Powszechny Zaklad Ubezpieczen SA (PZU) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm very pleased to welcome all of you, who've decided to come to our headquarters and listen to what we have to say about 2019, especially Q4, as well as -- I'd like to thank and welcome those of you who are with us through the webcast because of the very special circumstances, which don't require any additional explication. We're dealing with a special health-related situation. We are also implementing greater precautionary measures. At PZU, we have a crisis staff. And so today, I'll be here alone without the CEO to present to you the results and walk you through them. Of course, the results for 2019. What would I like to begin with? Well, this was a special year because the PZU Group could brag about reaching new records both in regards to sales as well as profitability. So the gross -- so the result attributable to holders of the parent company, which is subsequently up for distribution and reaches our shareholders in the form of a dividend. But if we begin with sales, it is just as in the case of our net result, this is the highest year with the highest sales we've ever generated as PZU, PLN 24.2 billion gross written premium on a very demanding market, difficult market. So since 2015, we've seen declining -- declines and negative growth rate in motor TPL. And so if we look at the life side things, too, so we -- and we'll speak about this many times, we've been able to grow both in life and in nonlife. So especially in non-motor business, we've seen growth rates that are substantially above the market. If we look at the data for the first 3 quarters of last year, we can say that the market had a growth rate of a number in the teens, whereas we were somewhere in the 30s. So if we look at life insurance, our market share is on the rise because of growing sales in group and individual business. What we're pleased by is we're speaking not only in superlatives about our core products. We're talking about individual sales, which is growing both in traditional channels. We're also revitalizing our own sales network. We have more and more agents working with us. We're also growing through bancassurance. And as a result of this cooperation, we can claim that we have the highest amount of protection, individual sales and across the board in individual insurance sales. So we can say that health sales have been very vibrant. We have good results in our foreign operations. Looking at gross written premium, we see growth year-on-year of 11%. These are things that we could really speak about. So basically, in every single dimension of sales, we've got very robust growth. This has translated into high levels of profitability. And so if you look at the results attributable to the holders of the parent, it's PLN 3.295 billion. This is the highest result we've generated in the history of PZU as a listed company, as a public company. And this is a result we've been able to achieve, thanks to very high level of underwriting profitability in nonlife business. So our combined ratio was 88.4%. So this is a result which is substantially below our strategic objective. So if we look at the combined ratio in Q4, it's under 85%. And all of this means it has a contribution to our consolidated result. The same is true of our life business. We've had a very good and high level of profitability, thanks to the low loss ratio. In group and individual continued business, thanks to a growing contribution made by our income through insurance portfolio. So if we look at how that -- the results of that portfolio have contributed, it's more than 20% year-on-year. So this is a real reason to be proud. A third area that was particularly positive, if we look at our results, this is our main portfolio. Let me remind you that our strategic objective was half -- a couple of percentage points above the risk-free range. So we've beaten that record in terms of the full year. So it's 250 basis points, whereas in particular in Q4, because we were in -- came in at 270 basis points, that means year-on-year we've been able to show you, and we're proud of the portfolio, which has behaved in a very predictable manner. And this means that quarter-on-quarter, we've been able to generate better results. If we look at our costs, we're strongly under control. We also have our costs under a lot of wage pressure. If we look at Q4 costs, we had a positive impact. I will tell you in just a moment. We have an additional provision for the historically high results. So we gave our employees a profit-sharing scheme. So in 2019, so our result was historically high, especially in the nonbanking area. And that means that we have a reason to remunerate all of those persons who have contributed to generating such a high result. So we have a very strong capital position. So our solvency ratio is 220%. What else is important is that this ratio already includes a certain type of estimate about cash flow capital that will be paid out within the next 12 months. As you are fully well aware, one of the main flows in this period is the dividend. For the purposes of this presentation, we've already made a calculation under which we've assumed that the dividend will be paid at the level of the upper limit within the range for the dividend. This is -- 50% and 80% is the range, let me remind you that. But this of course is not an indication of what sort of dividends we should expect to announce and propose to the shareholder meeting in