Chairman of the Supervisory Board Statement Letter

Dear Stakeholders,

2018 was a very successful year for the Polish economy. High GDP growth, equilibrium in the current account balance, the extremely low public finance sector’s deficit and the unemployment rate coming in at a level unrecorded in nearly 30 years formed great conditions for doing business. Relying on its strong brand and economies of scale, the PZU Group leveraged this period to strengthen its competitive edge and develop all areas of its operations.

From an economic point of view 2018 was primarily a period in which the PZU Group reported spectacular results that surpassed all-time highs quarter on quarter. The value of insurance sold increased by PLN 623 million to PLN 23.5 billion, while the overall PZU Group’s net profit climbed by PLN 1.2 billion to PLN 5.4 billion. The robust profitability of the core underwriting business and the expanding share of the banking segment made a major contribution to this performance. We delivered such rapid business growth while preserving a rational risk appetite. The SII solvency ratio in Q3 2018 was nearly 245%, representing the optimum level of safety from the Supervisory Board’s vantage point.

2018 was also a period of ambitious projects that will serve as the foundation for the digital transformation of the overall PZU Group. We have reached ever more frequently for advanced technology in our business processes: robotics, machine learning and sophisticated mobile solutions. Genuine solutions tested in pilots and acceleration programs back up these slogans. Executing these initiatives over the next several years will underpin the PZU Group’s competitive edge in insurance. It will also make it possible to build new quality in asset management, health and banking.

As the key authority overseeing the Management Board’s operations, the Supervisory Board fastidiously scrutinized the implementation of multiple changes against the regulatory backdrop as Polish regulations were harmonized with European Union law. The Insurance Distribution Act (“IDD”) precipitated extensive modifications in sales, distribution and network management. It also expanded the protection of client interests, which is something positive for the overall insurance market. The General Data Protection Regulation (“GDPR”) contributed to greater client data security. Nevertheless, these legal amendments did not adjudicate some issues, e.g. personal data processing in respect of health for underwriting purposes. The payment of claims for (pain and suffering) caused by the vegetative state of a relative injured in an accident returned as a topic. That is why PZU set up additional provisions of PLN 148 million to make possible payments by virtue thereof. Despite that, we anticipate that these types of events will happen less and less frequently because work is underway on a law to regulate the operations of firms that pursue claims.

The PZU Group is more than just ambitious strategic objectives. It also espouses fundamental ethical values that will persist for much longer than the horizon of the current strategy. Having this in mind we take a comprehensive approach to non-financial reporting, which according to the Supervisory Board is an important part of business assessment and the growth prospects of the PZU Group. I am confident that the unswerving execution of the strategy entitled “The New PZU – More Than Insurance”, which takes into consideration the principles of sustainable development, will deliver new value to shareholders, clients, employees and all other stakeholders.

Respectfully,
Maciej Łopiński
Chairman of the PZU Supervisory Board