Navigation Map Download our best practices
Interactive navigation is a tool that goes beyond the standard navigation of the integrated content (available in the report drop-down bar). New approach allowed to navigate in the two additional business dimensions of the PZU Group, i.e .:
- strategy (insurance, health, investments, finances);
- sustainable development (sales, employees, social responsibility, natural environment and ethics).
The above-mentioned areas were additionally supplemented with related GRI indicators, within each selected issue.
- strategy (insurance, health, investments, finances);
- sustainable development (sales, employees, social responsibility, natural environment and ethics).
The above-mentioned areas were additionally supplemented with related GRI indicators, within each selected issue.
In the CHAPTER
GRI
- 102-7 Scale of the reporting organization
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 201-1 Direct economic value generated and distributed
- 102-13 Membership in associations and organizations
- 102-40 List of stakeholder groups engaged by the reporting organization
- 102-42 Basis for identification and selection of stakeholders engaged by the organization
- 102-43 Approach do engaging stakeholders, including the frequency of engagement by stakeholder type and group
- 102-44 Key issues and concerns raised by stakeholders and the organization’s response, also by reporting them
In the CHAPTER
GRI
- 102-8 Data pertaining to employees and other persons working for the organization
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 404-1 Average number of hours of training per year per employee
- 404-2 Managerial skill development and continuing education programs supporting continuity of employment of employees and facilitating the retirement process
- 404-3 Percentage of employees subject to regular assessments of work quality and professional development reviews, by gender and employment category
- G4-FS16 Initiatives to enhance financial literacy by type of beneficiary
In the CHAPTER
In the CHAPTER
GRI
- 103-3 Evaluation of the approach to management
- 307-1 Cash value of penalties and total number of non-financial sanctions for non-compliance with the law and/or regulations on environmental protection
- 301-1 Raw materials/materials used by weight and volume
- 302-1 Energy consumption by the organization, taking into account the types of raw materials
- 302-4 Reduction of consumption of energy
In the CHAPTER
GRI
- 102-9 Description of the supply chain
- 102-11 Explanation of whether and how the precautionary principle is addressed by the organization
- 102-15 Description of key impacts, opportunities and risks
- 102-16 Organization’s values, code of ethics, principles and norms of behavior
- 102-17 Internal and external mechanisms making it possible to obtain advice regarding the behaviors in ethical and legal issues and issues associated with the organization’s integrity
- 103-2 Approach to management and its elements
- 103-3 Evaluation of the approach to management
- 102-5 Organization’s form of ownership and legal form
- 102-18 Organization’s supervisory structure along with the commissions that report to the highest supervisory body
- 205-1 Actions assessed in terms of threats associated with corruption
- 205-2 Communication and training on anti-corruption policies and procedures in the organization
- 206-1 Legal steps taken against the organization for cases of violating the principles of free competition and monopolistic practices
- 405-1 Composition of supervisory bodies and employees broken down into employee groups by gender, age and other diversity factors
- 406-1 Total number of discrimination cases and corrective measures taken in this regard
- 419-1 Non-compliance with the law and socio- economic regulations
In the CHAPTER
GRI
- 103-2 Approach to management and its elements
- G4-FS13 Access points to sparsely populated areas that are less economically developed
- G4-FS14 Initiatives undertaken to improve access to financial services for disfavored persons
- G4-FS15 Policies for the fair design and sale of financial products and services
- 417-1 Internal requirements concerning the labeling of products and services and information regarding them
- 417-2 Incidents of non-compliance with regulations and voluntary codes concerning the labeling of products and services and information regarding them
- 417-3 Incidents of non-compliance with regulations and voluntary codes concerning marketing communications
Read more:
- Client at the center of attention
- Innovations
- Responsible sales
- Insurance
- Banking and strategic partnerships
- Working conditions
- Employee development
- Knowledge sharing
- Enhancing safety
- Health
- Improvement of living conditions in local communities
- Our impact on the natural environment
- Practical challenges in managing direct impact
- Products and adaptation to climate change
Business model
Employee
CSR
Environment
- Ethical foundations of business operations
- Preventing corruption and conflict of interests
