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

Good afternoon, ladies and gentlemen. It's my pleasure to welcome you to the meeting to wrap up the financial results of PZU for 2020 and in particular, for Q4 of last year. As has been the case up until now, today's meeting will follow the classic path of discussing the main topics that we dealt with in Q4. I'll talk a little bit about business development. I'll sum up the financial results. And we'll say a few words about our accomplishments, how we delivered on the promises, the obligations that we had mentioned with respect to the group strategy in 2017 - 2020, and 2020 was the last year in that time span. So we'll begin with a discussion of the events and the drivers of the results in 2020. I'll try to walk through this portion of the presentation very quickly. I'm assuming that you know this quite well. But as we look at 2020 we can say that it was basically dominated by what was happening with the interest rates, both in the banking segment as well as in the main portfolio. So on one hand, we had a very atypical situation, a stressful situation in the banking segment where we had a lower interest income. Banks were adding provisions, they were taking impairment losses. On the other hand, we had a very resilient business model, in particular in the insurance segment. And as a result, since PZU does not consist of a single operating segment, we're wrapping up the year 2020 with very decent results. The reported result is PLN 1.912 million -- billion. If we were to look at the banking segment, we had an increase of 11%. But if you were to cleanse it of things that were directly linked to coronavirus or which were knock-on effects of the coronavirus, like the situation of the interest rates market, where we can say that the economy somehow responded to what we were grappling with and what we continue to grapple with, we could say that the result could have been better by 17% than the historically high result in 2019. So if you look at the insurance activity, we can see that we continue to grow our market share, especially in life insurance. We see more renewals, higher renewal rates, especially in the motor portfolio, good profitability. All of these things we delivered last year, we achieved last year. So perhaps I could quote a few numbers to illustrate this fact. If we look at the combined ratio, you can see that we have a similar level as last year's, so 88.4%. The margin in group and individual (sic) [ individually ] continued insurance for the 12 months, it's roughly 12%. It's 19.7% despite the fact that we had a gigantic wave of coronavirus in Q4, which led to excessive mortality in Q4 2020. Despite that, we were able to come out of this unscathed. And we've had good profitability on the main portfolio. All of this contributed to very good results. In the nonbanking segment, if we can use that type of terminology, where the return on equity, if it's adjusted for those one-offs, we can say that it was above 22%. So from this point of view, we can say that the strategy for 2020 was in fact executed. If we look at what's happening in Q4 itself, we have to say 2 things. The first one is that we have a very good combined ratio, quite low. And that means that non-life insurance was quite profitable. We ended Q4 with a figure of 87.6% combined ratio. If we look at the return on the main portfolio, it was 4.8 percentage points above the risk-free rate. This means that it's a very good result in that quarter. If we look at the life insurance. As I mentioned at the outset, we had a lot of pressure linked to the third wave, which had a negative impact on this segment. Let me remind you that the impact of these additional events which can be divided into 2 subjects: one, our claims or benefits paid and the additional provisions for unexpired risks. Well, in total, that impact is PLN 200 million and some PLN 50 million. So the combined effect is a little bit higher than the one that we had expected when we talked with you about our expectations regarding coronavirus when we looked at the results at the end -- after the third quarter. So if we take a look at the situation in sales and how the pandemic affected our top line. In the insurance segment, I think we can sum this up in the following manner. We had a demanding market, where we are grappling with a large number of restrictions, limitations, new business was limited. We had decline in the registrations of new cars, used cars; the behavior of our customers was highly conservative. We had sales at a level that was very similar to the level we achieved in 2019. So we can say the composition of the result is that, in the life business we're quite flat, whereas in non-life business, we saw a 3% dip. So we're also flat in foreign operations. So we have a mixed negative result of only 2% retraction, from PLN 6.7 billion to PLN 6.6 billion. So having in mind these circumstances, we believe that this result was very good. We continue to improve our presence on the marketplace, especially if we talk about life insurance, the life insurance market, which of course is under the influence of shrinking in investment business, investment products, especially single premium business. As you're well aware, we are not -- we don't have a large percentage of that product in our overall line of business. So we are growing here in terms of absolute figures, and we're continuing to grow our market share. If we look at the non-life business, we can say that there were price cuts -- I'll talk about them in a few moments -- stimulated by lower frequencies. So from the point of view of insurance, 2020 was a year in which the term "frequency" is utilized in many different radical cases. We had frequency of events, excessive mortality on the life side. On the other hand, we had lower frequencies, especially in Q2, 3 and 4 in non-life insurance, with special emphasis placed on motor insurance. So this is something that really shaped the overall marketplace last year. We see very strong growth in life insurance as well as in terms of our mutual fund management company, TFI. All of these things contributed to good results in terms of our nonbanking activity. If we look at our solvency ratio, business stability, we can say that we're close to what we talked about when we reported our Q3 results. So we have a very high level of solvency, 257%. And this is solvency at the end of Q3, we have a quarter lag in terms of reporting because of the