4.8 Calculation of provisions for employee benefits

Provisions for retirement and death benefits (as described in Section 28) are estimated using actuarial methods with the application of appropriate actuarial techniques and assumptions.

Actuarial assumptions

The table below presents the key actuarial assumptions made for calculation of provisions.

Key actuarial assumptions made for calculation of provisions for retirement benefits31 December 201331 December 2012
Discount rates, including:    
- PZU and PZU Życie in accordance with the bond yield curve 1 3.7% 
- other PZU Group companies 2.0%-4.5%  1.0%-5.0% 
Anticipated pay growth rates, including:    
- PZU and PZU Życie 3.0%   3.0% 
- other PZU Group companies 1.5%-3.0%   3.0% 
Mortality rate, including:    
- PZU and PZU Życie PLET 2  PLET 2 
- other PZU Group companies PLET PLET 2 
Employee turnover ratio, including:    
- PZU and PZU Życie applicable to the company 3   applicable to the company 3 
- other PZU Group companies 0.0%-10.0%  0.0%-13.0%
Disability rate (entitlement to disability benefits), including:    
- PZU and PZU Życie 00.2%   00.2% 
- other PZU Group companies 30%-60% PLET 4  30%-60% PLET 4 

1) The yield curve for zero-coupon Treasury bonds used for discounting the provisions for employee benefits at PZU and PZU Życie as at 31 December 2013 covers the period from 2014 to 2044, assuming increasing values for the range until 2031 (2.68%-4.87%) and subsequently becoming an inverted yield curve decreasing to the level of 4.61%.

2) The mortality rate adopted at the level specified in the Polish Life Expectancy Tables (PLET) (for both men and women), published by the Central Statistical Office (GUS).

3) The employee turnover ratio has been calculated based on ongoing observation of employee turnover. The ratio differs depending on the employee’s age, length of service and pay. Some PZU Group companies do not take the aforementioned ratio into account.

4) The disability rate represents a relevant percentage of the above mortality ratio. Some PZU Group companies do not take the aforementioned rate into account.

Sensitivity analysis

Effect of changes in actuarial assumptions for retirement and death benefits on the related provisionsRetirement benefitsDeath benefits
Discount rates    
- increase by 1 p.p. (1 505) (1 953)
- decrease by 1 p.p. 1 863 2 328
Anticipated pay growth rates:    
- increase by 1 p.p. (614) (1 061)
- decrease by 1 p.p. 965 1 430
Mortality rate:    
- increase by 10% (164) 1 707
- decrease by 10% 167 (1 736)
Employee turnover ratio:    
- increase by 10% (214) (457)
- decrease by 10% 224 479