PZU Życie – activity in the life insurance market in Poland

In the PZU Group PZU Życie SA is responsible for operations on the Polish life insurance market. It offers a wide range of life insurance products, including group and individual protection insurance, investment insurance and pension products.

Market situation

In 2015 PZU Życie continued to be the clear leader in the regular premium segment. In2015, it collected 43.9% of the regular premiums collected by all the insurance companies operating on the Polish market. In 2015, the life insurance market in Poland measured by the gross written premium amounted to PLN 27.5 billion, which means that it has declined by an annual average of 3.6% over the past 5 years. The premium collected during in 2015 was simultaneously lower by 4.0% than in the corresponding period of the previous year, which is a continued decline after a series of increases, which ended in 2012.

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

Źródło: KNF (www.knf.gov.pl). Biuletyn Kwartalny. Rynek ubezpieczeń 4/2015, Rynek ubezpieczeń 4/2014, Rynek ubezpieczeń 4/2013, Rynek ubezpieczeń 4/2012, Rynek ubezpieczeń 4/2011.

It should be noted that the premium decline applied exclusively to the single premium (a decline of 9.5% year-on- year), mainly in the bancassurance channel. The dynamics for the corresponding period of 2014 were also negative at -20.0%.

Life insurance market – gross written premium (PLN millions)

The reasons of the lower single premiums in recent years include the current situation of the capital market and changes in the legal environment. 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 life and endowment policies with fixed rate of return or interest-based return was introduced on 1 January 2015, which reduced the client interest in such products.

Simultaneously, the share of the bancassurance channel in the gross written premium of life insurance companies is reducing quarter to quarter starting from 2013. In 2015 it amounted to 39.2%² and decreased by 1.6 p.p. compared to the corresponding period in 2014.

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. Throughout in 2015 this premium was higher by 0.1% compared with 2014.

The gradual increase in the attractiveness of employee pension programs (EPP) on the life insurance market is noticeable. Much like in previous years, the most common form of EPP were insurance programs. In 2015, they represented 65.4%³ of all Employee Pension Programs. At the end of 2015, the value of assets gathered in all employee pension programs (irrespectively of the form) amounted to PLN 10.6 billion and rose by 3.5% in comparison with 2014. By the end of 2015, almost 2.4% Polish employees were covered by EPP.

The total technical result reached by life insurance companies in 2015 was lower than in the corresponding period of 2014 by PLN 438.7 million (13.4%) and amounted to PLN 2,840.8 million. The weaker result is the effect of lower profitability in all groups, especially unit-linked life insurance (Group III) – drop in technical result by PLN 361.6 million (-146.0%; the effect of regulatory changes lowering the charges collected by insurance companies).

2 PIU data(www.piu.org.pl), bancassurance market after Q4 2015

3 Employee Pension Programs in 2015, Polish Financial Supervision Authority, June 2016

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

Source: PFSA (www.knf.gov.pl). Quarterly Bulletin. Insurance Market 4/2014, PZU Życie data

During this period, life insurance companies generated the net result of PLN 3,065.3 million, which constituted a year-on-year growth of 3.5% (PLN 102.3 million). 

The value of investments of life insurance companies in 2015 was PLN 40.1 billion and dropped by 7.0% from the end of 2014. At the same time, the high premium (which exceeded paid benefits) contributed to increasing the net assets of life insurance with investment risk falling onto the insurer (2.8% growth to PLN 55.6 billion).

PZU Życie’s activities

PZU Życie SA (PZU Życie) operates on the Polish 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.

In 2015 PZU Życie continued to be the clear leader in the regular premium segment. In 2015, it collected 43.9% of the regular premiums collected by all the insurance companies operating on the Polish market.

PZU Życie collected 29.1% of the gross written premium of life insurance companies in three quarters of 2015 to retain last year’s market share. Simultaneously, PZU Życie continued to remain the decisive leader in the regular premium segment. 

PZU Życie’s technical result constituted the majority of the result achieved by all life insurance companies. This is the evidence to the high profitability of the products offered. PZU Życie’s technical result margin (22.1) was almost four times higher than the margin achieved by all the other companies offering life insurance together.