terms of what we want to distribute for 2019. Basically, this is just a method for the purposes of this discussion, that even if we make such high payout and having in mind the credit situation we're dealing with linked to coronavirus, and looking at our insurers, we're capable in every instance to regulate and discharge all of our payouts linked to the assets that have been entrusted to us and the protection of life and health as well as our investments. So these results that are so high, ladies and gentlemen, are not work of happenstance. It's a matter of who we work with, what sort of working conditions we create, and it's all about the group that PZU is. So in 2019, if we look at the engagement research, PZU has beaten its own record, but we've even gone counter to the market. So if you look at employee engagement, commitment, we see the companies on average have seen a downward trend, whereas PZU in this period has been able to ratchet up that employee engagement by 11 percentage points. And so we had some 85% turnout or participation. So if you look at the satisfaction of employees, it's growing across the board. So cooperation with management board, balance, so -- engagement, all of these factors are positive, and that means we're able to share with you good information about the results of this engagement. We're able to create a job, place -- a workplace that attracts the best people. Of course, there are challenges here. And this is a place where, thanks to these challenges, we're enabling -- we're able to share the profits and share the profits with our shareholders as well is in place. So I won't go through all of the things linked to digitalization. We continue to do myPZU. This is not just the client platform: It's a platform for communication between sellers and the company. So digitalization of a lot of processes is underway. And then we have the cash service, which enables us to increase retention of corporate clients. So it's an additional service addressed to our clients, both in the life and the nonlife business. And so they in turn can offer their employees attractive conditions for loans in cooperation with Alior Bank. And so together with Alior Bank, we've put together the solution. And this is one of the elements, a non-salary-related element, is a type of benefit where our corporate clients can make this proposal to their employees. The solution has enjoyed quite a bit of popularity. So it's a classic situation in which we're able to achieve additional benefits by cooperating with members of the group in the form of the events. So we're going through digitalization or automating processes. We continue to invest in life and health protection. We have PZU GO. We also have a telemedicine office, doctor's office, whereby our clients can, on their own accord, run tests. And if they're disturbed by something, they're able to contact with a medical adviser. Then we have this Band of life, which is quite important amongst our clients, senior citizens, to monitor their vital signs. And so if there is a major deviation, this would generate an alert or a notification for a caregiver. So this talks about the mission that the PZU Group has, not only in the financial dimension related to that. We've achieved a number of distinctions and awards. I won't walk through that, but we've received a lot of awards and distinctions. We're working together with start-ups in order to offer these very innovative solutions. If we look at the market itself, as I've mentioned, the market was capricious, was demanding. We've seen declines in motor business, especially motor TPL, in 2019. This was a year in which the market faced a lot of negative growth rates because of the downturn in prices that's been going on for some 2 years. So this sort of came to an end more or less the turn of 2 -- second and third quarters, then we saw the trend, which is flattening. And at the end of the Q4, we saw that there were increases in prices. And this also contributed to growth in gross written premium in PZU, and this also improved the attractiveness of PZU vis-à-vis the rest of the market. So the market has grown in non-motor business. We've grown much more quickly than the rest of the market, as I mentioned previously in Q3, to maintain comparability. We grew by 21%, the market by 16%. So motor business, even though there was a lot of price pressure, was characterized by rising costs of handling claims, and this led to squeeze on margins. We were able to do well with these factors. Especially if you look at individual clients, if you look at our results, if you look at the combined ratio, you can see the year-on-year, we're talking about the same level of profitability, which is a major accomplishment. Having in mind all of the factors, opposing factors, we've seen higher costs, cost of damages as well as wage pressure. So if you look at nonlife insurance, non-motor, we've got pretty decent profitability. This is something that we've accustomed to you in Q4. We're below 80% in the mass segment, net of mass events. We're under 75% in the corporate segment, with early 80s. So all of this translates -- and having in mind the higher premiums, this means that we've been able to generate even more robust results on the overall portfolio. If we look at the life business, the situation is as follows: The market is shrinking by more than 3%. If we look at the most recent available data for Q3, we've grown by more than 2.5%. So our market share as a result is on the rise. It's