- Diversity and respecting human rights
- Whistleblowing system
- Transaction security
- Risk management, taking into account non-financial risk
- Risk appetite
- PZU Group’s risk profile
- Reinsurance operations
- Polish and Baltic States insurance sector compared to Europe
- Regulations pertaining to the insurance market and the financial markets in Poland
- Non-life insurance (PZU, LINK4 and TUW PZUW)
- Life insurance (PZU Życie)
- International operations
- Contribution made by the market segments to the consolidated result
Risk and ethics
Market
Business
Financial results
Read more:
- Client at the center of attention
- Employee development
- Health
- Cultural patronage
- Practical challenges in managing direct impact
- Ethical foundations of business operations
- Diversity and respecting human rights
- Whistleblowing system
- Transaction security
- Risk appetite
- PZU Group’s risk profile
- Risk vulnerability
- Capital management
Business model
Employee
CSR
Environment
Risk and ethics
Read more:
- New approach to sales
- Working conditions
- Employee development
- Diversity and respecting human rights
Business model
Employee
Risk and ethics
Read more:
- Client at the center of attention
- Medical services (Health)
- Working conditions
- Enhancing safety
- Health
Business model
Employee
CSR
- Our impact on the natural environment
- Practical challenges in managing direct impact
- Diversity and respecting human rights
- Medical services (Health)
Environment
Risk and ethics
Business
9.2 Fair value hierarchy
On the basis of the input data for fair value measurement, the individual assets and liabilities for which fair value has been presented have been classified to the following levels:
- Level I – assets and liabilities measured based on quoted prices (unadjusted) from active markets for identical assets and liabilities. This level includes:
- liquid quoted debt securities;
- shares and investment certificates quoted on exchanges;
- derivatives quoted on exchanges;
- Level II – assets and liabilities whose measurement is based on input data other than quoted prices included within level I, which can be observed on the market, either directly (as prices) or indirectly (derived from prices). This level includes:
- quoted debt securities carried on the basis of the valuations published by an authorized information service;
- derivatives – among others FX Swap, FX Forward, IRS, CIRS, FRA;
- participation units in mutual fund;
- investment properties or properties held for sale measured using the comparative method, including free land free land for development and certain smaller and less valuable buildings (such as residential units, garages, etc.);
- liabilities to members of consolidated mutual funds;
- investment contracts for the client’s account and risk.
- Level III – assets measured based on input data unobserved on the existing markets (unobservable input data). This level includes:
- unquoted debt securities and non-liquid quoted debt securities (including non-treasury debt securities issued by other financial entities, local government and non-financial entities), measured using models based on discounted cash flows;
- investment properties or properties held for sale measured using the income method or the residual method;
- loan receivables from clients and liabilities to clients under deposits;
- options embedded in certificates of deposit issued by PZU Group companies and options concluded in the interbank market to hedge embedded option positions.
In a situation in which the measurement of an asset or liability is based on input data classified in different levels of the fair value hierarchy, the measured asset is assigned to the lowest level from which the input data are taken, provided that they have a significant impact on the overall measurement.
The value of the measurement of components of assets or liabilities qualified in level III is affected to significant extent by unobservable input data.
| Measured assets | Unobservable data | Description | Impact on measurement |
| Loan receivables from clients | Liquidity margin and current margin from the sale of the product group | Fair values are estimated using valuation techniques, with an assumption that when the loan is granted, the fair value is equal to the carrying amount. The fair value of loans without recognized impairment is equal to the sum of future expected cash flows discounted at the balance sheet date less expected credit loss. The cash flow discounting rate is the appropriate risk- free market rate plus the liquidity margin and current sales margin for the loan’s product group. The margin is determined by product group and by maturity. For the purpose of estimating the fair value of foreign currency loans, the liquidity margin for PLN loans is used, adjusted by quotations of FX swap and basis-swap transactions. The fair value of loans with recognized impairment is equal to the sum of future expected salvage discounted using the effective interest rate, since the average expected recoveries fully reflect the credit risk component. For loans that do not have a repayment schedule (current account loans, overdrafts and credit cards), the fair value is assumed to be equal to the carrying amount. | Negative correlation. |
