Sensitivity to risk

Risk pertaining to financial assets

The table on page 137 summarizes the results of analysis of the sensitivity of the PZU Group’s net financial result and equity to changes in interest rate risk, foreign exchange risk and equity instruments price risk. This analysis does not take into account the impact of changes in interest rates on the insurance agreements presented in the liabilities or the investment contracts and receivables of bank’s from its clients and loans to customars.

Financial assets exposed to exchange risk include deposit transactions and debt securities used to hedge payments from technical provisions denominated in foreign currencies, exposures to equity instruments quoted on stock exchanges other than WSE, investment fund units and certificates, exposures to derivatives denominated in foreign currencies and financial assets of consolidated international insurance companies.

Risk pertaining to technical rates and mortality

In the table on page 139, a sensitivity analysis is presented of the net result and equity to changes in the assumptions used to calculate the provision for the capitalized value of annuities. This analysis does not take into account the impact of changes in the valuation of deposits taken into consideration in the calculation of the provision on the net financial result and equity.

Banking activity

Interest rate risk

Interest rate risk is defined as the risk of the level of market interest rates exerting an adverse impact on the current result or the net present value of the Bank’s capital. When managing the interest rate risk in banking book, banks endeavor to secure the economic value of their capital while achieving their intended interest result target within the accepted limits.

The table below depicts the estimated change in the valuation of a given transaction/item as a result of a parallel shift in the yield curve from a given point by 1 basis point (BPV)

Foreign exchange risk

The fundamental measure of foreign exchange risk in both banks is the Value at Risk (VaR) model to designate the potential value of a loss on currency positions due to changes in exchange rates, while maintaining the assumed confidence level equal 99% and the period in which the position is kept.

This value is calculated daily for all areas responsible for risk taking and risk management, both on an individual and collective basis.