on the rise. Our share of the profitability of the market is also on the rise. So we're about 50%. We're growing in growth -- group business on a very flat market. This segment has grown by PLN 86 million only. Our participation is PLN 35 million. We're growing in the individual business, in traditional channels and in bancassurance channel. So that means -- so with the market that's fallen by some 6 percentage points, this is a pretty big achievement to have maintained our market share at the level we have. Where are we growing and why are we growing? And what has impacted profitability? If we look at the group business, we continue to work on adding health riders to the portfolio. More than 2 million clients in group business have relations in the health segment. We also have this orthopedic injury rider. So our offering, our health offering, and this is being confirmed from the point of view of its attractiveness. And we see that the takeup amongst our life clients is quite vigorous. We're growing in group business through riders to individual continuation. We see higher contributions to employee pension schemes. We're the market leader here. So as unemployment has fallen, wages have grown, we've benefited from these flows. We're able to manage the loss ratio in a controlled fashion. Year-on-year, loss ratio hasn't changed, 66.5% and 66.7%. So that's the difference year-on-year. We -- quarter-on-quarter, we see a slight deterioration in profitability, but there is a certain amount of seasonality with Q1 and Q4 having noticeably lower profitability ratios, whereas the summer periods offer higher profitability. So this is also affected by cost inflation, especially admin costs. I've already indicated that this growth is largely linked to some of the provisions to pay out bonuses, as I've indicated previously. If we look at individual business, we have record-breaking sales of protection products, so we're at the highest level. Year-on-year, we've grown by more than 24%. We're also growing strongly in terms of our investment products sold in cooperation with banking entities, not only banks belonging to the group, but also Bank Millennium and ING. So we've seen a lot of incoming contributions. New investment programs are being run. The margin has expanded as a result, as we see sales growing, this segment has contributed to consolidated financial result, a 20% increase. So this is smaller margin, but that's as a result of the changes in the product mix because we have some more investment products with a lower margin that in particular were sold in Q4 2019 and there was quite a bit of purchases there in Q4 2019. If we look at the health area, health products, we've talked about this many times, we have some key acquisitions like the imaging diagnostics sector, Tomma Group. So we want to offer health across Poland for customers to have access to our services whether or not we're in Warsaw, Poznan, Cracow or any other city or community in Poland. So having in mind these imaging diagnostics, we'll be able to benefit from vertical integration and what happens with the margins there. So not only on the side of risk management, but also on the service. So by managing that, we're going to be able to prepare attractive offer for our customers. So if you look at the health business and the figures there, so 130 own centers, we have 2,200 partners. We have some 50 hospitals, a large number of specializations, 8,000 pharmacies and 4,000 physicians. So this service has become basically a universal service. If we look at the magnitude of our business, it's grown quite a bit, measured by top line. If we look at the number of contracts also, so insurance on the products -- health products are offered in each one of our product factories. It's not just PZU Life or PZU Health, but also PZU SA, Link4 and our mutual are offering this. So we want to deliver our offer, our health offer, to our customers regardless of where they have the original point of interaction with the PZU Group. So we see steady growth in the health business. We're also working strongly on costs, and this has contributed to the profitability. So let me talk about a couple of metrics. We're able to manage patient flow. So we want to send patients to, of course, our own centers or cooperating entities. That's for the 50%. So that means we're able, different from the market, to grow having in mind the inflation of medical services. So in the market, it's 7% inflation. We've had a single percentage point of inflation. So that means the profitability in the segment and the profitability of the other -- of the whole group is on the rise. So the bulk of the revenue is in our own center with a lower inflation rate. If we look at the percentage of customers, patients, we are able to handle during the first visit, that's more than 50%, we're able to manage well the no-show ratio. So that means we have a patient booked, but patient doesn't show up. And so since we can manage that, this contributes to higher profitability in excess of 10%. If we look at asset management in turn here, last year, we can say, was offered attractive yields to our customers especially in our core products. So the Polonez and debt fund, our active fund, we had the highest rates of return in its peer group. We had a large amount of incoming contributions. We had the new EPS, employee pension scheme programs. We had 200 almost new programs and our customers consider this to be an attractive addition through their program. If we