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PZU Życie – activities on the life insurance market in Poland

PZU Życie SA operates on the life insurance market within PZU Group. The Company offers a wide range of life insurance products, including group and individual protection insurance, investment insurance and pension products.

Situation on the market

The life insurance market in Poland measured by the gross written premium decreased by an annual average of 2.3% over the past 5 years. The premium collected in 2014 was 8.3% lower than in the corresponding period of the previous year, which means a continued decline after a series of increases ended in 2012. The rates of growth for the same periods of 2013, 2012 and 2011 were respectively -14.1%, 14.2% and 1.4%.

It should be noted that the premium decline applied exclusively to the single premium (a decline of 20% y/y), mainly in the bancassurance channel. The dynamics for the corresponding period of 2013 were also negative at -26%.

Life insurance market – gross written premium (PLN million)

20142013
PZU ŻycieMarketMarket without PZU ŻyciePZUŻycieMarketMarket without PZU Życie
Regular premium 7,059 16,488 9,429 6,948 16,037 9,089
Single premium 1,124 12,180 11,056 1,895 15,227 13,332
TOTAL 8,182 28,667 20,485 8,843 31,264 22,421

Source: KNF (www.knf.gov.pl). Biuletyn Kwartalny [PFSA Quarterly Bulletin]. Life insurance market 4/2012, data collected by PZU Życie

The reasons of the lower single premiums in recent years include the current situation of the capital market. The record low interest rates reduce the profitability of short-term endowment policies (polisolokaty) thereby generating greater interest in other investment products, i.e. the investment funds offered by TFI or the unit-linked insurance products. Additionally, a tax on revenue from short-term endowment policies was introduced on 1st January 2015, which reduced the customer interest in such products already in the last year. 

Due to the above, the share of the bancassurance channel in the gross written premium of life insurance companies is reducing quarter to quarter starting from 2013. This share was 40,8%1 in 2014 and dropped since the corresponding period of 2013 by 12.6 p.p.

The result of the changes taking place on the market is the rising prominence of the regular premium over the single premium, which is PZU Życie’s competitive advantage on the market. In 2014 the premium was higher by 2.8% compared to the corresponding period of 2013.

The gradual increase in the attractiveness of employee pension programmes (EPP) on the life insurance market is noticeable. Much like in previous years, the most common form of EPP were insurance programmes. In 2014 they represented 66%2 of all Employee Pension Programmes. However, their share declined by 1.2 p.p. compared with 2013. Regardless, much like other EPP forms, the ones offered by life insurance companies recorded a growth of assets in 2014 (by 2.8% y/y). By the end of 2014 almost 2.4% Polish employees were covered by EPP, which means that the market still holds great growth potential.

The total technical result achieved by life insurance companies in 2014 was greater by PLN 293.4 million (9.8%) than in the corresponding period of 2013, mainly due to the greater profitability of life insurance (Group I) – technical result growth of PLN 310.3 million (+39.7%).

Gross written premium of life insurance companies in Poland (PLN million)

Life insurance market – gross written premium vs. technical result (PLN million)

 20142013
 PZU ŻycieMarketMarket without PZU ŻyciePZU ŻycieMarketMarket without PZU Życie
Written premium 8,182 28,667 20,485 8,843 31,264 22,421
Technical result 2,122 3,301 1,180 1,823 3,008 1,185

Source: KNF (www.knf.gov.pl). Biuletyn Kwartalny [PFSA Quarterly Bulletin]. Life insurance market 4/2014, data collected by PZU Życie

During this period, life insurance companies generated a net result at a level of PLN 3.1 billion, which constituted a growth of 11.1% (PLN 317.8 million). This growth results mainly from the investment results of the insurance companies that benefited
from the continuing boom on the debt market. As at the end of 2014, the debt instruments and fixed income securities in the portfolios of the life insurance companies composed 65.7%.

The total value of investments of life insurance companies at the end of 2014 amounted to PLN 99.2 billion, which means growth of 4.1% compared with the end of 2013.
In particular, high premiums (and higher than the level of the benefits paid) contributed to an increase of the unit-linked net assets (increase of 8.4% to PLN 54 billion).

The Solvency II project - life insurance

The condition of the life insurance sector in Poland one year before the requirements of the Solvency II Directive come into effect, i.e. on 1 January 2016, can be graded as positive.
According to the quantitative survey conducted by PFSA among the domestic insurance and reinsurance companies as at the end of 2013 (QIS2014), the solvency of capital requirements (SCR) established with the standard formula for the life insurance market in Poland was 343.2%.

