Ladies and Gentlemen,
2015 was a year of external factors whose variability affected the operations of PZU Group. It was a good time for the Polish economy, but less so for the insurance business. Insurers had to take into consideration a number of factors, such as low interest rates, a difficult capital market situation, and regulatory changes in Poland and in the European Union.
However, all these factors did not threaten PZU’s position as a leader in the Polish insurance market. As a result of its latest acquisitions (the purchase of several RSA Group companies, including Lietuvos Draudimas and AAS Balta), the Group also strengthened its position in Central and Eastern Europe. Today, we can say with pride that PZU is among the largest and most dynamic financial institutions in the region.
In 2015, there was also ongoing work on the new Act on Insurance and Reinsurance Activity as part of the implementation of the Solvency II directive. We now know that the capital standing of PZU after implementation of the EU directive will remain strong. The ratios estimated at the end of Q3 2015 are nearly three times higher than the capital requirements. This puts PZU at the forefront of European insurers.
The demand for insurance services in 2015 remained stable, yet a higher claims ratio in group and individual life insurance and a low yield in motor insurance made it more difficult to achieve satisfactory profits. A price competition on the market has been observable for quite some time now, and last year, it aroused the interest of the Polish Financial Supervision Authority (PFSA). In one of its open letters, the Authority requested that insurance companies review their profitability. As a result, we should expect that the market will be forced to increase premiums for general motor TPL insurance. However, the implementation of the PFSA guidance by insurers should translate into improved profitability in this segment in the future.
There was also a second important PSFA recommendation last year from the perspective of insurers, on the claims handling process. The Authority stressed the need for fair valuations and the use of original spare parts, which may in turn result in higher premiums in motor insurance.
The high investment result achieved last year put a great deal of pressure on the Group this year to match those results. Unfortunately, the higher yield of Polish treasury bonds prevented us from doing so, with net investment result being nearly 34.3% lower in 2015 than 2014. That exerted significant influence on the total performance of the Group.
The good news, on the other hand, is that a new record was set in gross premiums collected. In 2015, PZU Group sold insurance worth almost PLN 18.4 billion, 8.7% more than in 2014. Life insurance and motor insurance, especially thirdparty liability motor insurance, contributed most to that success.
We are closing 2015 with the ambition to improve on the indicators which adversely affected the Group’s results. In the months to come, we will be focusing on trends in both the global and local economy. The current forecasts suggest that high price fluctuations on the global financial markets will continue to occur, which may, in turn, have negative effects on our investment result. The condition of Polish currency will be a major domestic factor as it affects spare parts pricing in motor insurance. The final operating result of the Group will also depend upon the level of taxation on the assets of financial institutions, which was introduced in January 2016.
I would like to thank all PZU employees for their contribution toward building the value of our company in the last year. At the same time, I wish all the best to the new management board. I truly believe that PZU Group has many successful years ahead of it.
Chairman of the Supervisory Board of PZU