look at our PTE business, even though we had the negative impact of the slide, we have good cooperation with the banks, so this is giving a positive contribution. So our percentage of bancassurance is growing. So it's grown by 4.5 percentage points. We're increasing our share, not only in terms of investment products, but also, above all, through protection products in life, nonlife business, and this means we have very high rates of return. We're continuing to grow in insure banking. We offer the accounts of our banks in our own branches, in the contact center. We've also launched the cash loan platform I mentioned to you previously, and we're also trying to penetrate the portfolio of our banking partners in terms of collateral for loan repayments. And so this is something that still -- it's rather a little penetration ratio. So these are things that are being selected by customers. Having in mind what's happening across the country, across the world, 24 hours a day and all of various things and opinions on that subject, what's the impact on our results? Sales have grown dynamically more than 7% till 8%; quarter-on-quarter, nearly 20%. If we break that time into segments, we have the following: Looking at mass segment, as I mentioned previously, we have a small correction for TPL. Motor own damage has grown strongly. We can see that there is motor own damage vis-à-vis motor TPL as a result of the changes in the mix of cars. And we have more younger cars, which aren't financed with own funds but with loans, and that means that both forms of insurance are taken out. We're growing very clearly in other mass products. So the seasonality of crop insurance and then the fall campaigns and the impact they've had, if you look at TPL in Q4 quarter-on-quarter as well as motor own damage have grown, this is a confirmation of what we said previously that there is a change in the trend -- trends, both with respect to price and we see the initial symptoms of a rebound. This is something we've mentioned. This is something that's happening slowly but visibly and is having an impact on Q1. If we look at the corporate segment, year-on-year we see declines in both motor own damage and motor TPL. So last year, in Q4, overall market had the pressure because of the tax incentives for these contracts back in 2018. So we benefited from that growth. So we've had sales of PLN 270 million, and so far they're not representative and so we have comparable levels. So we see now quarter-on-quarter, this is pure growth. And this is a statement of the continuation of growth in subsequent quarters, Q1, Q2. If we look at other products, Q4, that year, we had several contracts with a high unit value. We had several contracts that have a bigger level of reinsurance, where, on one hand, we benefited from being a leader of co-insurance arrangements, and we were able to realize a reinsurance premium and commission, which doesn't have any risk attached to it. And what I'm saying here shows the strength of the PZU brand, and how we're able to act outside of the motor business, and we were able to grow here in Q4. If we look at our life business, we're up by more than 7% year-on-year, 3% quarter-on-quarter. We've discussed this already, group growth has been moderate to control profitability. In individual business, we have very strong growth across all channels. So as we've said, we're revitalizing our network here. So we have projects like [ Network++, ] and that means we're able to rebuild -- regain levels of sales we had prior to 2015. We also see the added impact of sales in the foreign operations. Let's look at our potential, and then I'll go through the results. Today, we're talking about a group -- a financial group and a financial conglomerate, which has an ability to generate some PLN 3.5 billion in profit, so outside of nonrecurring events. So if we look at the Court of Justine of the European Union judgments that affected banks and the PZU Group as a result, we had to set up additional provisions as a result. And then we had very strong growth in the fees paid to the banking guarantee fund. So let's think about how they've impacted our consolidated results. That's more than PLN 250 million impact. So if we were to add that to the reported results, that means we would have a normalized result in excess of PLN 3.5 billion. If we look at our income statement, we've already talked about the top line. If we look at -- claims and benefits were quite low in Q4, so loss ratio was below 58%. In life, center control had 66.5%, basically on the same level year in, year out. As a result, in Q4 we benefited from all of these changes, and we were able to recognize a combined ratio of slightly under 85%, which is substantially below our strategic objective. And so on a full year basis, we are below 90%. Another thing that pleases us is the cost of distribution, but they're growing at a pace much lower than the top line both year-on-year and quarter-on-quarter. So even though we're selling more and more products that are more profit in non-motor, nonlife business, where we have a broker representing our clients, for example, and where the broker receives a fee, a double-digit fee for the broker fee. Despite that, we see costs growing at a pace lower than the top line, top line being gross written premium. We also see growth in admin expenses. But as I mentioned previously, this growth is primarily driven by staff costs, so wage hikes for those persons who should have an increase as a result of some of the changes that took place last year. On top that, we have some incentive programs, especially in PZU SA, PZU Life. So this has been achieved even though the banking segment had a much smaller contribution. So the structure of the result is -- the composition is that the banking segment has a smaller portion of the contribution. And so that means we have an additional provision, and we're giving a variable bonus to our employees. That's why we have that provision, additional provision. So if we look at our main portfolio and our investment performance, investment result, we have a very good result, 270 basis points above the risk-free rate in Q4. 