PZU Życie’s activities

PZU Życie SA (PZU Życie) operates on the life insurance market within PZU Group. The Company offers a wide range of life insurance products, including group and individual protection insurance, investment insurance and pension products.

Life insurance companies - share of regular gross written premiums (%)

In 2014, PZU Życie collected 28.5% of the gross written premiums of the life insurance companies. In comparison, in 2013, the Company had a 28.3% share of the market. Simultaneously, PZU Życie continued to remain the decisive leader in the regular premium segment. During three quarters of 2014, it obtained 42.8% of such premiums of all life insurance companies.

PZU Życie’s technical result constituted the majority of the result obtained by all life insurance companies. This is the evidence of the high profitability of the products offered. PZU Życie’s technical result margin was more than four times higher than the margin obtained by all the other companies offering life insurance together (26.2% compared with 5.8%).

In 2014, PZU Życie adjusted its product offering to the rising customer needs, the actions taken by the competition and the changing legal situation.

In 2014, PZU Życie adjusted its product offering to the rising customer needs, the actions taken by the competition and the changing legal situation.

The 2014 changes in the offer include the following:

  • individual protection insurance – in 2014, PZU Życie added the new “PZU Pomoc od Serca” additional insurance to the offer, which was positively received by the clients.
    This insurance provides financial support in instances of suffering from a major illness such as malignant tumours, multiple sclerosis, and others. In such instances, the insurance provides access to foreign medical consultation in addition to the payout from the policy. This allows the clients of PZU to take advantage of the knowledge and experience of the best health care centres in the world. Everyone covered by this insurance is entitled to a fiveyear protection and guaranteed that the premium will not change over this period;
  • group protection insurance – the offer for SMEs wasmodified with the introduction of a new, flexible offerallowing the client more freedom in the selection ofadditional insurance and the total insurance and benefitamounts;
  • group health insurance – the new changes in the generalinsurance conditions favour the clients as there is easieraccess to health care (approximately 1,380 health carecentres in 460 Polish cities) and there is a new offer for theclients from the SME sector;
  • medicine insurance – introduction of the new Cztery PoryRoku product, which mainly covers drugs treating seasonal diseases.

Simultaneously, PZU Życie actively worked towards attracting new customers for group insurance. Because the number of employment establishments operating in the public sector placing orders for insurance services in the tender procedure is increasing, the company entered many – successfully completed – tenders for group insurance.

The year 2014 saw rising client interest in traditional individual life and endowment insurance. Simultaneously, PZU Życie worked intensively on the adjustment of the current offering to the further decline of treasury bond profitability.

In 2014, PZU Życie was active in the field of pension insurance, which also aimed to preserve the portfolio and acquire new clients. The month of January saw the implementation of changes to the IKZE product resulting from the amendment of the Act, which introduced changes favouring the clients as they simplified the structure of payment limits and limited the tax from the pension benefit to the flat rate of 10%.

According to the strategic principles concerning the revitalisation of the investment offer and adjustment of the products to the client and distribution channel segments, the sales of the individual unit-linked life insurance Plan na Życie were ended as at 1st February 2014.

In 2014, in accordance with Polish Accounting Standards, PZU collected gross written premiums of PLN 8,182.2 million, which was 7.5% less than in the previous year. The vast majority of the Company’s premium was from regular premium products. It represented 86.3% of the gross written premiums (as opposed to 78.6% in the previous year). It primarily included the written premium from group insurance and individually continued insurance, from which approximately 12 million Poles benefited.

In 2014, PZU Życie settled claims and benefits at the amount of PLN 6,529.9 million, which was 4.4% more than in the previous year.

In 2014, PZU Życie generated a net profit of PLN 1,931.3 million in accordance with the Polish Accounting Standards.

PZU gross written premium (PLN million)

Factors, including threats and risks, which will affect the activities of the life insurance sector in 2015

The situation on the life insurance market in 2015 will primarily be affected by:

  • low interest rates, which reduce the profitability of investments made from premiums collected;
  • the economic climate on the capital markets, which is difficult to predict and which determines the attractiveness of unit-linked insurance products;
  • the guidance in scope of insurance distribution released by the PFSA, which affect both the product structure and the entire insurance agency sector;
  • OCCP (Office for Competition and Consumer Protection) rulings in scope of unit-linked fund products;
  • implementation of the Solvency II requirements from January 2016, which is based on risk evaluation and may change the operating model of selected areas of the insurance companies on the market (e.g. the pricing policy).