51.4 Situation in Ukraine

In 2016, despite first signs of the improving economic situation and stabilizing political environment in Ukraine, the insurance market was still operating in hard conditions resulting from the country’s weak economy, low client activity, devaluation processes, and drop in liquidity of the banking system. The market was also characterized by a high level of costs relating to sale of insurance products, difficulties of some insurance companies to retain their current liquidity, and lowering the level of trust of natural persons, which resulted from the problems connected with liquidity of part of the banking system. The trend of clients choosing reliable and solvent insurers with western capital that was started in 2014 was eventually replaced in favor of price. Despite these conditions, PZU Ukraine and PZU Ukraine Life Insurance, by diversifying their portfolios and sales channels, were more flexible to market changes and implemented their sales plans for 2016.

The Management Board of PZU, in cooperation with the management boards of PZU Ukraine and PZU Ukraine Life Insurance, carries out constant monitoring of external risks and changes in the Ukrainian regulations. PZU developed scenarios and control mechanisms to respond to market changes in Ukraine. The company does not intend to withdraw its operations from the Ukrainian market. As at the date of signing the consolidated financial statements, the Management Board of PZU assumes that the further activity of PZU Ukraine and PZU Ukraine Life Insurance will be continued in accordance with the approved objectives; however, the unstable business environment of Ukraine could negatively affect the results and financial standing of PZU Ukraine and PZU Ukraine Life Insurance in the future in a manner not currently determinable. These consolidated financial statements reflect the current assessment of the Management Board of PZU in this respect.


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