250 basis points for the full year. That's a wonderful and evolutionary result. And having in mind what's happened in 2019, we've been able to build a portfolio where its attribute was to be -- and we were successful in doing this. Its attribute is to have a lot of resistance to the various negative volatility factors, even ones linked to the coronavirus. So today, we're benefiting from having a portfolio that is very durable and resilient, having in mind the duress experienced by the financial markets, fears of slowdown or recession, and things that we talk about in terms of stock exchanges and, generally speaking, equities. We've talked about admin expenses. We have that growth in Q4 primarily, as I said, because of salaries. To a lesser extent, because of regulatory costs. We see that there are more and more requirements that the external world is placing on us, [ GDPR ] now a new standard of insurance, and so this is fairly costly. And so we have to meet certain regulatory requirements, and we have to do it with a large amount and that means that our costs have increased. So real estate maintenance expenses, we have a big increase in the prices of utilities and also some modernization of buildings to make sure that we can continue to operate. And our buildings is on the final slide in this portion of the presentation. So solvency is at a very high level. And we also show what the capital strength of the group would be at. We not included, of course, the dividend payout expectation. So basically we see that we're able to react very strong with what's happening on the market because that shows the solvency ratio would be ranging between 220%, 240%. So execution of the strategy, this is a pretty special year. We've broken a lot of our own records. We had a lot of personal bests. So the execution of the strategy shows that the strategy and the recipe that we have for PZU were sensible, and that's why we're able to speak the way we're speaking at present. So starting with nonlife insurance, we're a little bit below our target, which was our ambition. But thanks to the fact that we've not participated in price wars, which were underway for nearly 2 years. We are able to show you very decent level of profitability with a higher retention of the portfolio than originally anticipated. The admin expense ratio is only slightly above the long-term target in the life business. We're a little bit below, measured by the number of clients, but we're above the long-term profitability in our core product, which is group and individual in continuation. We've already talked about the solvency ratio coming in at 220%. And then we have assets, third-party assets under management, basically on target for the target for this year. But if you look at the fact that up until now we've not been successful in market consolidation of asset management, the transactions that took place on a market we believe took place at an unjustified premium, wasn't justified by the decrease in asset management fees. So there is a delta against that long-term ratio target we had in mind. Even though there is that delta, we're more cost effective in this asset management segment. So it's making a bigger contribution than we originally planned, with a high surplus of the main portfolio profitability. So health has experienced strong growth. So we had PLN 1 billion at the end of the year. We have a profitability that's double-digit, in excess of 10%. The banking segment where it is spent at the end of the year because of provisions, because of the judgments handed down by the Court of Justice of the European Union, and we saw declines in that segment's contribution to the consolidated result. Despite that, however, we can say that we've generated the highest result. We have a profitability in excess of 21 percentage points. There is -- so this is one of the highest results, not only in PZU but if we look at any and all financial groups in this part of Europe. So the last slide in this part of the presentation looks at coronavirus and some of the questions we've encountered in terms of the level of preparation in our portfolio, and how susceptible we are in terms of sales results, in terms of what we see happening on the street. So if you look at nonlife, then life and then health insurance and then investment portfolio, a good sequence. If we look at business interruption insurance, so people being sick and then companies not being able to produce and not having staff, this coverage is triggered by a loss event. So there has to be a fire or water damage. So our exposure here is very limited in respect to coronavirus. If we look at contractual guarantees, bonds, there could be an impact of this insurance because of delayed execution of contracts. So if the situation occurs, then we'll take on those liabilities and discharge our duties