direct business) was 35.8% (unchanged y/y). 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). 3. Maintaining the leading position in life insurance with periodic premium. Market share was 45.8% after the third quarter of 2017 (a year earlier 45.0%). In the whole life insurance market, PZU Życie’s share after the third quarter of 2017 was 34.8% (up by 1.1 p.p. y/y). 4. Strengthening the position of the market leader in Lithuania and Latvia. The share of the Lithuanian company in the non-life insurance market amounted to 31.0% (increase by 1.6 pp compared to the previous year), while the share in the Latvian market after the third quarter of 2017 remained at a similar level and amounted to 27.2%. The share in the Lithuanian life insurance market was 5.9% (up by 1.1 pp). The share of the PZU Group on the Estonian non-life insurance market in 2017 was 15.6%, up by 1.1 pp. After the third quarter of 2017, the Ukrainian non-life company recorded a decline in its market share (3.3%) by 0.4 pp. compared to the same period of the previous year, while the life company registered an increase in the share (10.4% vs. 8.5% y/y). 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). 7. The PZU Group became a member of Lloyd’s and closely collaborates with the Argenta Syndicate. PZU received a prestigious certificate entitled „Member of Lloyd’s”. 8. Extending works aiming at the use of telematics in the PZU Group. After the solutions implemented in LINK4, start work on the PZU GO project, which aims to improve the safety of drivers. 9. Commencement of works aimed at introducing innovative solutions in the scope of tariffication and sales support in PZU. 10. Commencement of implementation of advanced risk management consulting services through PZU Lab. 11. PZU won the Polish Radio’s Economic Prize in the “National Treasure” category awarded to businesses that stood out in the past year on the market place and contributed to promoting Poland on the international arena. 12. PZU received a prestigious award as a Trusted Brand in 2017 conferred by the “My Company Polska” monthly for products and services that feature a special degree of trust according to commercial undertakings. |
| Investments | 1. TFI PZU ranked third on the market in terms of net asset value under management. At the end of 2017, the value of TFI PZU AuM amounted to PLN 19.8 billion, which accounted for 7.1% of assets collected by domestic TFI. Pekao TFI in fourth place on the market in terms of net asset value in management. At the end of 2017, the value of Pekao TFI AuM amounted to over PLN 18.4 billion, which was 6.6% of assets accumulated by national TFI. 2. Increase in the size of assets under the management of external clients from PLN 7.0 billion at the end of 2016 to PLN 7.3 billion at the end of 2017. The share of assets of external clients of TFI PZU in TFI market assets (excluding non-public assets) at the end of 2017 was 4.3%. 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. The net asset value of OFE PZU Złota Jesień at the end of 2017 was PLN 23.3 billion. Moreover, OFE PZU „Złota Jesień” achieved the highest rate of return in 2017 from all Pension Funds at the level of + 20.9% y/y. Net asset value of Pekao OFE at the end of 2017 at PLN 2.7 billion. 5. Net profit of PTE PZU at the end of 2017 at PLN 70.8 million. 6. A new strategy for managing the investment portfolio for the PZU Group’s account and at its risk has been devised. 7. Kick-off of preparations to modify PZU’s offer with an eye to the future changes to the pension system (Capital Accumulation Program). |
| Health | 1. At the end of 2017, PZU Zdrowie’s revenues were PLN 455.6 million, signifying growth of 25.2% from the previous year. 2. 27.1% growth in gross written premium in group health insurance in comparison with 2016. 3. Acquisition of shares in Revimed by PZU Zdrowie and purchase of shares by Elvita in NZOZ Trzebinia in 2017. PZU Zdrowie merged with Medicus in Opole also in 2017. In addition, in January 2018, PZU Zdrowie acquired shares in Centrum Św. Lukasza. 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. 5. Performance of work on implementing a functionality enabling online communication with Medical Hotline consultants to book medical services with an extensive network of medical centers. 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. |
| Banking | 1. On 7 June 2017, PZU and PFR finalized the deal to acquire a 32.8% equity stake in Bank Pekao SA for a total amount of PLN 10.6 billion. The price per share was PLN 123. It was one of the largest transactions in the European banking sector in recent years. This strategic investment has enabled PZU to become the largest financial group in Poland and Central and Eastern Europe. 2. An increase in the value of banking assets held by the PZU Group to the level of PLN 255 billion at the end of 2017. 3. The banking segment’s contribution to the PZU Group’s operating result was PLN 2,487 m at the end of 2017. 4. Continuation of work aimed at achieving revenue and cost synergies resulting from cooperation between PZU and banks within the group (Alior Bank, Pekao). |
| Supporting factors | Recap of actions and achievements in 2017 |
| Socially responsible organization* | Social commitment The strategic pillars for PZU’s social commitment are as follows: safety (road safety, public safety and local safety), health, culture and national identity. Safety - leading area, actions involving road safety are under way:
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. |
| Efficient service, effective operations, flexible IT | 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. Launch of a new version of the web-based application “Self-Service Claims” making it possible to conduct an inspection and calculate the claim to be paid quick and simple. The entire process takes 5 minutes on average, while the person holding the record received the claim payment a mere 54 minutes after registration in PZU’s system. 3. Work was launched to automate and optimize the claims and benefits handling process based on solutions employing robotics. 4. Continuation of work to enhance procurement efficiency. 5. Work continued on deploying a Fraud Identification System in motor insurance. 6. Continuation of the process to sell redundant properties from the standpoint of the statutory activity of PZU and PZU Życie. 7. PZU was recognized as the Institution of the Year for its service in branch offices and remote channels. This distinction awarded by the mojebankowanie.pl portal promotes companies delivering the highest quality of service to their clients. 8. EFMA, a European organization conferred the Insurance Innovation of the Month award to PZU. Poland’s largest insurer was recognized for its innovative method of catering to the needs of deaf and hard of hearing clients. PZU was the first company in Europe to launch three party video connections via the web with a sign language consultant in 2017. |
| Cost effectiveness culture | 1. Administrative expenses in the underwriting segments in Poland fell PLN 10 m at the end of 2017, i.e. –0.7% y/y. 2. The administrative expense ratio in the underwriting segments in Poland improved 1.1 p.p. at the end of 2017 to 7.0%. 3. The administrative expense ratio in the international companies improved by 1.3 p.p. At the end of 2017 this ratio was 9.8%. 4. Commencement of the downsizing process (Management Boards of PZU SA and PZU Życie SA) that concerned all of the company’s functional areas. |
| Capital and investment policy and integrated risk management system | 1. Disbursement of a dividend in the amount of PLN 1.2 billion, i.e. PLN 1.40 per share. The dividend yield was 3.3%. 2. S&P Global Ratings, a US-based rating agency raised PZU’s rating outlook from negative to stable. At the same time, PZU’s financial strength rating stayed at A-. This is one of the highest possible ratings for a Polish company to receive. 3. PZU raised PLN 2.25 billion in a private subordinated bond issue denominated in Polish zloty. It was the largest issue of subordinated bonds in the history of the Polish financial sector, while at the same time being the first issue in Poland complying with Solvency II requirements. The bonds are listed on the Catalyst market. PZU has been awarded the prize awarded by the Warsaw Stock Exchange for the biggest value of its debut on Catalyst in 2017. |
* The full range of information on the implementation of the principles of corporate social responsibility by the PZU Group, including all legally required non-financial information, is included in the Report on non-financial information of the PZU Group and PZU SA for 2017, which constitutes an annex to this Management Board’s Report on the Activity the PZU Group and PZU.
