CEO Letter to Shareholders

Paweł Surówka - PZU SA CEO until March 12, 2020

Dear Shareholders,

On behalf of the management boards of the PZU Group companies, I have the pleasure of conveying to you our activity report for 2019, which was an exceptionally successful year for the PZU Group. The Group’s net profit attributable to the holders of the parent company totaling PLN 3,295 million was a recordbreaking level in PZU’s history on the stock exchange.

 At the same time, 2019 was the third year in a row in which the PZU Group’s profit grew. Net profit per share climbed 2.7% year on year and by 14.0 percent versus 2017. As a result, the dividend has also risen. The dividend per share in 2019 was PLN 2.80, or double the amount paid two years earlier.

Unwavering execution of the #newPZU strategy

The successes we have achieved are the outcome of pursuing our ambitious strategy entitled “The New PZU – More Than Insurance.” By basing our business on an extensive distribution network consisting of roughly 2,000 proprietary branches and offices run by tied agents and on a corporate network, activity in the banking sector and the skillful utilization of the opportunities afforded by new technologies, we strive to be present in every dimension and at every stage of life of our clients and satisfy the bulk of their needs.

The mojePZU platform, as the most extensive electronic client service system on the insurance, finance and health market has become a symbol depicting the PZU Group’s new approach and bringing together all of its competitive advantages. It provides clients with convenience and the ability to use PZU’s services from any venue at any time of the day. What’s more, it has become a crucial tool in how our employees and agents streamline client service, proving that direct sales is not inconsistent with an efficient distribution network but rather is something that supports and broadens its reach.

PZU Zdrowie has become a key area serving to bolster one of the pillars of our strategy, namely client interactions. In 2019 it posted impressive 47% growth on the private health services market. The number of PZU Zdrowie’s own centers has nearly doubled, while it now has 2,200 partner centers. We have marketed a host of new products, we have extended the benefits provided to date and we have streamlined service. We were the first medical operator to launch virtual clinic, thereby enabling patients to obtain a consultation from a physician, receive a referral for testing or a prescription for medications without leaving the comfort of their own homes. We also opened the first telemedicine office in which patients can do diagnostics on their own by using a specialist apparatus and consult their results with a physician through a video link.

In 2019 we successfully continued work on optimizing and automating processes employing artificial intelligence to identify and handle claims. The outcome is improvement in claims handling standards and shortening of the time for technical analysis while simultaneously augmenting cost effectiveness. According to the targets in the strategy, the comprehensive approach to clients is creating new quality that is translating into the centralized and smarter utilization of data.

Changing organizational culture, employees’ greater engagement

The successfully implemented changes simultaneously involve a transformation in the PZU Group’s organizational culture so as to strengthen employee engagement and to align them to the company and its strategy.

PZU’s employee engagement, which has been evaluated in an independent study, has grown by 11 percentage points since 2018, thereby reaching a record-breaking level of 51% despite the downward trends on the market. At the same time, PZU is one of the top ten employers in the reputable “Employer of the Year” study that has been conducted by AIESEC Polska for nearly 30 years. These results make me particularly proud because they prove that the PZU Group is gaining an ever greater ability to attract and retain the best employees while creating working conditions for them in which they are able to develop professionally and be successful.

To an ever greater degree the PZU Group is also opening up to international cooperation, thereby becoming an advocate of the Polish economy and the overall region. During the World Economic Forum in Davos we set up the Business Council of Growing Europe jointly with the largest companies from Central and Eastern Europe to promulgate investments in the region. The strategic partnerships being established with global financial institutions like Goldman Sachs open up opportunities for us to offer our products to an ever wider community of clients, while forming a window to the world for our clients to date.

Maintaining the stability of the Group’s foundations

The outcome of these projects and initiatives is that the PZU Group’s position is getting stronger on the insurance market in Poland. The record-breaking value of gross written premium in 2019 was a success as it exceeded PLN 24 billion, while maintaining a very high return on equity of 21.2%. This was the result of the high profitability achieved in the most important sales areas. The combined ratio in non-life insurance was 88.4%, while the operating margin in group insurance was 21.3%.

The results generated in 2019 and the successfully implemented solutions allow us to gaze into the future with a large amount of optimism. They serve as proof that the PZU Group is a dynamic organization that fastidiously observes the market environment, analyzes market cycles and is capable of drawing conclusions based on the changes taking place, or even get in front of them for the benefit of its shareholders.

 I can assure you that the Management Board under my leadership will continue to pursue with determination ambitious plans to develop the PZU Group by building new client access channels and extending the offer and perfecting data analysis processes. We are endeavoring to become our clients’ partner of top choice, among individual and corporate clients, as we stand at their side, recognizing the risks and protecting them against these risks while allowing clients to meet their needs, ambitions and plans.

This is how we see our responsibility; this is how we understand our role in interactions with clients, employees and communities where we function and – quite naturally – in interactions with our shareholders.

I would like to thank you for the trust you place in us.

Respectfully yours,

Paweł Surówka,

President of the PZU Management Board