there. If we look at other products like general TPL insurance, medical TPL, D&O insurance or any other TPL products, where we have some sort of civil liability of our customers vis-à-vis their customers or some contractors because of business interruption or something like that. I would like to emphasize here very strongly that we don't have any exposure in terms of insurance guarantees for tour operators. There is a period of time when we wanted to be strong in that segment. But after we had some pretty negative experience there, we decided to exit that market. So our exposure here is very moderate. From the point of view of life and health, we have to be aware that we see more traffic in our medical centers. We have a hotline. We have more or less 4,000 people a day calling in with questions about coronavirus. But this is nothing that would affect costs or profitability. We're looking at building models, what the mobility ratio might be in Poland. As we examined, what's happened in China and Italy, so I hope that thanks to all of the measures, preventive measures being taken at children not attending school, that we have much less movement on the streets. But we have a lot more remote work. Also in PZU, we have remote work and then we have rotational work. Some people have been separated. So we have sort of 2-week replacement systems. We want to eliminate or reduce the risk of sicknesses. So since in Poland, we've introduced preventive measures fairly early, we're seeing less negative impacts than -- effects than we would have seen from some models. So we hope that the impact on the financial dimension will be much less. I don't want to provide any specific numbers, but what I can say is that we're prepared for a scenario that's more pronounced than the one we've been dealing with up until now, having in mind the time from the appearance of the first sickness in Poland. So if you look at our portfolio, the situation is totally under control. As of today, our exposure to instruments with higher risk was greatly limited compared to last year. So our exposure to equities, to debt, high-yield debt, is very small. So as a result, we don't anticipate any major negative impacts or defaults on our main portfolio. And I think that would be it in this portion of the presentation. I would propose now that we move on to the Q&A session. Primarily, these would be questions coming in from the webcast unless somebody in the room has a question. So if there is a question in the room, please, welcome.

I wanted to ask how about your outlook for motor profitability in 2020.

The improvement in prices at the end of 2019 would allow one to think about this segment having an upswing in profitability, yes. But we should also be aware what the mechanics will be in 2020. So for the first half of the year, we'll continue to recognize the effects of downward prices in the latter half of 2019, which took place because this has looked at the net premium level, and then we have the provisions at the end of the year. So the working premium as it would will recognize the growth that we were mentioning from the point of view of sales. So the actual premium that's working and the risk exposure, however you want to call this, would go through kind of a trough graph. So in the first part of the year, we'll continue to move downwards, and then we'll have a rebound in the latter half of the year.

My follow-up question, about the nonlife segment and non-motor business. I understand that the biggest question mark is related to the impact of the coronavirus on downtime in the economy. Is there some sort of major risk that the financial guarantees, contractual guarantees -- are these amounts -- that this quiet the management board in terms of 2020?

I have to respond to this question a little bit academically. It depends. It really depends on how deep of a slowdown or the recession we'll have. And also, we sold these products to some companies, and it depends to what extent they're going to be susceptible to this downturn because their employees aren't coming to work or maybe their subcontractors aren't able to deliver products, semi-finished products, disrupted supply chains and so on and so forth. So I'm not able to respond to this question. It depends on the magnitude. For now, we do not see any sort of inundation or heightened level of notifications of claims under sureties and guarantees. We should at the same time be aware that people are thinking of something else right now. And once that first wave of panic dissipates and people start going back to work and they start to understand where they are, when they see where their trading partners are, that's probably the point in time when we'll face that phenomenon. Right now I can only say we don't see that. We're monitoring this on a daily basis.

Which sectors of the economy have this exposure? Is there some dominant, prevalent sectors?

Since PZU is a universal insurance company, we could say that it goes across the board. But one sector with elevated risk where we've been able to constrict impact successfully, this was the construction sector and related services. And it's very good that our exposure in this industry has fallen. Another thing that we've successfully done over the last 1.5 years is reduce the average ticket. So from a point of view of concentration of individual expenditures, we've tried to limit our exposure. And then also, if we think about quality, we've resigned from risks that are in the Classes 4 through 7.

