Business model [UoR] [IIRC]

We are changing PZU – we are becoming a lifetime partner

Our client relationships and our knowledge of our clients are the PZU Group’s core value, while our chief product is our acumen in addressing client needs to have a stable future. This approach has been defined in the “New PZU” strategy announced in 2018, which lays down the Group’s new mission as “We help clients care for their future”, which is an innovative and broader approach to establishing a long-term relationship with clients in a manner that greatly transcends insurance.

PZU’s philosophy of thinking is driving the gradual transformation of the company’s operating method from a typical insurer model (pricing and transferring risk) to the model of a service company specializing in utilizing data (risk management consulting and services as well as caring for the future of clients, retail and business alike). This new formula blends all kinds of the PZU Group’s activities and focuses them on clients to support them at every stage of their lives.

PZU’s operating model distinguishes its comprehensiveness. The Group operates in insurance (life, non-life), finance (banking, pension and investment products) and health (health insurance, insurance for medicine, medical service bundles).

CHALLENGE

In connection with the PZU Group’s development, it is necessary to create a system to ensure effective management of the overall corporate group while preserving the distinctiveness of its various companies and the separateness of the markets on which they operate.

Since 2010 the PZU Group’s practice in terms of its corporate governance model and collaboration among its various entities is for representatives of PZU and PZU Życie in the supervisory boards of the group’s main companies. That is why Paweł Surówka, CEO of PZU, is the Supervisory Board Chairman of Bank Pekao; Tomasz Kulik, Management Board Member of PZU and PZU Życie, the CFO, is the Supervisory Board Chairman of Alior Bank; while Bartłomiej Litwińczuk, Management Board Member of PZU Życie and PZU Group Director, is the Supervisory Board Chairman of LINK4. Since the supervisory boards constantly supervise the operations of the companies in all the areas of their operations, this solution ensures a uniform approach to governance standards in the key areas of the PZU Group’s functioning.

In addition to PZU, 26 subsidiaries currently cooperate with each other in a number of areas, including: procurement, risk management, IT management, internal audit, the PZU Group’s strategy and project management, marketing and PZU brand management, legal advisory and assistance services, security management, HR management, corporate communication, tax policy, corporate governance in the PZU Group, actuarial services, accounting, planning and controlling, compliance, reinsurance, oversight over international companies, client experience management, claims and benefits handling, corporate social responsibility, tariff-related actuarial matters, analysis of the experience and tariff-setting for insurance and development of technology and sales tools.

The scope of cooperation in a given area is specified in the Group’s policy and may involve the following in particular:

• rules of cooperation between PZU’s pertinent cells and entities;
• fundamental operating rules for cooperation;
• description of the tasks discharged by PZU’s pertinent cell in relation to entities and by entities in relation to PZU’s pertinent cell;
• scope of, and deadlines for, reporting applicable to the entities.

Implementing PZU Group policies directly in banking structures would require the incorporation of the distinctive nature of banking operations therein, including separate solutions pertaining to risk management, which might not be an optimum solution. Accordingly, relationships with banks within the PZU Group are governed by separate agreements laying down the rules of cooperation and exchange of information, among others, on reporting duties and accounting, planning and controlling, compliance and internal control, internal audit, risk and security.

Because the PZU Group includes two banks (Alior Bank and Bank Pekao), PZU’s organizational structure is governed by the principle of Chinese walls implemented in PZU’s organizational cells responsible for the conduct of business processes. The purpose of Chinese walls is to ensure the observance of the two banks’ legally protected trade secrets and limitation on the exchange of sensitive information concerning their business activity, also to ensure the separation of the flow of information obtained from PZU as the entity heading up the PZU Group, to procure compliance with the legal regulations pertaining to information subject to banking secrecy and other legally protected secrets.

A major challenge in unifying governance standards in the PZU Group was the implementation of a coherent and effective risk management system.

Having regard for the different business nature of the banking entities and the insurance entities, and their sectoral regulations, the direct application of the risk management system functioning in the insurance companies was not plausible. The challenge was to align the process so that the attainment of the PZU Group’s objectives in risk management would transpire while respecting the banking sector’s regulations, the independence of the entities within the understanding of the Commercial Company Code and equal access to information among all the shareholders of the banks. This alignment was crafted in full cooperation with both banks. Risk appetite in banking entities is a topic for consultation with the PZU Group’s parent company and the subject matter of opinions issued by the PZU Group Risk Committee with a view to ensuring consistency between the activities carried out by the banks and the strategic plans and business objectives of the PZU Group as a whole while maintaining an acceptable level of risk at the Group level. Once agreed, the level of risk appetite is then approved by the banking entities’ supervisory boards.