The management principles for credit risk arising from investing activity in the PZU Group are governed by a number of documents approved by supervisory boards, management boards and dedicated committees.
Credit risk exposures to respective counterparties and issuers are subject to restrictions based on exposure limits. The limits are established by dedicated committees, based on the analyses of risks associated with a given exposure and taking into account the financial standing of entities or groups of related entities and the impact of such exposures on the occurrence of concentration risk. Qualitative restrictions on exposures established by individual committees in accordance with their powers form an additional factor mitigating the credit risk and concentration risk identified in investment activities.
The limits refer to exposure limits to a single entity or a group of affiliated entities (this applies to both credit limits and concentration limits). The use of credit risk and concentration risk limits is subject to monitoring and reporting. If the limit is exceeded, appropriate actions, as defined in internal regulations, are taken.
Credit risk assessment of an entity is based on internal credit ratings (the approach to rating differs by type of entity). Ratings are based on quantitative and qualitative analyses and form one of the key elements of the process of setting exposure limits. The credit quality of counterparties and issuers is regularly monitored. One of the basic elements of monitoring is a regular update of internal ratings.
Risk units identify, measure and monitor exposure to credit risk and concentration risk related to investment activity, in particular they give opinions on requests to set exposure limits referred to individual committees.
Information on the credit quality of assets related to investing activity is presented in section 39.
Exposure to credit risk
The following tables present the exposure of credit risk assets to credit risk broken down by ratings granted by external rating agencies. Credit risk exposures arising from conditional transactions are presented as an exposure to the issuer of the underlying securities.
The tables do not include loan receivables from clients and receivables due under insurance contracts. This was because these asset portfolios are very dispersed and therefore contains a significant percentage of receivables from unrated entities and individuals.
| Credit risk assets as at 31 December 2022 | Basket 1 | Basket 2 | Basket 3 | POCI | Total |
| Debt securities measured at amortized cost – carrying amount | 91 428 | 208 | – | 10 | 91 646 |
| gross carrying amount | 91 515 | 236 | 24 | 63 | 91 838 |
| from AAA to A | 65 085 | – | – | – | 65 085 |
| from BBB to B | 1 959 | 141 | – | – | 2 100 |
| no rating | 24 471 | 95 | 24 | 63 | 24 653 |
| write-off for expected credit losses | -87 | -28 | -24 | -53 | -192 |
| Debt securities measured at fair value through other comprehensive income – carrying amount | 38 719 | 237 | – | – | 38 956 |
| from AAA to A | 30 380 | – | – | – | 30 380 |
| from BBB to B | 4 518 | 123 | – | – | 4 641 |
| no rating | 3 821 | 114 | – | – | 3 935 |
| write-off for expected credit losses 1) | -45 | -21 | – | – | -66 |
| Debt securities measured at fair value through other comprehensive income – carrying amount | X | X | X | X | 2 469 |
| from AAA to A | X | X | X | X | 1 313 |
| from BBB to B | X | X | X | X | 99 |
| no rating | X | X | X | X | 153 |
| assets at the client’s risk | X | X | X | X | 904 |
| Term deposits with credit institutions and buy-sell-back transactions – carrying amount | 9 884 | 129 | 126 | – | 10 139 |
| gross carrying amount | 9 885 | 140 | 136 | – | 10 161 |
| from AAA to A | 575 | – | – | – | 575 |
| from BBB to B | 1 437 | – | – | – | 1 437 |
| no rating | 7 852 | 140 | 136 | – | 8 128 |
| assets at the client’s risk | 21 | – | – | – | 21 |
| write-off for expected credit losses | -1 | -11 | -10 | – | -22 |
| Loans – carrying amount | 4 269 | – | – | – | 4 269 |
| gross carrying amount | 4 300 | – | – | – | 4 300 |
| from BBB to B | 170 | – | – | – | 170 |
| no rating | 4 130 | – | – | – | 4 130 |
| write-off for expected credit losses | -31 | – | – | – | -31 |
| Derivatives | X | X | X | X | 16 197 |
| from AAA to A | X | X | X | X | 4 394 |
| from BBB to B | X | X | X | X | 670 |
| no rating | X | X | X | X | 11 113 |
| assets at the client’s risk | X | X | X | X | 20 |
| Reinsurers’ share in claims provisions | X | X | X | X | 2 429 |
| from AAA to A | X | X | X | X | 2 129 |
| from BBB to B | X | X | X | X | 16 |
| no rating | X | X | X | X | 284 |
| Reinsurance receivables | X | X | X | X | 54 |
| from AAA to A | X | X | X | X | 31 |
| no rating | X | X | X | X | 23 |
| Total | 144 300 | 574 | 126 | 10 | 166 159 |
| Credit risk assets as at 31 December 2021 | Basket 1 | Basket 2 | Basket 3 | POCI | Total |
|---|---|---|---|---|---|
| Debt securities measured at amortized cost – carrying amount | 73 828 | 346 | – | 9 | 74 183 |
| gross carrying amount | 73 897 | 354 | 35 | 39 | 74 325 |
| from AAA to A | 60 350 | – | – | – | 60 350 |
| from BBB to B | 1 242 | 35 | – | – | 1 277 |
| no rating | 12 305 | 319 | 35 | 39 | 12 698 |
| write-off for expected credit losses | -69 | -8 | -35 | -30 | -142 |
| Debt securities measured at fair value through other comprehensive income – carrying amount | 44 788 | 251 | – | – | 45 039 |
| from AAA to A | 35 806 | – | – | – | 35 806 |
| from BBB to B | 5 117 | 127 | – | – | 5 244 |
| no rating | 3 865 | 124 | – | – | 3 989 |
| write-off for expected credit losses 1) | -54 | -26 | – | – | -80 |
| Debt securities measured at fair value through profit or loss – carrying amount |
X | X | X | X | 2 466 |
| from AAA to A | X | X | X | X | 1 142 |
| from BBB to B | X | X | X | X | 171 |
| no rating | X | X | X | X | 145 |
| aktywa na ryzyko klienta | X | X | X | X | 1 008 |
| Term deposits with credit institutions and buy-sell-back transactions – carrying amount | 5 501 | – | – | – | 5 501 |
| gross carrying amount | 5 502 | – | – | – | 5 502 |
| from AAA to A | 796 | – | – | – | 796 |
| from BBB to B | 519 | – | – | – | 519 |
| no rating | 4 167 | – | – | – | 4 167 |
| assets at the client’s risk | 20 | – | – | – | 20 |
| write-off for expected credit losses | -1 | – | – | – | -1 |
| Loans – carrying amount | 3 517 | 69 | – | – | 3 586 |
| gross carrying amount | 3 522 | 75 | – | – | 3 597 |
| from BBB to B | 150 | – | – | – | 150 |
| no rating | 3 372 | 75 | – | – | 3 447 |
| write-off for expected credit losses | -5 | -6 | – | – | -11 |
| Derivatives | X | X | X | X | 8 328 |
| from AAA to A | X | X | X | X | 6 632 |
| from BBB to B | X | X | X | X | 882 |
| no rating | X | X | X | X | 782 |
| assets at the client’s risk | X | X | X | X | 32 |
| Reinsurers’ share in claims provisions | X | X | X | X | 1 399 |
| from AAA to A | X | X | X | X | 1 192 |
| from BBB to B | X | X | X | X | 8 |
| no rating | X | X | X | X | 199 |
| Reinsurance receivables | X | X | X | X | 63 |
| from AAA to A | X | X | X | X | 35 |
| no rating | X | X | X | X | 28 |
| Total | 127 634 | 666 | – | 9 | 140 565 |