| Liabilities to clients under deposits | Sales margin | Fair values are estimated using valuation techniques, with an assumption that when the deposit is accepted, the fair value is equal to the carrying amount. The fair value of term deposits is equal to the sum of future expected cash flows discounted at the balance sheet date. The cash flow discounting rate is the appropriate risk-free market rate plus the current sales margin. The margin is determined on the basis of deposits accepted in the last quarter, by product group and by maturity. For short-term deposits (current deposits, overnight deposits and savings accounts), the carrying amount is taken as fair value. | Negative correlation. |
| Options embedded in certificates of deposit issued by PZU Group companies and options concluded in the interbank market to hedge embedded option positions. | Model parameters | Embedded instruments are plain vanilla options and exotic options for individual shares, indices, commodities and other market indicators, including interest rate indices and exchange rates and their baskets. All separated options are offset on an ongoing basis on the interbank market. Currency options are measured based on the Garman-Kohlhagen option pricing model (and in the case of barrier and Asian options based on the so- called extended Garman-Kohlhagen model). Exotic options embedded in deposit agreements and their offsets are measured using the Monte-Carlo technique, assuming a geometric Brownian motion model for risk factors. | |
| Non-liquid bonds and loans | Credit spreads | Spreads are observed on all bonds (their series) or loans of the same issuer or a similar issuer. These spreads are observed on the dates of issue of new bond series, dates of conclusion of new loan agreements and dates of market transactions on the receivables following from such bonds and loans. | Negative correlation. |
| Investment property and property held for sale | Capitalization rate | Capitalization rate is determined through analysis of rates of return obtained in transactions for similar properties. | Negative correlation. |
| Construction costs | Construction costs are determined based on market construction costs less costs incurred as at the date of measurement. | Positive correlation. | |
| Monthly rental rate per 1 m2 of relevant space or per parking space | Rental rates are observed for similar properties of similar quality, in similar locations and with a similar size of leased space. | Positive correlation. | |
| Derivatives | Model parameters | Currency options are measured based on the Garman-Kohlhagen option pricing model (and in the case of barrier and Asian options based on the so- called extended Garman-Kohlhagen model). Exotic options embedded in deposit agreements and their offsets are measured using the Monte-Carlo technique, assuming a geometric Brownian motion model for risk factors. | |
| Own issues and subordinated loans | Issue spread above the market curve | If historical issue spread above the market curve is used, these issues are classified at level III of the fair value hierarchy. | Negative correlation. |
| Equity instruments not quoted on an active market | Quotations of financial services |
9.2.1. Assets and liabilities measured at fair value
| Assets and liabilities measured at fair value | 31 December 2018 | 31 December 2017 (restated data) | ||||||
| Level I | Level II | Level III | Total | Level I | Level II | Level III | Total | |
| Assets | ||||||||
| Investment financial assets measured at fair value through other comprehensive income | 22,200 | 9,329 | 7,208 | 38,737 | n/a | n/a | n/a | n/a |
| Equity instruments | 309 | 1 | 212 | 522 | n/a | n/a | n/a | n/a |
| Debt securities | 21,891 | 9,328 | 6,996 | 38,215 | n/a | n/a | n/a | n/a |
| Investment financial assets measured at fair value through profit or loss | 12,758 | 4,684 | 252 | 17,694 | n/a | n/a | n/a | n/a |
| Equity instruments | 1,105 | - | 115 | 1,220 | n/a | n/a | n/a | n/a |
| Participation units and investment certificates | 102 | 4,182 | 14 | 4,298 | n/a | n/a | n/a | n/a |
| Debt securities | 11,551 | 502 | 123 | 12,176 | n/a | n/a | n/a | n/a |
| Loan receivables from clients | - | - | 1,814 | 1,814 | n/a | n/a | n/a | n/a |
| Measured at fair value through other comprehensive income | - | - | 1,511 | 1,511 | n/a | n/a | n/a | n/a |
| Measured at fair value through profit or loss | - | - | 303 | 303 | n/a | n/a | n/a | n/a |
| Financial derivatives | 35 | 2,384 | 68 | 2,487 | 29 | 2,222 | 100 | 2,351 |
| Financial assets available for sale | n/a | n/a | n/a | n/a | 30,027 | 17,081 | 1,411 | 48,519 |
| Equity instruments | n/a | n/a | n/a | n/a | 210 | 156 | 298 | 664 |
| Debt securities | n/a | n/a | n/a | n/a | 29,817 | 16,925 | 1,113 | 47,855 |
| Financial instruments measured at fair value through profit or loss – classified as such upon first recognition | n/a | n/a | n/a | n/a | 6,143 | 464 | 43 | 6,650 |