calendar, the regulatory calendar. We have very great capital strength, and we have A minus -- we have a AAA capital strength rating, and we have A minus if you look at our -- with a stable outlook, having in mind what's taking place in the banks and the impairments that were taken. We have very good solvency ratio at the stand-alone basis and the investment portfolio and its composition are quite robust. And this is a good response to the volatility that we've experienced. Now if we look at some of the trends on the market, so we'll begin our discussion with nonlife insurance. Last year, after a sluggish Q2, in motor and non-motor insurance we saw negative growth rates. We returned to positive growth in Q3. The positive growth rate is not something that was seen by all product lines. It's enough to mention the motor products, where in motor TPL was -- that growth rate was flat. Basically, there was no growth. Motor own damage saw growth coming in at 5% to 6% but we had flat sales in motor TPL. And this was achieved with transaction prices being quite strongly discounted. And this was driven by the coronavirus as well as the limitations on mobility. If we look at the non-motor business, we saw a lot of growth in the overall property insurance classes 8 and 9, construction assembly, residential insurance for SMEs. These were things that saw double-digit growth. Then we had accident and financial insurance on the other side, on the other pole. So we had declines there of 17% to 18%. Having in mind this situation, we continue to maintain a fairly strong market share in terms of gross written premium, and also in terms of our percentage of the technical result, so it's close to 50%, whereas in terms of gross written premium it's around 32%. So if we think about the analog where all through the traditional world. We talked about this when we were actually physically meeting with you, we were talking about the situation on the growth rate. What can we anticipate and how this market is changing and will change. We've decided to show you this slide because it's quite interesting, and it will be responsible for how profitabilities will flesh out in 2021. As you can see, after several years of regular price decline, which we witnessed on the motor market, that was the end of 2017, '18 and '19, we saw declines. And as we discussed about this at 1 point, we had anticipated that in 2019 that was going to be the year where we saw a reversal, where we'd have a new underwriting cycle. And everything had suggested that these suppositions were to be confirmed, and we started the year with an increase, as you can see on this graph. Then coronavirus hit and then everything basically perished or died. And then we started to scrutinize very cautiously and think what this means for prices. But at the same time, on account of the limitations, restrictions, which you can see on the graph below, we saw stimulus because there were limits on mobility. And that meant that we had double-digit declines in frequency of claims, and this was something that was present in Q2, Q3 and Q4 after some slight increases in Q1. So the space appeared which no one in the marketplace had supposed that, because nobody could have envisaged an event like coronavirus of such magnitude. And this generated additional profitability in a manner that was unexpected. So what we saw in Q3 and Q4, as you can see on the slide, this was an attempt to translate that additional profitability into prices. And so prices fell off -- quite substantial price declines, which we saw in those 3 -- 2 quarters, Q3 and Q4, which basically really changed that underwriting cycle, and this will be responsible for shaping the results in 2021, especially if coronavirus dissipates. And let's hope this is the case. So if we look at the transaction prices, we can say that they're basically at a level where if we come back to transactionality, from the period prior to coronavirus. In many cases, we might have inadequate prices. And that would, of course, lead to many insurers generating losses. So as a result, last year, we wanted to cool down the market in terms of appetite for further price decline. I think we were partially successful in doing that, but we'll see whether or not that reflection, which I conveyed to you a moment ago, will, in fact, be shared by our competitors this year. What does this mean in terms of our premium in motor business? Of course, declines on one hand, because of volumes. We also had declines because of price. And so the combined price is down by 4.5% in motor. So basically, outside of motor business, we can see that premium was pretty much flat, and we can say that what we saw in our portfolio is essentially the same that we see across the sector. So we saw increases in terms of Class 8, Class 9 of non-life insurance. We saw decline in all of the lines that are linked to these limitations or restrictions in terms of travel insurance and things of that nature. In the corporate segment, last year we saw a pretty interesting story. And as you know, we have a mutual insurance company TUW, and it's a special channel of reaching customers. In our corporate business, we have a bigger and bigger percentage of policies longer than 12 months. And their renewals do not always show up. They're not renewed in the same quarter, year in year out or in comparable periods. And this is something that's happened this time. And up until now, over the calendar year, everything was netting out because the shifts were between quarters, where last year was particular or distinct in such a way that the 12-month renewal which took place in 2019 in Q4, now takes place in 2021. And so that means from the point of view of analyzing gross written premium, I speak about this quite frequently. If we think about corporate lines, this is no longer a good metric because of the percentage of longer term insurance. Basically, earned premium, both gross and net, is a much better metric. But if we look at this from the point of view of gross written premium, we see a decline, but there's not a matter of losing volumes. This is more of a technical issue linked to a very characteristic or noncharacteristic period of cover. If we look at some of the trends on the life insurance market, I've already said a couple of words about this subject. So the market was shrinking, but we're growing. So our market share is growing in terms of periodic premium business as well as single premium business. And having in mind group