Life insurance companies — share in gross written premium in 2015 (%)

Capital groups:Talanx - Warta, Europa, Open Life; VIG - Compensa Życie, Polisa Życie, Skandia Życie, Benefia (merged with Compensa Życie on 30 September 2014); Aviva - Aviva TUnŻ, BZ WBK-Aviva TUnŻ
Source: PFSA Quarterly Bulletin. Insurance market 4/2015

In 2015, besides being adapted to new legal regulations, the product offer of PZU Życie was expanded with innovative solutions designed to make it more attractive. The 2015 changes in the PZU Życie product offer include the following:

• implementation of new regular premium insurance „PZU Cel na Przyszłość”. This product is meant for clients who either have or are planning to establish an investment objective for a long period, over which they would like to gather a specific amount. The investment objectives may include extra funds for future retirement, building a house, educating children, paying off a mortgage early, etc.;
• introduction of a new version of additional insurance with the Pharmacy Card to group protection insurance and individual continued insurance. The product change is related with the expansion of the previous non-cash model with the cash option of the Pharmacy Card, which allows the benefits to be realized at all pharmacies;
• introduction of modified group life insurance Pogodna Przyszłość. This is a new version of PZU’s offer for clients interested in employee pension programs (EPP). The main modification is the change of the investment platform; the previous equity of PZU Życie with weekly valuation have been replaced with funds from the PZU TFI offer with daily valuation. The individual program includes 6 funds with a broad investment range and the recommended program includes 4 funds.

Furthermore, there were numerous changes made to the health care product offer, including new technological solutions, some of which are presented below:

• expansion of the offer with additional „Cztery Pory Roku” (Four Seasons) insurance in individually continued insurance. The insurance includes a guarantee for co-funding of immediate medication and antibiotics. The product is available nationwide at all pharmacies and only requires a prescription. The co-funding is in non-cash format in roughly 1/3 Polish pharmacies;
• implementation of the „Z miłości do zdrowia” (Out of love for health) additional insurance, which includes coordination of treatment progress for people recuperating from heart attacks and strokes or battling tumors. Besides medical consultations, rehabilitation, and diagnostics, the product covers psychological support and a personal assistant to lead the insured party through the treatment process. The product has the advantage of offering preventive examinations, to which the insured party will be subject throughout the effectiveness of the insurance agreement;
• telemedicine (introduced as a pilot program in 2016) – remote cardiologic care providing for unassisted home ECG examination and subsequent consultation of the results with a physician. This is a 24-hour service;
• expanding the network of health care centers for medical insurance clients to 1,580 in 500 cities.

Furthermore, there were 10 Świat Zysków (World of Profits) subscriptions, which were very popular among structured insurance clients. Individual subscriptions offered diverse investment strategies, which adapted to the changing market conditions. Besides the payout of the guaranteed capital, certain closed subscriptions concluded with a payout of the profit (the greatest profit was paid to the clients of 25 subscriptions and constituted 33.33%).

In 2015, the bank channel saw continuation of cooperation with current distributors. The high sales of the Multicurrency Investment Program unit-linked single premium product, which was offered through Bank Millennium SA, were a success and were sustained especially in the first half of last year.

In 2015, in accordance with Polish Accounting Standards, PZU Życie collected gross written premiums of PLN 8,064.0 million, which was 1.4% less than in the previous year. The vast majority of the Company’s premium was from regular premium products. It represented 89.9% of the gross written premiums (as opposed to 86.3% in the previous year). It primarily included the written premium from group insurance and individually continued insurance, which had approximately 12 million customers in Poland.

In 2015, PZU Życie settled claims and benefits at the amount of PLN 6,294.8 million, which was 3.6% less than in the previous year.

In 2015, PZU Życie generated a net profit of PLN 1,677.1 million in accordance with the Polish Accounting Standards.

Gross written premium PZU Życie (PLN million)

Factors, including risks and dangers, which will impact the activities in the life insurance sector in 2016

The situation on the life insurance market in 2016 will primarily be affected by:

• low interest rates, which in longer period reduce the profitability of investments made from premiums collected;
• lower interest in investment products – outflow of capital to alternative investment forms other than insurance policies;
• economic climate on the capital markets which is difficult to predict and which determines the attractiveness of unit- linked insurance products;
• guidance in the scope of insurance distribution released by the PFSA and included in the Act on Insurance Activity, which affect both the product structure and the entire insurance agency sector;
• UOKiK [OCCP, the Office of Competition and Consumer Protection] rulings in the scope of unit-linked products;
• implementation of the Solvency II requirements based on risk evaluation from January 2016 may change the operating model of selected areas of the insurance companies on the market (e.g. the tariff policy).