| Equity instruments | n/a | n/a | n/a | n/a | 1,802 | 127 | 18 | 1,947 |
| Debt securities | n/a | n/a | n/a | n/a | 4,341 | 337 | 25 | 4,703 |
| Financial instruments measured at fair value through profit or loss – held for trading | n/a | n/a | n/a | n/a | 7,363 | 6,133 | 97 | 13,593 |
| Equity instruments | n/a | n/a | n/a | n/a | 526 | 4,091 | - | 4,617 |
| Debt securities | n/a | n/a | n/a | n/a | 6,837 | 2,042 | 97 | 8,976 |
| Investment property | - | 141 | 1,556 | 1,697 | - | 151 | 2,204 | 2,355 |
| Liabilities | ||||||||
| Derivatives | 34 | 3,295 | 36 | 3,365 | 22 | 3,400 | 52 | 3,474 |
| Liabilities to members of consolidated mutual funds | - | 266 | - | 266 | - | 420 | - | 420 |
| Investment contracts for the client’s account and risk (unit-linked) | - | 266 | - | 266 | - | 312 | - | 312 |
| Liabilities on borrowed securities (short sale) | 120 | - | - | 120 | 737 | 13 | - | 750 |
| Movement in assets and liabilities classified as Level III of the fair value hierarchy in the year ended 31 December 2018 | Investment financial assets measured at fair value through other comprehensive income | Investment financial assets measured at fair value through profit or loss | Derivatives – assets | Derivatives – liabilities | Loan receivables from clients measured at fair value | Investment property | ||||
| Equity | Debt | Equity | Investment certificates | Debt | through other comprehensive income | through profit or loss | ||||
| Balance at the beginning of the period – classification at the time of applying IFRS 9 | 221 | 4,855 | 95 | - | 163 | 100 | 52 | 1,556 | 365 | 2,204 |
| Purchase/opening of the position | - | 3,034 | - | 14 | 727 | 16 | 10 | 409 | 3 | 139 |
| Reclassification from Level I | - | - | 2 | - | - | - | - | - | - | - |
| Reclassification from Level II | - | 190 1) | - | - | - | - | - | - | - | 3 |
| Reclassification from own properties | - | - | - | - | - | - | - | - | - | 4 |
| Profit or loss recognized in the profit and loss account as: | - | 49 | 14 | - | 3 | (30) | (9) | 29 | 3 | 48 |
| - net investment income | - | 49 | - | - | - | - | - | 29 | - | - |
| - net result on realization of financial instruments and properties | - | - | (2) | - | - | (3) | - | - | - | - |
| - net movement in fair value of assets and liabilities measured at fair value | - | - | 16 | - | 3 | (27) | (9) | - | 3 | 48 |
| Profits or losses recognized in other comprehensive income | (9) | (12) | - | - | - | - | - | 31 | - | - |
| Sale and settlements | - | (1,056) | - | - | (756) | (18) | (17) | (514) | (68) | (11) |
| Reclassification to assets held for sale | - | - | - | - | - | - | - | - | - | (831) |
| Reclassification to Level II | - | (64) | - | - | (14) | - | - | - | - | - |
| Foreign exchange differences | - | - | 4 | - | - | - | - | - | - | - |
| Balance at the end of the period | 212 | 6,996 | 115 | 14 | 123 | 68 | 36 | 1,511 | 303 | 1,556 |
1) Corporate and local government bonds were reclassified to level III; for those bonds, a parameter implied from historical data (credit spread) used in the valuation model exerts a significant influence on measurement.
| Movement in assets and liabilities classified as Level III of the fair value hierarchy in the year ended 31 December 2017 | Investment financial assets available for sale | Investment financial assets measured at fair value through profit or loss – classified as such upon first recognition | Investment financial assets measured at fair value through profit or loss – held for trading – Debt | Derivatives – assets | Derivatives – liabilities | Investment properties | ||
| Equity | Debt | Equity | Debt | |||||
| Balance at the beginning of the period | 38 | 614 | 17 | 25 | 135 | 53 | 26 | 1,589 |
| Purchase/opening of the position | 6 | - | 21 | - | 290 | 32 | 23 | 63 |
| Reclassification from Level II | - | 662 1) | - | - | 4 | - | - | - |
| Reclassification from own properties and properties held for sale | - | - | - | - | - | - | - | 830 |
| Profit or loss recognized in the profit and loss account as: | - | 31 | 2 | 2 | 3 | 37 | 19 | (102) |
| - net investment income | - | 31 | 5 | - | - | (1) | - | - |
| - net movement in fair value of assets and liabilities measured at fair value | - | - | (3) | 2 | 3 | 38 | 19 | (102) |
| Profits or losses recognized in other comprehensive income | 9 | (26) | - | - | - | - | - | - |
| Sale and settlements | - | (437) | (22) | (2) | (380) | (22) | (16) | (4) |
| Reclassification to own properties and properties held for sale | - | - | - | - | - | - | - | (196) |
| Foreign exchange translation differences | (1) | - | - | - | - | - | - | |
| Change in the composition of the Group | 246 | 252 | - | - | 45 | - | - | 24 |
| Other | - | 17 | - | - | - | - | - | - |
| Balance at the end of the period | 298 | 1,113 | 18 | 25 | 97 | 100 | 52 | 2,204 |
1) Municipal bonds were reclassified to level III; for those bonds, a parameter implied from historical data (credit spread) used in the valuation model exerts a significant influence on measurement.