and individual business, we'll say a few words more about that in just a couple of minutes. If we look at life insurance, in Q4 we saw a continuation of everything we had done up until now; above all, upselling riders. So we wanted to increase the percentage of medical risks. So there was quite a bit of pressure on costs. So what we were dealing with, with our partners, we're trying to optimize their costs. At the same time, they're reducing employee benefits. And so the ability to grow last year was limited last year. And we saw some additional attrition in work establishments as well as the excess mortality due to coronavirus. And I've already said quite a bit about that. If we look at individual lines of business, we have very high levels of sales. So Q2, Q3, Q4, quite similar, roughly PLN 0.5 billion in terms of protection business, as well as combined protection and investment business with a periodic premium. This is a market which is close to our hearts, but the growth is achieved in the banking channel to a great extent. So our cooperation with our partners, our banking partners, both [ the ones ] belonging to the group as well as by working with banks from outside the group, we have insurance that's offered to customers who are taking out loans, mortgage loans, so classic bancassurance. So at the same time as we anticipated the product interventions, we limited or curtailed our presence in structured products, and they were withdrawn from the offering in 2019. And this led to a slightly lower level of sales in this segment and the lack of attractiveness had an impact on the capital markets position. And there's quite a bit of caution or prudence in making investment decisions, and this was prudence taken by our customers. If we look at the health operations, we can say that we've nearly achieved our target in the strategy. As you remember, we talked about PLN 1 billion, we have PLN 965 million. So we believe this is a very good result in terms of the nonrepresentative 2020 year for the reasons that we talked about. So we're trying to grow in terms of our premium or our revenue for ambulatory contracts by adding riders to insurance in group business and continued business. We are endeavoring to give access to specialization doctors, specialized physicians and physicians in specific specializations. And so gradually, we're trying to increase the number of products held by our customers within the health ecosystem. We want to be as close as possible to our customers. And that's why we're expanding our network of proprietary branches. There's no sense in me reading out the information on this slide, but we continue to work on ensuring that our own branches are able to accommodate more and more footfall, because that gives us greater control over booking visits. And at the end of the day, we have the average unit cost of a doctor's visit -- doctor's appointment or a specific operation. And if we look at the final segment, which is assets under management. We're very pleased to say that TFI PZU is one of the elite TFIs that had a positive net outcome in terms of inflows and outflows of nearly PLN 1.3 billion. At the same time, the overall market was flat. So we can say that our business model proposed by our colleagues from the TFI company has proven itself in terms of yields. But it's also proven itself in terms of the product structure, where we have regular savings products to the greatest extent. So we have PPE, PPK. And so they represent more than 50% of the portfolio. And that's one of the reasons why we have regular inflows. And as long as customers are generating good returns, we can assume and talk to you about a growing level of assets under management. We're pleased by the success and position that we've achieved in the Employee Capital Schemes, the Polish abbreviation is PPK. We have a high percentage in this market, a high market share. Measured by the number of companies, we have some 35% of the market at the end of the year in terms of the assets that we've attracted. So every single month, assets will grow so there's nearly PLN 400 million. So this is a segment that's growing quite nicely. I've mentioned bancassurance, assured banking. So we're continuing to do consistently what we've done in the past. So we're growing our share in bancassurance. And at the same time, we're generating additional savings effects, thanks to synergies within the group. At the end of the year, if we look at the number of contracts, we have more than PLN 180 million of savings under these synergies. So if you look then at the financial results. I've mentioned already at the beginning of our presentation that 2020 has a totally different view if you look at it from an insurance point of view or the banking point of view. So despite the situation in Q4, we saw that the negative impact of COVID-19 wasn't very big in the insurance segment, whereas it was incomparably larger in the banking segment. So if you were to cleanse the results of that, so we estimate that the total impact is roughly PLN 1.9 billion. So if we would have a cleansed result that would be adjusted for these net of these nonrecurring events, we would have a result of nearly PLN 3.85 billion. So if you take a look at the same picture for Q4, if we were to do a similar exercise for just Q4, we would have seen 19% growth, and we would have had a result in excess of EUR 1.1 billion. So we can say that it would have been a very good year, had what happened, not happened. But of course, what did happen did exert a quite strong impact on our results. So if we look at premium year-on-year, we're in a totally different market environment. We can say we're quite flat in terms of gross written premiums. So this is a very big achievement. If we look at claims paid, we saw increases primarily in the life side. We talked about that. We had a very good yield return and a big contribution in our consolidated results from our investment segment. We saw an increase of 30% year-on-year and pretty big improvement quarter-on-quarter, and we've had a stable interest income despite the pressure coming from the falling interest rates. And this is something that will appear through our results. If we look at our debt instruments, we saw increase there. We also have equity instruments trending up. So we had a lot of additional fuel in the logistics segment, and we know about that perfectly well. And so as a result, a strategy that has been consistently developed in the field of real