PZU Group’s asset and liability structure

On 31 December 2019 the PZU Group’s total assets were PLN 343,340 million, up PLN 14,786 million in comparison with their balance at the end of 2018.

Assets

Loan receivables from clients were the chief component of the Group’s assets as at 31 December 2019. They held a 56.8% share of total assets with their balance of PLN 194,868 million, which compared to the end of 2018 expanded by PLN 12,814 million.

The second largest asset category were investments (investment financial assets, investment properties and financial derivatives). They totaled PLN 116,504 million and were PLN 10,655 million higher than at the end of the previous year. They represented 33.9% of the Group’s total assets compared with 32.2% at the end of 2018. The growth in the value of investments took place in Pekao. Excluding banking activity, the investment portfolio shrank due to the amortization of the own bond issue in EUR and the Group’s dividend distribution. These effects were partially offset by the higher influx of funds due to premiums in connection with business development and the higher value of investments.

PZU Group’s receivables, including receivables under insurance contracts and current income tax were PLN 5,737 million, which represented 1.7% of assets. For the sake of comparison, at the end of 2018 they were PLN 6,343 million (1.9% of the Group’s assets) and their decrease was caused mainly by the outstanding transactions on financial instruments and margins.

Non-current assets consisting of intangible assets, goodwill and property, plant and equipment were recognized in the statement of financial position in the amount of PLN 11,375 million. They accounted for 3.3% of the assets. The growth in the account balance of PLN 1,140 million versus 2018 stemmed, among others, from the recognition of new right-of-use assets as a result of applying IFRS 16- Leasing.

As at 31 December 2019, the PZU Group held PLN 7,788 million of cash and cash equivalents (2.3% of assets). At yearend 2018, this value was PLN 17,055 million and the movement occurred mainly in the cash accumulated by Bank Pekao in the central bank in conjunction with the reserve requirement.

The balance of the assets held for sale totaling PLN 580 million fell in comparison with the previous year by PLN 567 million due to the sale of a portion of the investment property portfolio.

PZU Group’s asset structure (in %)

Equity and liabilities

At yearend 2019 consolidated equity hit PLN 39,288 million, up from PLN 1,881 million at the end of 2018. The value of non-controlling interests rose by PLN 637 million to PLN 23,119 million versus last year, with this change being the outcome of the result attributed to non-controlling shareholders of PLN 1,890 million (generated by Alior Bank and Pekao), the uptick in the measurement of debt instruments and derivatives measured at fair value through other comprehensive income and Pekao’s dividend attributed to non-controlling shareholders of PLN 1,385 million. Equity attributable to the parent company’s shareholders rose by PLN 1,244 million compared to the year before – as an effect of the net result attributed to the parent company earned in 2019 in the amount of PLN 3,295 million, the growth in the measurement of debt instruments measured at fair value through other comprehensive income and PZU’s distribution of profit for 2018, including the allocation of PLN 2,418 million as a dividend.

Financial liabilities were the most important component of equity and liabilities at the end of 2019 with a share of 71.8%. The value of this item was PLN 246,490 million and included in particular:

• liabilities to clients for deposits totaling PLN 218,588 million (current and term deposits held by Pekao and Alior Bank up PLN 10,922 million compared to December 2018);
• liabilities on the issue of own debt securities of PLN 9,273 million, including:
• PLN 3,976 million in bonds, down compared to last year following the amortization in July 2019 of eurobonds worth EUR 850 million issued through the wholly-owned subsidiary doing business as PZU Finance AB, which was partially offset by Pekao’s bond issue,
• PLN 3,940 million in certificates of deposit issued by the banks Pekao and Alior,
• PLN 1,357 million in covered bonds issued by Pekao;
• subordinated liabilities of PLN 6,700 million. The increase of PLN 639 million in the balance versus the end of 2018 was chiefly related to Pekao’s subordinated bonds issue for a total of PLN 750 million in June and December 2019. SECTION 8.7 DEBT FINANCING OF PZU, PEKAO AND ALIOR BANK

As at the end of 2019, the value of technical provisions was PLN 47,329 million, which accounted for 13.8% of liabilities and equity (PLN +1,490 million compared to the end of 2018). The movement in this item resulted in particular from:

• higher unearned premium reserves in non-life insurance resulting mainly from insurance sales development;
• higher claims provisions in non-life insurance due to the notification of several high value claims;
• higher provisions for unit-linked life insurance products due to high positive investment income.

The balance of other liabilities as at 31 December 2019 was PLN 8,069 million compared to PLN 7,407 million at the end of 2018. This uptick pertained to accrued reinsurance expenses in particular.

Structure of PZU Group’s equity and liabilities (in %)

Cash flow statement

Net cash flow at yearend 2019 totaled PLN (9,292) million, down PLN 18,066 million compared to last year. This drop related particularly to net cash flow on investing.

Material off-balance sheet line items

The value of contingent liabilities at the end of 2019 totaled PLN 59,437 million, up PLN 1,770 million compared to last year. The value of contingent liabilities extended to the clients of Alior Bank and Bank Pekao was PLN 57,951 million. The PZU Group’s balance of contingent liabilities consisted in particular of contingent liabilities worth PLN 11,122 million for revolving limits in settlement and savings accounts and credit cards, credits and loans in tranches of PLN 29,867 million and extended guarantees and sureties in the amount of PLN 9,782 million.

In addition, standby underwriting obligations for securities worth PLN 3,636 million contributed to the balance of contingent liabilities.