8.3 External capital requirements

Equity management involves, among others, monitoring of the insurers’ key solvency parameters, such as the level of own funds and the degree to which such funds are sufficient to cover the required solvency margin and the guarantee fund. The International Financial Reporting Standards do not lay down principles applicable to calculation of the required solvency margin or own funds covering the above margin.

Pursuant to the Act on insurance activity, insurance companies having their registered offices within the territory of the Republic of Poland are obliged to have own funds in the amount not lower than the required solvency margin and the guarantee fund.

In order to determine the value of own funds of PZU, the Company’s assets are reduced by the value of intangible assets, deferred tax asset, assets allocated to settle all expected liabilities as well as shares held by the Company and other assets used to finance the equity of insurance companies operating within the same insurance capital group. The value determined in the above manner is adjusted in proportion to the shares held by PZU by the total surplus or shortage of own funds of the controlled insurance companies over their solvency margins.

The principles for calculation of the required solvency margin and the minimum value of the guarantee fund have been laid down in the Ordinance of 28 November 2003 on the manner of calculation of the solvency margin and the minimum amount of the guarantee fund for insurance sections and classes (Journal of Laws No. 211 of 2003, item 2060 with subsequent amendments, the “Solvency Margin Ordinance”).

Calculation of own funds and solvency marginal includes financial data in accordance with PAS.

Presented below is the calculation of own funds covering the required solvency margin of PZU.

Calculation of own funds to cover the required solvency margin31 December 201331 December 2012
PZU equity 12 259 761 13 452 581
Intangible assets (244 582) (129 729)
Value of shares in insurance companies operating within the insurance capital group of PZU (4 565 872) (6 847 006)
Deferred tax asset (347 521) (309 132)
Effect of other insurance companies operating within the insurance capital group of PZU on the value of PZU’s own funds: 2 403 826 4 789 418
PZU Życie 100.00% 2 407 872 4 808 768
Own funds 4 184 609 6 551 153
Required solvency margin 1 776 737 1 742 385
Surplus of own funds to cover the required solvency margin 2 407 872 4 808 768
UAB DK PZU Lietuva 99.76% 7 931 2 769
Own funds 48 438 38 550
Required solvency margin 40 488 35 774
Surplus of own funds to cover the required solvency margin 7 950 2 776
UAB PZU Lietuva Gyvybes Draudimas 99.34% 6 608 7 201
Own funds 21 996 22 873
Required solvency margin 15 344 15 624
Surplus of own funds to cover the required solvency margin 6 652 7 249
PrJSC PZU Ukraine 100.00% (13 094) (15 721)
Own funds 10 554 5 987
Required solvency margin 23 648 21 708
Surplus/shortage of own funds to cover the required solvency margin (13 094) (15 721)
PrJSC IC PZU Ukraine Life Insurance 100.00% (5 491) (13 599)
Own funds 9 557 2 025
Required solvency margin 15 048 15 624
Surplus/shortage of own funds to cover the required solvency margin (5 491) (13 599)
Own funds of PZU 9 505 612 10 956 132
Required solvency margin of PZU 1 362 353 1 343 831
Guarantee fund of PZU 454 118 447 944
Surplus of own funds to cover the required solvency margin 8 143 259 9 612 301
Surplus of own funds to cover the guarantee fund 9 051 494 10 508 188