estate. Of course, we had some reversals because of FX differences. This is something that happens in every second and fourth quarter. Basically, we reverse the volatility because of not having appraisals done at the end of Q1 and Q3. And so at Q2 and Q4, we don't have any of that volatility. If we look at admin expenses, they are under control despite the fact that the premium is a little bit lower. Admin expenses or their percentage of top line is lower. That pleases us, having in mind the CapEx spent on changing the operating model that we had to move into a remote work approach or a hybrid approach because we had additional expenditures for IT infrastructure, IT systems. That spend was necessary in order to be able to shift the work we do from the offices from a classic approach to a hybrid approach. So this is something that gives us a lot of satisfaction. Acquisition expenses are correlated to sales. So everything here is under control. Additionally, the contribution made by the banking segment is lower than last year and lower than 1 quarter ago. Ultimately, it's around PLN 721 million, which I think is a good, but a bit of a surprise result when you're looking at your expectations in terms of the quarterly results for the PZU group. At the same time, we have a good return on equity, where our core business generated a robust profit. Of course, net of the life segment, where the profitability of 1.7 percentage points is historically the lowest. And it's clear why it was the lowest -- we talked about this many times, why that's the case. So this is something that we're very pleased with overall. So if we look at the operating segments, I don't think there's any reason for us to walk through this. I think it's worthwhile to point out, perhaps, that we have strong profitability in mass and corporate non-life business. Also our foreign companies have very decent results and that means that our insurance result has grown by some 20% year-on-year. I think that's a pretty good summary of where we stand. In terms of our loss ratio, we can say quite a bit. This is basically a reiteration of all of the information I've conveyed to you. So I think I'll go ahead and move on to the next slide. The combined ratio in motor business is similar to what it was last year. If we look at nonmotor business, we can see that we're below 80% combined ratio. So that's a very strong profitability in this business. If we look at the life side of things, group and individual business, unfortunately we had the additional costs. And the margin on the individual business, we see is down year-on-year, but that decline is linked to allocated income according to transfer prices and also to the development of protection products in the bancassurance channel, which have slightly smaller profitabilities. If we think now about Q4 in terms of the life segment, so group and individual continued business, we can say that the loss ratio is substantially higher, so some 23 percentage points, while this was partially offset by health products, where we continued to benefit from lower frequencies. And utilization of subscriptions on the life side. In Other risks we had if we have permanent dismemberments or accident insurance or the benefits because of childbirth, all of these products offset the extensive mortality we saw. We saw an increase there of more than 27 percentage points, and so that meant that our overall loss ratio in the segment came in around 94%. If we look at the experience and distribution of deaths based on gender, age and time, here we have a very good illustration of what we were grappling with last year. And this, of course, translated into the incremental cost, 200 million. I'll reiterate we had additional loss ratio of 200 million related to death. We had an additional PLN 50 million spent because of provisions for unexpired risks, which is basically a way in which we can fill in for the shortfall of premium to make sure that we maintain stability in this product. And if we look at our investment results, I think I've already said quite a bit about our investment performance, I don't want to reiterate that. We're very pleased with the level of 4.8 percentage points surplus profitability above the risk-free rate in our main portfolio. And basically speaking, all of the component elements, constituent elements, made a positive contribution to this graph. On the main portfolio, both year-on-year and quarter-on-quarter, the changes we saw were roughly 25% and above. So we saw very strong yields. If you look then at cost effectiveness. Just to be brief, primarily, this is the result of less transactionality, fewer transactions. We weren't driving, we weren't flying. We were meeting with you the way we are meeting right now, so remotely. So we had much lower consumption of energy. Our costs were lower in terms of real estate maintenance. All of these things were characteristic of our new model of work. And we started witnessing that last year. Of course, naturally we had a bit higher seasonality in Q4 because of holiday leave provisions, because this is a time when people plan their vacations or holidays because of marketing campaigns and things that are generally related to the pandemic. We've already talked about the group's solvency. We have a very high level of 257%. It's true also of the stand-alone results in PZU SA and PZU [ Zycie ]. So this forms a good basis for us to think about the dividend, especially when we have in mind the most recent recommendation given by the Polish Financial Supervision Authority. And looking at the results, I told you at the end of the last Q3 conference and so we'll be able to come back to what we're well-known for, and what are we well-known for, is that we're a dividend company. So I'm pleased that we're going to be able to go back to paying dividends. If we look at the execution of the strategy, I think we've said everything. Perhaps I'll just wrap up by talking about ROE. The reported ROE for last year is a little bit below 11%, if you adjust it for all of these nonrecurring elements linked to the lack of comparability because of coronavirus of some 22%, And so we believe this means that we executed the major indicator in the strategy. And so the strategy in 2017 - 2020 was achieved. And so I think it's good for me to pause for a moment, and we can go on to the Q&A session. And as a result, I assume that this assumption is quite well placed. So let's go ahead and get started with the Q&A session.

