Management Boards report on the activity of the PZU Group and PZU SA (2023)

insurance

banking

investments

innovations

Table of Contents

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Integrated table of contents

strategy and perspective /110

inwestments

/54

risks and opportunities

/130

insurance

/48

health

/53

PZU GROUP /23

7

performance

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banking

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policy

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Stakeholders /69

INSURANCE | HEALTH | INVESTMENTS | BANKING

Anita Elżanowska

Member of the PZU Supervisory Board delegated to temporarily perform the function of the PZU CEO

Letter from the CEO to Shareholders

[GRI 2-22]

Together with the Management Boards of the Companies that make up the PZU Group, I am providing you with the Annual Report for 2023. This was a period in which we operated under conditions of gradual recovery from the pandemic crisis, but still under pressure from the consequences of the war in Ukraine. We also must not forget about long-term trends, such as climate change, demographics, labor market transformations and technological advances, which also bring great challenges. Polish entrepreneurs in this environment have demonstrated exceptional flexibility, adaptability and even expansion. This can be seen in the performance of our economy, especially against the economies of the EU countries that form the Eurozone.

Sales and profitability

Despite operating in a very challenging geopolitical and macroeconomic environment, the PZU Group achieved its strategic goals in 2023. Net profit attributable to shareholders of the Group's Parent Company, PZU SA, amounted to nearly PLN 5.8 billion, growing year-on-year by more than 50%. It also exceeded the 2024 strategy

target by 34%. The adjusted retuon equity (aROE) was 22%, up 5.7 p.p. compared to 2022. The PZU Group also strongly increased sales. In 2023, gross insurance revenues amounted to PLN 26.9 billion, more than 2 billion higher than the previous year. The main driver of growth was non-life insurance, where revenues rose 11.4% year-on-year to PLN 16.1 billion. This was driven primarily by revenue growth in non-motor insurance and the MOD segment. Sales growth was accompanied by high profitability achieved in key business lines. The Combined Ratio (COR) for non-life insurance in Poland was 85.3% and the operating margin in group and individually continued life insurance was 21.9%.

In the structure of revenue growth, noteworthy is the growing role of mutual insurance, which, in the PZU Group, is the domain of TUW PZUW. In less than four years, the its membership has doubled, and there are now more than 600 members. In 2023, PZU also acquired Polski Gaz TUW and Polski Gaz TUW na Życie, and this will allow PZU to increase its premiums written in this area, and at the same time, the values of the funds accumulated by EPS (Employee Pension Schemes) participants and managed by the Group.

Investment performance and contribution of banks

An important component of the PZU Group's performance generated in 2023 was the profit earned on its investment portfolio, which rose to PLN 2.5 billion, up 12.1% year-on-year. This was mainly influenced by the level of interest rates, favorable from the point of view of the performance on interest-bearing instruments.

The performance on banking operations was another positive factor. The contribution of Pekao and Alior

banks to the PZU Group's profit attributable to the equity holders of the Parent Company was more than three times higher than in 2022, amounting to nearly PLN 2 billion (vs. PLN 580 million a year earlier).

Implementation of IFRS17 standard

An important development for the PZU Group in 2023 was changing the accounting standard, from IFRS4 to IFRS17. For external stakeholders, this was mainly visible in the structure and content of the reporting documents. Internally, however, the implementation of IFRS17 has meant many changes in analytical and planning areas. These changes coincided with dynamic changes in the macroeconomic environment, particularly in relation to inflation and the response of central banks. As

a consequence of these events, it was necessary to revise the PZU Group's strategy and set new or update some of the existing metrics.

Today, the PZU Group is already in the final year of implementing its Strategy for 2021-2024. As such, our priority will be to work on preparing new strategic goals and ambitions, the implementation of which will contribute to building the Group's value, taking into account the principles of sustainable development.

Sustainable development

The PZU Group has consistently strengthened its leadership position in key financial market segments, doing so in accordance with the principles of sustainable development. The Group incorporates environmental, social and governance factors in all aspects of its operations and treats these factors equally.

In 2023, this was mainly manifested in supplier outreach activities, expanded ESG assessment of corporate clients, increased involvement of the PZU Group in climate- energy transition processes, rapid progress toward achieving climate neutrality for its own emissions, and numerous initiatives and programs to improve the quality of life for clients and employees. Continuing to do so will be key to keep the fundamental values of growth over the long term, while maintaining balance at the level of committed equity. In the shorter term, this will be another factor stabilizing the effectiveness of the PZU Group's business model.

