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Ladies and Gentlemen,
The year 2016 saw many changes in the PZU Group, which are making it a bigger and stronger entity, with a growing prominence in the Polish economy. The past 12 months were also important from the perspective of the Group’s focus on long-term development and the building the value for shareholders.
The PZU Group’s Strategy 2020 was presented in August 2016, while the Capital and Dividend Policy was presented in October. According to the chosen plan, PZU will continue to provide an attractive stream of dividends at no less than 50% of the consolidated net profit. The remaining capital will serve to accelerate growth through organic investments as well as mergers and acquisitions. The PZU Management Board wants to create one of the most innovative insurance groups in Europe.
A fundamental event for PZU in 2016 was the signing of the agreement with UniCredit S.p. A. to purchase 32.8% of Bank Pekao S.A. shares for a total amount of PLN 10.6 billion, in consortium with PFR. The finalization of this transaction will open a path for PZU Group to a more extensive use of bank synergies, to be able to ensure more efficient use of surplus capital, and will make PZU the biggest asset manager in Poland. From the perspective of the Management Board, we see the negotiated price as positive, as it included a several- percent discount in relation to, both the sale price of 10% shares in Bank Pekao by UniCredit in July 2016 and the average price of Pekao shares on the Warsaw Stock Exchange, over the last six months before the agreement’s signing. The settled price was also positively verified by the market. Within just a few months of the conditions being announced, the market valuation of Bank Pekao’s shares grew by almost 20%, while S&P Global Ratings confirmed the financial strength rating and credit strength rating of PZU at A-, one grade higher than Poland’s rating for debt in foreign currencies.
The year 2016 saw many changes in the PZU Group, which are making it a bigger and stronger entity, with a growing prominence in the Polish economy. The past 12 months were also important from the perspective of the Group’s focus on long-term development and the building the value for shareholders.
2016 was not an easy year for the motor insurance business. On the one hand, after the tremendous losses recorded in past years by the insurance industry in this market segment, the motor insurance pricing trend reversed in 2016. On the other, there were numerous factors contributing to a decrease in the loss ratio; including more payments in TPL insurance claims from before 2008, PFSA’s introduction of pro-client guidelines concerning claims handling, more claims concerning replacement cars and car repair costs, judgments by the Supreme Court associated with i.a. the introduction of VAT in estimated cost settlements and treatment cost reimbursement, as well as a growing activity of insurance claim agencies.
Despite these problems, the effective use of a competitive advantages allowed the PZU Group to improve its position and record a growth of over 20% in non-life insurance premium to PLN 11 billion, and strengthen its leadership in Poland where its market share grew by 3 p.p. y/y to 36.0%.
From the beginning of 2017, we have witnessed improvements in the economic situation: rising GDP, dropping unemployment, rising household consumption, and a clear capital markets recovery. This situation will benefit the realization of the chosen strategic objectives. I am certain that PZU will continue to generate high added value for its shareholders, clients, and employees with its strong foundations and high safety ratios.
Yours faithfully,
Paweł Górecki
Chairman of the PZU Supervisory Board
