Beata Kozłowska-Chyła, CEO of PZU

Dear Shareholders,

On behalf of the PZU Group, I hereby convey to you our activity report for 2020.

The past year was a huge unknown for the entire economy. Uncertainty in businesses and households triggered by the avalanche-like spread of coronavirus and the enactment of business restrictions in many industries led to a marked decline in economic activity. The year of the pandemic meant many challenges for the PZU Group companies. Even though they were difficult to anticipate, they did not form an obstacle to development. Rather they served as a driving force to introduce more dynamic change. By taking this approach to business the PZU Group retained its strong position as the leader in financial services and the insurer crafted a new strategy for upcoming years.

High profitability and good client relations

The PZU Group’s capital position continues to be strong. Return on equity attributable to the parent company in 2020 was 10.9%, which surpassed the levels generated by the entire market and our main competitors according to data for the first three quarters of 2020. The high level of profitability was also maintained. The PZU Group’s combined ratio in non-life insurance in 2020 was 88.2%, 0.3 p.p. better than in 2019, the margin in group and individually continued insurance was close to 20%, while the return on our investment portfolio consistently outpaces market rates.

Although the PZU Group’s 2020 financial results were burdened by the effects of the COVID-19 pandemic, the companies did however jointly retain their leadership position on the financial services market. Net of the banking business, the result attributable to the equity holders of the parent company was 11.7% versus 2019. Gross written premium totalled PLN 23,866 million. This result is of special importance to us because it confirms that we do enjoy the trust of clients who entrust their assets and savings as well as their health and lives to us. There is no doubt that the determination shown by all of the PZU Group employees in their actions and their conscientiousness in performing their daily duties in the demanding reality of the pandemic bore fruit in the form of good relations with clients.

The newest technologies to serve clients

As the leader in digital transformation that continues to draw upon the newest technologies and consistently rolls them out, we focused on accelerating the digitalization of our products and services and migrating many processes to remote channels during the pandemic to afford our clients a high degree of safety when taking advantage of our offering. The utilization of artificial intelligence, among others, gave clients and employees alike the maximum level of service comfort in this trying time, while at the macro scale it contributed to the development of the overall economy by setting new market trends. Remote forms of sales and claims handling have become widespread, the process of digitization in health protection has accelerated and the role played by telemedicine has grown considerably. Its development is currently the most important trend.

In the health segment we have given an excellent response to patients’ new needs by rolling out multiple innovative solutions to serve them in making quick, effective and remote diagnoses. This consists of extending e-offerings and e-benefits and developing the myPZU portal where the option has been added to authenticate identity remotely using the myID and mCitizen apps without having to visit a branch. These are innovative projects that have lent support to the offer in health and have led to greater interest in this offer.

The increase in gross written premium in the group and individually continued insurance segment in 2020 was caused by the acquisition of more contracts in health insurance. New clients in ambulatory insurance and higher sales of health products at the end of 2020 gave the PZU Group a portfolio of more than 2.8 million in force contracts of this type.

New sustainable development challenges

The challenges the pandemic has brought have released enormous layers of energy and creativity in us whereby we have found a host of new solutions and we are dynamically developing all of the areas of our business. We will face the additional challenges we have included in the new strategy. The priorities in the upcoming years will include the following: ensuring business growth, doing business in a sustainable manner while adhering to ESG standards, providing shareholders with above-average rates of return and an attractive stream of dividends.

I am confident that with the support of the Supervisory Board and the commitment of all of our employees we will achieve our targets. I thank you for your trust.

Respectfully,

Beata Kozłowska-Chyła, CEO of PZU