One more question. How about the coronavirus? I assume that PZU doesn't have reinsurance contracts for -- or treaties for pandemics?

No. We don't have that type of coverage purchased. We tried a long time ago to do some quotations, but these quotes didn't justify the purchase of that insurance because once the risk materializes, nobody will sell that. But the protection -- the coverage is so expensive that a better solution from the point of view of the simulations we have, looking at possible scenarios on the Polish market, economically does not justify to hold that type of cover. So now I understand that no other questions here in the room. So we'll take a look at the questions from the internet. How is it possible that you haven't written down goodwill on Alior Bank? And this is a question from Santander Bank. Well, ladies and gentlemen, it's true that Alior was purchased at a price slightly different from the current market price. It's true that since 2015 until today, the rules of the game have changed quite materially. So we have the fees to the banking guarantee fund. We have the additional provisions set up because of the big and the small judgments of the Court of Justice of the European Union. And this bank was purchased prior to the levy on financial assets and financial institutions [indiscernible]. And you can see how big that levy is in our financial statements. So we have an entity who's value based on the economics and the leverage is where we thought that we're going to be able to create value, while there has to be some sort of very strong reaching revision. We've been -- I believe, it's our duty in every single case, where the conditions of the game change, we should think whether or not we're going to write down goodwill on a nonchalant basis, where we are able to find the solution and remodel the stream of revenue. And basically that determines how the value is formed between PZU and Alior. We've to do it in such a way to ensure that we have a justification in totally different circumstances. And based on totally different foundations, which we utilized for the purchase of that bank in 2015, we'll think about whether or not we're able to deliver the value that's replicated by the average price and the goodwill that we're defending. So we felt that if Alior were to be a stand-alone entity, if we didn't have such a strong capital groups like the PZU Group, and if Alior didn't have access to our customers, so we have the cash platform here. For example, if Alior were not to have leased products and all the lease activity where we're working together with them on that, well then, in that scenario, such an impairment would have to be taken. I'm profoundly convinced that we've taken a totally different approach from the one utilized 5 years ago when, looking at that transaction, we're going to be able to monetize that position. So we've done an impairment test, but this test consists of 2 components. So looking at the bank on a stand-alone basis just the way analysts see your bank, customers see your bank, and how the minority investors see that institution and then how we see that institution, and looking at that second component where this has a value. In every other case, we would not be able to maintain that valuation in our measurement in our books. That's my response to your question. We're going to have to and this is how we've talked to the auditor: Go through a very scrupulous look at this plan and how the plan is being executed. Coronavirus is not going to be of any assistance here. We'll depend what other banks' plans will look like at the end of H1, where they're going to have to -- to another pit stop on that subject and think about the fact that we have an idea. Well, the question is, are we able to implement that idea or not at that phase? Are we effectively able to implement? That's the real question. Today, I believe that this is, I believe, in the latter part of my statements. There's another question from Santander about potential acquisition of mBank. I can only say which has already been said on the subject and promise you that as soon as we'd be able to share information with you, we'll do that properly, whether during a conference or through our current report today. I'm not able to say anything more. We've also talked about the consequences of the coronavirus. This was a question posted also by Santander Bank. And then we have another question from Autonomous Research. Whether or not I could dwell at greater length on the growth in other products for the corporate client. I could say more to the extent I can share information with you. The growth we see here is generated not by a single client. It would be hard to imagine such an exposure, business growth generated by several customers. It's not coal or things like that, but we, in our portfolio, have an 18-month transaction, which was renewed in Q4. So those of you who track us better, that's part of the response, that's not the entire response. These are risks primarily Class 8 and Class 9. So nonlife, partially it's TPL and general TPL. That's the product mix. These are policies that have a high level of reinsurance. If you look at Q4, and if you look at the full year, you'll see that in the corporate segment, reinsurance share has grown quite strongly. The second question is about the growth in prices in Q4 in 2020 in motor. I understand that I've already covered that question. Then there's the question about the investment portfolio from the point of view of profitability, of having a target of wanting to generate more than 200 basis points of return above the risk-free rate. I could add one thing here. We talk about whether this is sustainable or not. Today, this portfolio behaves very well, and we're above the strategic target even though we're dealing with this coronavirus-related situation. There's another question about the investment portfolio, about equities and the geographic exposure. I'm not able to give you the exact location, but I could say that today our equity portfolio is very, very, very small. Let me turn to the proper slide to reply to this question. Sorry, I'm not clicking same direction as where I'm looking. This is the composition of our portfolio. As you can see, equities -- listed equities account for a percentage point. Unlisted equities, similar exposures of a more strategic nature. That's 0.3. And so even without listed equities are measured mark-to-market. That's the entire exposure of forward and abroad. So as a result, we're saying that we have exposure of PLN 400 million or less at the end of the year.

