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PZU Group’s income

Annual Report 2019 > PZU Group’s income
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Premiums


In 2019 the PZU Group collected record – high gross premiums of PLN 24,191 million or 3.1% (PLN 721 million) more than in 2018. The following factors made the greatest contribution to the shift in gross written premium (net of the intersegmental premium):

  • premium growth of PLN 235 million in the individual insurance segment (+17.5% y/y), chiefly due to the steadily rising level of premium for protection products on endowments and term insurance offered in proprietary channels and the expansion seen in the insurance portfolio in investment products and protection products in the bancassurance channel. Following dynamic y/y growth the gross written premium is at its second highest level in PZU’s history on the stock exchange;
  • premium growth in the corporate client segment of PLN 205 million over 2018 (+6.7%) to the record-breaking level of PLN 3,264 million, mainly in insurance against fire and other damage to property after acquiring several contracts with high unit values in Q4 2019 through inward reinsurance;
  • sales in international companies up PLN 199 million (10.8%) versus 2018 enabling the foreign segments to produce the highest sales in history at the level of PLN 2,048 million. These areas of growth were particularly visible in motor insurance and health insurance in the Baltic States;
  • higher sales in the group and individually continued insurance segment – premium surged PLN 75 million (+1.1%) y/y to its highest level in PZU’s history on the stock exchange at PLN 6,966 million, especially as a result of attracting more contracts in health insurance concluded as group insurance and the active up-selling of other insurance riders in individually continued products;
  • sales in the mass client segment in Poland at a record-breaking level of PLN 10,332 million, up PLN 7 million versus 2018. Incremental premium growth in the non-life insurance class was partly offset by declining gross written premium in motor TPL (lower number of insurance policies coupled with an inconsequential decline in average premium).

Insurance segments (PLN million), local GAAP Gross written premium (external)
2015 2016 2017 2018 2019
TOTAL 18,359 20,219 22,847 23,470 24,191
Total non-life insurance – Poland (external gross written premium) 9,074 10,878 12,702 13,384 13,596
Mass insurance – Poland 7,309 8,742 10,029 10,325 10,332
    Motor TPL 2,595 3,635 4,606 4,610 4,383
    Motor MOD 1,727 2,147 2,406 2,524 2,572
    Other products 2,987 2,960 3,017 3,191 3,377
Corporate insurance – Poland 1,765 2,136 2,673 3,059 3,264
    Motor TPL 367 532 735 845 814
    Motor MOD 510 712 848 878 827
    Other products 888 892 1,090 1,336 1,623
Total life insurance – Poland 7,923 7,949 8,519 8,237 8,546
    Group and individually continued insurance – Poland 6,689 6,775 6,855 6,891 6,966
    Individual insurance – Poland 1,234 1,174 1,664 1,346 1,581
Total non-life insurance – Ukraine and Baltic States 1,288 1,305 1,527 1,729 1,897
    Ukraine non-life insurance 138 173 181 202 256
    Baltic States non-life insurance 1,150 1,132 1,346 1,527 1,641
Total life insurance – Ukraine and Baltic States 74 88 100 120 151
    Ukraine life insurance 31 37 42 55 79
    Baltic States life insurance 43 51 58 65 72

Structure of gross written premium in the PZUGroup (%)

Net revenues from commissions and fees

Net revenues from commissions and fees in 2019 stood at PLN 3,279 million, or were PLN 76 million lower than in the previous year, mainly as a result of higher commission costs in banking activity.

They included mainly:

  • net revenues from commissions and fees in banking activity totaling PLN 2,603 million (including mainly: brokers’ commissions, revenues and expenses related to handling bank accounts, payment and credit cards, fees charged for intermediation in insurance sales);
  • income on OFE asset management. They stood at PLN 143 million;
  • revenues and payments received from funds and mutual fund management companies of PLN 528 million, or PLN 34 million less than in the previous year.

Net investment result and interest expenses

In 2019 the net investment result2 including interest expenses was PLN 9,211 million compared to PLN 7,849 million in 2018. Disregarding the impact of banking activity, in 2019 the net investment result including interest expenses was PLN 1,995 million, up PLN 1,091 million over last year.

The following factors affected the income:

  • higher result earned on listed equity instruments in particular due to improved market conditions on the Warsaw Stock Exchange – with the WIG index up 0.3% in 2019 in contrast to a 9.5% decline in the previous year;
  • high performance of real estate funds due to the settlement of property developers’ earnings in Q4;
  • curtailment of volatility in the earnings of the PZU Global Macro EUR portfolio in connection with the purchase of bonds aligned to the portfolio’s investment horizon constituting above all coverage of the liabilities taken under the issue of own bonds in EUR falling due in the middle of 2019;
  • better investment results in the portfolio of assets used as coverage for investment products that do not, however, exert any influence on the PZU Group’s total net result as they are offset by higher net insurance claims and benefits paid.

In 2019 the value of the PZU Group’s investment portfolio, net of banking activity,3 was PLN 49,689 million compared with PLN 50,270 million at yearend 2018.

The decrease in the value of the investment portfolio was associated with the repayment of EUR-denominated own bonds and the disbursement of a dividend by the Group. These factors were offset by the inflow of premiums and investment performance. The increase in the percentage of non-treasury debt market instruments is the result of the consistently implemented investment policy to ensure greater diversification of the investment portfolio and curtailment of volatility in results.

2 Net investment result includes: net investment income, net result on realization of financial instruments and investments, movement in allowances for expected credit losses and impairment losses on financial instruments and net movement in fair value of assets and liabilities measured at fair value.

3 The investment portfolio contains investment financial assets (including investment products), investment properties (including the part presented in the category of assets held for sale) financial derivatives along with the negative valuation derivatives and liabilities arising from repurchase transactions presented in financial liabilities.

 

Structure of the portfolio of investments net of the impact of banking activity (in %)

* Interest rate, foreign exchange and equity price derivatives duly presented in the categories of debt market instruments – treasuries, money market instruments and listed and unlisted equity instruments.

Result on other operating income and expenses

In 2019, the balance of other operating income and expenses was negative and stood at PLN 2,832 million, compared to the balance in 2018, which was also negative at a level of PLN 2,165 million. The following contributed to this result:

  • higher fees paid to the Bank Guarantee Fund rising from PLN 372 million in 2018 to PLN 611 million in 2019 due to the higher payment to the compulsory resolution fund;
  • establishing a provision for disputed claims and prospective liabilities in connection with the CJEU judgment on consumer loans and mortgage loans in CHF totaling PLN 294 million and lower by PLN 75 million balance of provisions released and established for extended bank guarantees and sureties;
  • levy on financial institutions – the PZU Group’s financial institutions tax charge (for insurance and banking activity combined) was PLN 1,134 million in 2019 compared to PLN 1,092 million in 2018. This higher levy was for banking activity was a result of an increase in underlying assets (the bank levy rate did not change).