So the banks -- there's a question about the banking segment. Banks had a negative impact on the results of the group. Does PZU plan to merge Alior with Pekao. I'll say, so I would invite you to come to see us at 6:00 p.m. this evening, and we'll tell you a little bit more about the situation in this segment, in terms of how we want to shape our presence in the banking segment. That would be my response to this question, to come and visit us at 6:00 p.m. The next question, if you look at the non-life results, how much did you earn on the lower frequencies of claims in 2020? I could respond to this question in the following manner. The lower frequency was offset by lower prices. And as a result, when I think about this, if we were to draw a picture illustrating the development of prices in 2019 and 2020, and we were to show basically what happened in frequencies in those 2 years and we were to add to that the changes in prices, the average value of claims. So practically speaking, it's always the case that there's interaction between frequency and the average cost of the claim or a loss. It's almost always the case if 1 falls, the other grows, or the other way around. So this relationship comes from the fact if there is some type of limitations or restrictions on mobility, if we travel less frequently, if you have a few parking or store claims, they're relatively inexpensive and they actually dilute the average value of the claims. But if we're traveling less, we're driving less. And we were driving less then, so if we're traveling more, then we have more claims. So lower frequencies provoke also -- I'm not sure if you share this belief -- this sometimes encourages people to drive more boldly, that's the way it is. Perhaps that's the nature of human beings. So it seems that what we saw and the combined effect of these 2 or 3 parameters. So we have prices, frequencies and the average value of a claim. Basically, it doesn't have a major impact on the overall profitability in this segment. So if you look at the combined ratio, we can say that it's, practically speaking, at the same level year-on-year. We could say that motor TPL was falling in terms of the margin. So the contribution made by motor own damage was on the rise. And this is something that was characteristic of what was happening last year. So my impression is that the situation is more or less 0 plus. That's how we view it. The next question, during the presentation PZU mentioned that the impact of the pandemic on the net result was roughly 100 million, and it has a higher cost ratio, additional provisions, provisions for unexpired risks. During the call when we talk about -- can I ask you to explain the differences? Of course, you can ask about -- for an explanation of the differences. So when I talk about the amount of PLN 101 million. We're talking about the full year 2020. When I talk about 250 million, we're talking about Q4. So as you recall, so if things were different, then it would have been impossible to generate profitability in the life segment because this is nearly 20%. In Q2, in Q3 in particular, we benefited. And this is something we mentioned to you: of lower frequencies, and we had lower utilization of our medical subscription plans, fewer doctor's visits or appointments than had been planned when we set up the prices in this segment. And then we had all of the additional risks related to riders: childbirth, lower accident benefit payments or also for permanent dismemberments. So the nonstandard experience we saw in these classes of risk made a positive impact on our results in Q2, Q3, and to some extent in Q4. And this means they offset the incremental excess mortality which grew by more than 27 percentage points. So we were able, as a result, we were able, basically, to show a combined impact where we have much better figures. So basically, it's a mosaic of what happened in Q2 and Q3, it's a mosaic of what the distribution was in terms of frequency of death as opposed to frequency of other risks which were in that particular period, and how they behaved in terms of their frequency. So they were not representative of the overall portfolio's results.