Maybe one question on this slide. If we look at the result on investment products, it's a very good result. I understand there's some provisions, but what sort of exposures did you build this result on?

In Q4, it was primarily equities, still on equities. And in Q4 -- I'm talking about things that go beyond the normalized result. We have one debt portfolio, so interest plus measurements. So the biggest element that contributed with the property development premium. We are participating in investments in various stages of progress. And so if we invest primarily before real estate is commissioned, then we become a co-investor. And once the building receives an occupancy permit, we're able to recognize a growth and value between work in progress and a completed investment, and then tenants can move in. So this impact generates PLN 100 million. And so this made a major impact in Q4. So that was the property development premium. So the large number of questions about our portfolio, our investment portfolio. We've talked about equities. There's a question about our real estate, so shopping galleries, malls, residential. If we look at real estate, we are present in 3 segments: offices, shopping centers and logistics. Logistics represent a major portion. Why logistics? Because we believe, for a longer period of time, and we've got confirmation in our results that we'll observe more and more movement away from brick-and-mortar to e-commerce, and this requires support from large logistics parks, warehouses and also smaller logistics parks that can continue to deliver to individual consumers. So we're talking about the bigger and the smaller parks close to cities in order to deliver products. To the final concern. Here, we've been present for a longer period of time, and we've been doing well. What we would like to do, we'd like to rotate our real estate, which took place for the first time at this level in 2019. And that means we achieved that premium versus the valuation. Of course the next question is about the recommended dividend. Today we don't intend to make haste. So today I'm not able to give you any recommendation at this point in time. Can it be 80%? That's the question. So according to our policy, well, I would like to stick to what we said during the strategy presentation. When we announced the capital and dividend policy, if there's no transaction, if there are no needs to provide capital support through retaining earnings for organic growth funding, then we'll propose to the Supervisory Board and to the shareholder to make the upper range of the limit. And so this is something that's not going to change at all. What's the average duration of the treasury HTM portfolio and one that goes through equity? If we look at the duration of the HTM portfolio, we like for the duration to be adapted or aligned to our liabilities. As a result, this is that portion of the portfolio that gives a special protection to our technical insurance liabilities. So we try to adapt it or customize it to the greatest extent possible. We know it's very difficult to build that portfolio with a duration on average of 26, 27 years. So on auctions, we try to buy 30-year bonds and new sales take place with our current life products. If we're able to do that in a way that fully covers that risk with instruments, treasuries or money market instruments, duration is not the problem we face. The problem we face are historic levels of profitability in this portfolio, which over the next 3 years will come to an end quite in leaps and bounds. So we'll grapple with a lot of maturities of historical tranches. Everything will depend on where the market will be then. So how will we be able to replicate the current margin on the main portfolio in the future? I think that pretty much exhausts the response to that question. And there is a question about the dividend. We've already talked about the real estate activity. They may have -- we've already talked about being under 58%. So we didn't have any nonrecurring events taking place in Q4. So Q4, this is a very high level of profitability that was generated in a purely technical basis So it seems to me that we've responded to all of the questions posted through the internet. So there are no other questions here in the room. So I understand that we can go ahead and wrap up today. I'd like to thank you, ladies and gentlemen, for this opportunity to meet with you. Especially, I would like to thank those of you who have joined us in person. And so I hope that we'll be able to see each other at the next earnings conference. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]