9.2.1.1. Change in the fair value measurement methodology for financial instruments measured at fair value
Both in 2018 and in 2017, no changes were made in the fair value measurement method for financial instruments measured at fair value that would be of material significance for the consolidated financial statements.
9.2.1.2. Investment property classified as Level III fair value
| Investment property classified as Level III | Type of space | 31 December 2018 | 31 December 2017 (restated) | ||||
| Carrying amount | Rental fees included in the measurement | Capitalization rates included in the measurement | Carrying amount | Rental fees included in the measurement | Capitalization rates included in the measurement | ||
| Office properties | Office Parking lot | 651 | EUR 12.00 – 14.25 EUR 40.00 – 73.00 |
5.95% – 7.75% | 710 | EUR 8.00 – 19.18 EUR 35.00 – 119.88 |
6.60% – 7.55% |
| Commercial properties | Commercial | - | - | - | 102 | depending on size of leased space | 7.40% – 8.70% |
| Warehousing properties | Office Warehouse | 889 | EUR 6.48 – 9.15 EUR 3.00 – 4.04 |
6.00% – 6.90% | 1,365 | EUR 6.50 – 9.00 EUR 2.40 – 3.60 |
6.00% – 7.80% |
| Other | 16 | 27 | |||||
| Total | 1,556 | 2,204 | |||||
9.2.2. Assets and liabilities not measured at fair value
| Fair value of assets and liabilities for which it is only disclosed | 31 December 2018 | 31 December 2017 (restated) | ||||||
| Level I | Level II | Level III | Total | Level I | Level II | Level III | Total | |
| Assets | ||||||||
| Entities measured by the equity method – EMC | - | - | 14 | 14 | - | - | 20 | 20 |
| Loan receivables from clients measured at amortized cost | - | - | 180,507 | 180,507 | - | - | 169,393 | 169,393 |
| Investment financial assets | 24,251 | 2,301 | 21,541 | 48,093 | 17,632 | 9,849 | 16,164 | 43,645 |
| Measured at amortized cost | 24,251 | 2,301 | 21,541 | 48,093 | n/a | n/a | n/a | n/a |
| Debt securities | 24,251 | 1,239 | 11,900 | 37,390 | n/a | n/a | n/a | n/a |
| Buy-sell-back transactions | - | 126 | 3,153 | 3,279 | n/a | n/a | n/a | n/a |
| Term deposits with credit institutions | - | 936 | 1,830 | 2,766 | n/a | n/a | n/a | n/a |
| Loans | - | - | 4,658 | 4,658 | n/a | n/a | n/a | n/a |
| Held to maturity | n/a | n/a | n/a | n/a | 17,631 | 305 | 5,582 | 23,518 |
| Loans | n/a | n/a | n/a | n/a | 1 | 9,544 | 10,582 | 20,127 |
| Debt securities classified in the loans portfolio | n/a | n/a | n/a | n/a | 1 | 8,153 | 5,500 | 13,654 |
| Buy-sell-back transactions | n/a | n/a | n/a | n/a | - | 553 | 333 | 886 |
| Term deposits with credit institutions | n/a | n/a | n/a | n/a | - | 838 | 1,005 | 1,843 |
| Loans | n/a | n/a | n/a | n/a | - | - | 3,744 | 3,744 |
| Liabilities | ||||||||
| Liabilities to banks | - | 781 | 5,280 | 6,061 | - | 1,161 | 4,092 | 5,253 |
| Liabilities to clients under deposits | - | - | 207,668 | 207,668 | - | - | 201,605 | 201,605 |
| Liabilities on the issue of own debt securities 1) | - | 5,295 | 6,800 | 12,095 | - | 2,808 | 6,627 | 9,435 |
| Subordinated liabilities 1) | - | 2,013 | 4,043 | 6,056 | - | 1,257 | 4,108 | 5,365 |
| Liabilities on account of repurchase transactions | - | 540 | - | 540 | - | 1,167 | - | 1,167 |
1) The liabilities classified to level II are those whose measurement was not affected by unobservable parameters. They are primarily liabilities on account of bonds issued by Pekao.