Why has PZU made the decision to reduce prices in the motor policy business? What's the main reason for your shrinkage in the business? I would have thought that you would have better premiums because of one of the insurers losing its license.

Well, there's a lot of supposition here, a lot of questions here. As I mentioned, PZU endeavors, and that's its role, on top of the fact that we want to grow in this market, and we want to generate attractive returns, we also, at the same time, want to be a stabilizer on this marketplace. It's clear what would happen if we were to allow ourselves to be tempted to be drawn into some sort of price war. We would be the major -- we would take the major hit if we were to do that. While reducing prices and the negative result that is generated by reducing prices, that we would be able to offset that by having a positive increase in volume to offset entirely that loss. So from point of view of profitability, we would be best [ surplus ]. So in essence, this is something that's infeasible, not feasible or very difficult to achieve. So if we look at how PZU shapes its prices, it increases its market share when things -- when there's a growing cycle. And we see a decline when we see falling prices, because we want to shape our prices deliberately. So on one hand, we don't want to push the market down even further. So we don't want to be tempted to be drawn into something like that. And we have customers that are very price-sensitive, but they're not necessarily the best customers or the best risks long term. It's very difficult to build long-term business relations with them, and they have less sentiment or brand sentiments. I hope I've responded to this question.

What does PZU expect from changes in gross written premium in '2021?

So we expect growth. Especially if we think about P&C or non-life business, we believe here perhaps not in the first half of the year, but in the second half of the year, we believe that the market will start to rebound. Macro changes should come to the forefront. So higher optimism, greater consumption. So we believe that in 2021, consumption is going to be 1 of the major drivers of positive GDP growth in 2021. And this should lead to additional demand for insurance products that will look different in H1 from H2, but it should translate into growth on the non-life market, P&C market of some 2%. If we look at the life market, here our optimism is a bit smaller. We believe that we'll continue to observe what we saw in Q4. So an attempt to optimize costs, especially amongst our corporate clients, where they would reduce or withdraw from some types of cover. Plus the third wave will have a clear adverse impact on employment in the economy. And this is correlated with the development of the coronavirus, and this should sort of dwindle out or dissipate and then turn into a positive trend in H2 of this year, perhaps not until Q4. That's more or less how we see things fleshing out. Okay let's go to the next question. The solvency ratio at the end of Q3, does it mean diminuzation of the dividend? If so, for which years? Well, the solvency ratio does incorporate a pro forma dividend of PLN 1.2 billion. That's a value that's not representative. So please do not treat it as a forestatement of anything. It's basically something that results to 100% of the results of the Q3 -- first 3 quarters or 80% of the parent company, so PZU SA. And it incorporates -- it's there only to calculate more realistically that solvency ratio. All of this took place prior to the final decisions and our discussions with the Polish FSA, in terms of the results and the dividends and what can be done. So please do not treat that as a figure that would be representative of anything. It was prepared in totally different circumstances. We had been thinking that perhaps 2020 would be difficult for the regulator, but the regulator will make it possible for us to pay a dividend. So we'll be able to pay out 100% of the results in 2020. We know the final decisions. So we'll have the opportunity to look at the dividend a little bit more. And this was just an attempt to represent this more realistically, what that solvency ratio is.

