Structure of assets and liabilities

As at 31 December 2016, the total assets of PZU Group amounted to PLN 125,345 million and were 18.9% higher than at the end of 2015. The growth resulted mainly from the consolidation of Alior Bank with the separated part of Bank BPH.

Assets

The key components of the Group’s assets were investments (financial assets and investment property).

In total, these assets amounted to PLN 107,038 million and were 18.4% higher than at the end of the prior year. They represented 85.4% of the Group’s total assets compared with 85.8% at the end of 2015. The increase in the value of investments applied mainly to banking activity and was associated with the merger of Alior Bank with the separated part of Bank BPH and the development of credit activity – the growth in loan receivables from clients by PLN 14,775 million and exposure to debt instruments greater by PLN 4,634 million (resulting inter alia from the issuance of shares performed on 10 June of the current year by Alior Bank in the total amount of PLN 2.2 billion and the growth in deposits for non-bank customers).

PZU Group’s receivables, including the receivables from insurance contracts and current income tax, amounted to PLN 5,703 million, i.e. represented 4.5% of the assets. By comparison, at the end of 2015, they amounted to PLN 3,338 million (3.2% of the Group’s assets), and their growth resulted mainly from the unsettled transactions in financial instruments.

Non-current assets – in the form of intangible assets, goodwill and property, plant and equipment – were recognized in the statement of financial position at PLN 4,513 million. They comprised 3.6% of total assets. Their balance rose in 2016 by 6.8% from 2015, mostly in the material fixed asset categories associated with the acquisition of separated part of BPH.

As at 31 December 2016, PZU Group’s cash and cash equivalents amounted to PLN 2,973 million (2.4% of the assets). At the end of 2015, their value reached PLN 2,440 million, and the higher balance resulted from commercial strategy consisting in liquidity of portfolio denominated in euro for which it was decided to leave cash in the current bank account due to the fact that making deposits with negative interest rate prove unprofitable. At the same time, a decrease in cash accumulated by Alior Bank in the central bank was recorded.

Balance of assets for sale amounting to PLN 1,189 million pertained to the part of the portfolio of investment property held for sale.

Structure of assets in PZU Group (in %)

 

Liabilities

Just like in the case of asset structure, the structure of liabilities at the end of 2016 experienced considerable changes resulting from further development of activity in the banking sector. The share of technical and insurance provisions in the balance total dropped from 39.2% at the end of 2015 to 33.7% at the end of 2016.

At the end of 2016, the level of technical and insurance provisions rose by PLN 914 million, specifically due to the following:

  • increase in premium provisions in non-life insurance resulting mainly from the development of sales of motor insurance in Poland;
  • higher technical and insurance provisions in individual and group unit-linked products, offered in both own and bancassurance channel resulting from the positive results of investment activity and sales exceeding the level of paid benefits;
  • growth in damage provisions in motor insurance in Poland associated with the development of the portfolio.

The growth of technical and insurance provisions was partially compensated with the following:

  • in life insurance in Poland with lower provisions in structured and deposit bank products in relation to the end of insurance period of subsequent product tranches and no sales;
  • declining provisions in individual protection insurance associated with the fading oldest agreements with high unit provisions.

At the end of 2016, consolidated equity amounted to PLN 17,127 million and increased from the end of 2015 (13.3% growth). The growth of the consolidated equity pertained to minority shares, which, inter alia in relation to the issuance of shares by Alior Bank in H1 2016 and the merger with the separated part of bank BPH, amounted to PLN 4,117 million and increased by 87.6% from the end of 2015. The capital falling to the shareholders of the parent entity was maintained at a level similar to that of the previous year at PLN 13,010 which is the result of the distribution of profit for 2015, including allocating PLN 1,796 million to the dividend payment, partially offset by the result for 2016 in the amount of 1,947 (profit attributable to owners of equity of parent company).

Structure of liabilities in PZU Group (in %)

The biggest component of liabilities at the end of 2016 covered financial liabilities, the share of which rose from 42.4% in 2015 to 47.9% in 2016. Their balance amounted to PLN 60,030 million and included:

  • liabilities of PLN 51,241 million towards the clients (resulting mainly from deposits – growth associated with the development of banking activity);
  • investment contracts in the amount of PLN 396 million compared with PLN 546 million at the end of 2015. The PLN 150 million decline in value from 2015 is related inter alia to the withdrawal of such products from the offer;
  • liabilities from issuance of own debt instruments for the total amount of PLN 3,680 million (in total EUR 850 million);
  • subordinated liabilities of Alior Bank due to the loan and issued obligations with nominal value of PLN 1,027 million at the end of 2016. The PLN 268 million growth in liabilities from 2015 was associated with successive issues of bonds by Alior Bank in 2016;
  • liabilities from sell-buy-back transactions amounting to PLN 178 million at the end of 2016 – considerable drop from the 2015 balance of PLN 3,794 million.

The balance of other liabilities and provisions at the end of 2016 amounted to PLN 5,994 million compared with PLN 4,304 million at the end of 2015. The growth concerned mainly liabilities from unsettled transactions in financial instruments in the amount of PLN 932 million.

    

Cash Flow Statement

Total net cash flows as at the end of 2016 amounted to PLN 480 million and decreased by PLN 1,611 million compared with the previous year. This decline concerned mainly net financial flows on investment activity.

Significant off-balance items

Conditional assets of PZU Group as at the end of 2016 amounted to PLN 40 million, a considerable amount of which constituted guarantees issued by Bank Millennium SA for PZU and PZU Życie. Under the guarantee line agreement of 7 October 2013 between PZU and Bank Millennium SA, the bank extended bank guarantees (bid bonds and contractual guarantees) to PZU’s organizational entities appearing in the procurement proceedings for insurance services and proper execution of a rental agreement for non-residential premises.

The value of conditional liabilities as at the end of 2016 amounted to PLN 16,364 million.

The significant year-on-year growth resulted mainly from the development of activity in the banking segment. The value of conditional liabilities provided to Alior Bank clients amounted to PLN 14,484 million. The balance of conditional liabilities of PZU Group was composed of PLN 12,979 million in conditional liabilities from renewable limits in checking and savings accounts and credit cards and PLN 1,514 million in granted sureties and guarantees.

Moreover, the balance of conditional liabilities includes also claims toward which no provisions have been created, including insurance-related claims. The 2016 balance of conditional liabilities from claims amounted to PLN 624 million and included PLN 169 million of claims for compensation due to disqualification from right to the dividend specified in point 48.1 of the Consolidated Financial Statements for 2016.

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