Safe development

Risks originating from global events and trends still exist and could lead to further economic shocks. In this respect, high capital security remains paramount, in particular maintaining the Solvency II ratio at no less than 200%. Analysis of ESG risks in elements of the value chain is also gradually being expanded, including assessments of clients, suppliers, investments and products. This allows the PZU Group to identify and manage processes in accordance with the principles of sustainable development.

The PZU Group retains great potential for growth and further value creation. Given the scale of its operations and its position as a leader in the financial sector in Poland, crucial to its stability, all activities it undertakes must be carried out with a safe risk margin. We will do

our utmost to ensure that the PZU Group continues to enjoy a high level of trust from shareholders, clients and other stakeholders, as well as to provide them with certain benefits that are above standard in the market.

Best regards,

/-/ Anita Elżanowska - Member of the PZU Supervisory Board delegated to temporarily perform the function of the PZU CEO

Marcin Kubicza

Chairman of the PZU Supervisory Board

Letter from the Chairman of the Supervisory Board

Dear Sir/Madam,

PZU Group's operations in 2023 were characterized by stability and resilience. Effective risk management and a secure investment portfolio structure have contributed to maintaining a strong capital position, as expressed by the Solvency II ratio at a level significantly above 200%. This was confirmed when the rating agency S&P Global Ratings maintained its ratings for PZU and PZU Życie at a consistent, high level of A- with a stable outlook. The PZU Group's strong financial position has allowed it to meet its capital policy for disbursement of dividends in 2023. Under the decision of the Shareholder Meeting, more than PLN 2 billion has been allocated for this purpose. In 2023, the PZU Group achieved very solid financial results, closing 2023 with a net profit of nearly PLN 5.8 billion, which implies a very good outlook, both for further stability and strengthening the potential for dividend payments.

Business development

In 2023, gross insurance revenue rose to PLN 26.9 billion, mainly due to an increase in sales of non-life

insurance. The development of key strategic areas has also significantly strengthened the scale and scope of activities in the areas of health and investment services. PZU Zdrowie's revenues rose 25.9% year-on-year to PLN

1.6 billion, and the number of active health contracts in the Group exceeded 3.4 million. The network of PZU Zdrowie's medical facilities was consistently expanded. Last year saw the launch of multispecialty medical centers in Gdynia and Kraków, the commissioning of new imaging diagnostic labs in Gdańsk, Białystok, Poznań, Toruń and Kraków, and the acquisition of the Medical

Center in Gorzów Wielkopolski.

In the investment pillar, the level of external client assets managed by TFI PZU and OFE PZU increased by PLN 13.9 billion to PLN 54.8 billion at the end of 2023. As part of developing the offering, two more funds were launched that are part of the sustainable investment trend. The first one focuses on shares of companies whose activities contribute to the UN Sustainable Development Goals (SDGs), including tackling climate change and its negative effects. The second one focuses primarily on bonds issued to finance projects pursuing environmental or social goals. Both funds are compliant with Article 8 of the SFDR Regulation, meaning that they promote environmental and social aspects through their investment policies.

Digitization

Inflationary pressures continued to be the main challenge in maintaining high operational efficiency. Therefore, the implementation of digital solutions continued in 2023, and in the long term, they will contribute to maintaining client loyalty by making it easier to serve clients, as well as to reduce costs. These

innovative solutions are based on advanced analytics, the use of big data and robotics. In 2023, nearly 1500 ideas and start-ups were analyzed in the Group and in the end 9 pilots were launched. They included solutions to support actuarial processes, claims and benefits handling processes, the corporate sales area, as well as processes to improve the visibility of PZU's sales network in digital channels.

Climate challenges

The financial sector, including the insurance industry, plays an important role in the energy transition, the biggest challenge for the Polish economy in the coming years and decades. The PZU Group is aware of its responsibility in this area. In 2023, it has increased its commitment to investments supporting the transition to nearly PLN 2.65 billion, including PLN 417 million for financing onshore wind farms. The target annual production of turbines, to the construction of which the Group has committed, should provide green electricity for over 800,000 households in Poland.

As the dynamics of climate change increase, so do regulatory requirements in the process and reporting areas. As of 2025, the PZU Group will be subject to

a regime under the CSRD Directive; this regime raises the profile for activities such as the climate neutrality strategy, decarbonization strategy, design of pro-climate products and services, and implementation of processes based on a circular economy. In practice, this means aligning product portfolios, offerings and resources with the opportunities presented by the sustainability agenda. In the PZU Group, these processes will require the mobilization of more and more resources, and will also intensify involvement at all levels of management and