When you start the product [ Sports Course ], will you take over a fitness network? Will you have a special offer?

So I understand this is a question in a given context, having in mind there's a large number of articles, and there's a lot of gossip out there in this area. And we can say, as in every bit of gossip there is a germ of truth. Well, the germ of truth is the fact and we'll say more about that when we talk about our strategy. We want to develop, we want to grow, not only in terms of our insurance, but also in terms of our services which are complementary to insurance. So today, not everyone has a desire to sign an insurance contract for 12 months and so on and so forth. That's the first reason. We also see there's an attractive market outside of the pure insurance market. We want to give -- deliver value to our customers, not only dressed as insurance but also dressed as services, complementary services that fill out the picture of insurance. Yes, we want to be -- we want to appear on this market of services in terms of employee benefits. That does not mean that we're going to be buying or that we are buying a fitness network. Today, we are not participating in any such discussion. So of course, I can understand the backdrop, the background of what's happening in the marketplace. Today, we are not shaping that background. We will penetrate ecosystems. We're talking about an amalgamation of insurance and services rendered under a fee-for-service approach, which is true of how we've operated on the health market. Before we appear on a given market, we're going to want to learn about that marketplace in relationships with a partner who has experience, who's been operating in a market and who can support us. And we're going to be a good channel of distribution for such a partner, utilizing our customer portfolio, our network as a way in which we can sell additional services in terms of creating value linked to these ecosystems. Whether, how, when these resolution -- relations can transform into some sort of strategic cooperation between PZU and providers, it would be very difficult for me to dwell on that or muse on that subject. The only thing I can really say is that as of today, we are not participating in any discussions on acquiring fitness networks. Of the 143 million on equity, so it's 2/3 of our investment return in performance comes from the logistics sector. That was the question, what percentage of the 141 (sic) [ 143 ] million comes from that.

How do you assess the impact of market consolidation for sales of AXA and AVIVA? Will competition get more fierce?

Let me respond as follows. I believe that the consolidation of every market stabilizes the market, and translates into fewer irrational decisions, which are driven by building scale at all costs. Of course, I'm not referring to those 2 entities, AXA and AVIVA. I'm not saying that these are entities that had -- exert a negative impact on the market through their business decisions. Please do not understand my statements in this matter. But I'm just saying that if there's a young and ambitious player or market entrant that presents very hungry, and it starts to operate in a manner which is reminiscent of what we had seen in 2014, 2015, where there was an influx of direct players. And unfortunately, they had a pretty big impact on the marketplace, and they contributed to 1 billion in losses in the motor business. And at the same time, the trust slumped with respect to the insurance market overall. It was a major slump as a result. Will it make competition fiercer? Well, it will make competition different. As I said, I hope this means that things will be a bit more predictable. Let's go on to the next question.

Will you consider distributing 100% to [ Zabracham Zknowa ] of the [ Vatishansa Idnashya ] earnings and 50% of 2020 earnings?

I would not want to speak about the new capital policy. Our current capital policy, if we were to apply it to this question, says the following. For organic growth, we should earmark 20% for inorganic growth and investments to transform PZU's structure by another 30% to -- so 50% should be paid out. That's what the current policy says. And of course, we have the regulations and the recommendations of the Polish KNF. When we think about this, we're thinking about what we have in front of us. And on the other hand, we have in mind the opportunities we see in the marketplace, which could require from us capital expenditures linked to investments. In terms of what's in front of us, we have 2022 in front of us. We will have 5 years, time is flowing quickly, from the time when we issued our subordinated debt. Let me remind you, this isn't [ unquote 5 ] instrument. As I said then, and I'll say the same thing now, this is an instrument where we have to conduct ourselves correctly and this parameter is something that we'll have to take into consideration quite strongly when we present our recommendation for paying dividends for the cumulative period of 2019 and 2020.

That's in the Motor in Q4 2020, but what are you're currently seeing in market in 2021? And how does that compare with frequency?

For now, I mean we look at 2021, it's very difficult for us to talk about a continuation of anything. Certainly not continuation of declines. What we were dealing with last year, we had 2 very interesting pit stops, which took place in September and in December. These were periods when the market in terms of frequency, trying to basically [ enchant ] reality had basically transactions coming back to from prior to coronavirus. Coming to work, you were standing in traffic jams. And this was a period in time for the marketplace where the market could test on itself, what does it mean if the prices that we're selling out right now, if it's going to stay with us for another 12 months. And then frequency, day over night, from 1 day to the next, basically skyrockets back to the previous level. And so after those periods, so let's say, more October to a greater extent, when we were looking at the short-term consternation, and we saw prices rebounding. So we saw prices trending up almost immediately. But then when we had a lockdown again, and that we were going back to the experience from the pandemic in terms of the results, basically that temptation reappeared, for prices to be reduced. So now today, in Q1, in a moment, year-on-year, we would be at lower frequencies. So in just a moment, let me talk about what happened this year versus last year. Even though frequencies are low, they're no longer falling because they already fell, because we're going to be in a totally different reality in terms of the base year, base period. And so having that in mind in particular, I don't really think there's any reason to believe there's going to be further decline. Let's be aware of the fact that the result of the insurer is pretty tricky in terms of interpreting the adequacy of costs and revenues. Because revenues are forward-looking and costs are backward-looking. And so we come -- so basically, premium is not capable of catching up quickly if we go back to the previous reality. So in any case, I don't think we should anticipate that we'll be dealing with those type of topics in the near future.

[Foreign Language]

Sorry?

What in regarding motor portfolio, given challenging market environment [Foreign Language].

So there's 1 response. Our strategy is to have growth that's responsible and profitable. And it's not only about motor business, we're thinking about non-life insurance. So I can only assure you that we will not do any odd things. And we will continue striving to do what you know we do. Basically, we manage risk, and that's something we want to continue doing.

Update on dividends and what you intend to pay. [Foreign Language].

I think I already responded to the question. And then I have the final question? No, I guess not.

In corporate motor business, why did you have price cuts? Are these price cuts linked to the technical adjustments to cars and fleets, which doesn't guarantee lower frequencies if you look at the combined ratio.

Yes. Well, if we look at the corporate segment, because we're talking here about the fleet market. This market is a bit different, more -- has distinct features because the local restrictions don't have a major impact on frequencies, because we're talking about fleets that are traveling internationally, large-scale shipping businesses, which have different behavior models than mass market. What is the reason for these declines? Well, those declines came from the fact that, that market for a long period of time had been deprived of necessary attention. Especially among our clients it was seen as a difficult marketplace. And basically there was no real desire to attack it strongly, at least unless the competition and coronavirus change things there. And that's the main response to that question. As I've mentioned, we strive not to launch discussions about prices. If we're not able to generate profits here and now or in long-term relations to clients, where if we look at all of the business lines, if we can't get a positive value on the mixed result of all the businesses, then we don't enter that phase.

Rates seen so far this year [Foreign Language]

I think you're thinking about 2021?

In 2021 in life segment from COVID-19.

I'm trying to think about how to respond to this question. Well, we started 2021 with -- were above-average in terms of mortality, January, which was substantially higher. February, we saw a decline. In March, we're at the beginning of wave 3. And the third wave, we see strong records of upward movement in infections. I'm not able to respond to this responsibly, because every single model is not sufficiently representative. And after 2 or 3 weeks, we start to see major deviations from what we're observing outside our windows. Or today, no one is actually capable of anticipating looking at the number of mutations and variants -- British variant, the African variant and so on and so forth. Nobody is able to predict or forecast what the impact of the coronavirus will be in terms of the excess mortality this year. What I can say is the following. Q4 was a sample of how excess mortality can affect our result, and I'll leave it to you to draw the trajectories, the distributions that you anticipate in 2021 with respect to coronavirus. Well, we can say that statistically speaking, that you'll get -- if you have a certain number of people sitting at the table, you'll get that many different results. I don't want to talk to you about hypotheses. I want to talk only about the facts. This was the last question that I see that had come in. I don't see any other questions. If it were to turn out that there are additional questions that you'd like to pose, I would invite you to contact us directly with our IR department or to contact me, and we'll endeavor to respond to all of your questions. I'd like to thank you very cordially for today. And at the same time I'll say, we'll see you in the near future. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]