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

Good afternoon, ladies and gentlemen. I'm very pleased to be able to welcome all of you, who've joined us for the presentation of the Q4 results and for the full year '21. We'll kick off, as a matter of tradition, by saying a few words about our main accomplishments during the first portion of the presentation. We'll talk about the magnitude of our operations vis-a-vis the market. We'll talk about our financial results. We'll see where we are, in terms of the execution of the PZU Group strategy. And having in mind the full-year results, how this basically poises us, in terms of our strategic plans and objectives. So without any more ado, let me say what we all know. I hope that 2021 was a particularly good year for PZU, in terms of sales and the results that we delivered on these sales as well as in our various business lines, and this was not just a result of what happened in Q4 but in the full year. And we were able to achieve this, thanks to a highly-diversified business model. We wrapped up the year with a high level of profitability, substantially above the strategic target, where we had assumed that we wouldn't achieve that until 2024. We have a very high return on equity above 20% in Q4, so we're at 21%. So there are clear reasons for us to be proud. On top of the efforts, which contribute to growing results, rising results, recurring results, we've been able to do this in a sustainable fashion. And that means we expended efforts to ensure that we tried to reduce our carbon footprint, also utilizing renewable energy sources, making investments in this field, also our social sensitivity. We continue to pursue additional initiatives, and that means that the market sees us as an entity that continues to improve its results year in, year out. In terms of sales, we've mentioned already that we have record-breaking sales. We have PLN 25 billion in sales, and so our sales in Q4 were also on the rise. But what happened in Q4 was the fact that we were able to increase our market share. That's what happened. We grew our market share in Q4. So we're growing, and we're growing not only in line with our share of the market in Q3, and we've been able to increase our market share in Q4, and we're very pleased by the strong growth we've seen in nonlife, nonmotor business. And we can see that the motor business has been quite demanding for a while. And that's all the more reason for us to be happy with the expansion in nonmotor business, and so the premium grew by more than 11%. If we look at the mass portfolio, we had more than 30% in the fourth quarter. And we've been able to refine our insurance offering for SMEs, for residences. We're working with banks, and so we're selling our products to loans and bank loans. And we've had a very strong presence in the farm insurance category. And so we've seen strong incremental growth. If we look at our foreign companies, we can say that they also experienced robust growth. The negative thing that has occurred is that our position in the life market -- so the investment products, having in mind the intervention by the Polish FSA, where we have to submit to certain requirements as insurers, in terms of building much more value for the customer than was historically the case. And then there's a dwindling sentiment amongst distributors and customers, with respect to these products. We've also seen the negative events in various asset classes, and that meant that there was no new sales or no additional contributions to these products. So if we look at sales measured not by gross written premium but by the revenue recognized by noninsurance companies, this is something that's very pleasing. So we have the health pillar, for example. We're growing quite swiftly by nearly 25% year-on-year. We have robust growth generated by our medical centers as well as through our insurance products and subscription plans. The investment pillar has grown strongly as well. Year-on-year, it's increased by more than 6%. So PLN 35 billion of the target was achieved. We'll talk about this a little bit later during the presentation. So if we look at our achievements, accomplishments in Q4, so Q4 and the whole year was very high. We're pleased to have improved in basically every area. So ROE, profitability in nonlife, life insurance, especially if we look at our core product, meaning group and individual continued business. And so we have significant improvement here, especially having in mind the market -- where the life market, where we saw more turbulence because of the coronavirus pandemic. We remember first, second and third quarters, when we had a very big wave, and that is also true of Q4, when we had Omicron, so another big wave of coronavirus. Despite that, we've been able to grow our margins, and it's our hope that in -- this is an area that we'll be able to build the contribution to consolidated results, moving into the current year. So if we look at nonmotor insurance, we have a very robust profitability profile. So we have a challenge in the motor business linked to price, especially for motor TPL. We have strong growth in motor own damage, but the margin is something that's getting tighter, especially in motor TPL. And so the whole market had a technical loss in Q4. We, however, wrapped up Q4 with a 21% return on equity, which is a special reason to be pleased and to be proud. And all of this has been done at the same time, maintaining high levels of the solvency ratio, so the sufficiency of our capital base, and it's a great tool in having in mind the times, the turbulent times that we have. So on one hand, I hope that the health, coronavirus pandemic-related issues are gradually behind us, but we're now seeing lots of turbulence linked to the Ukrainian conflict. And so we hope that we're going to be able to give resistance to these various difficulties. And so in terms of the war in Ukraine, as a group, as a company, we want to be seen as a socially responsible group. One that shapes relations, molds relations with clients, in terms of products, insurance, banking, health and others. But when our customers need us like with coronavirus that we were highly engaged. And then we also talk about providing assistance and aid to the employees and families of our employees in Ukraine. So lodging, food, means of sustenance, material aid, medical care, psychological help and support. These are things that we've been giving, and at the same time, building consistently at the position of our company as a socially responsible company. So let me say a couple of words about the market development. It's very nice to talk about PZU having in mind a broader context. So what's happening on the market? If we look at the pace of growth, as you can see on this graph, for several quarters, we've seen that it becomes -- grown more soft -- softer. So if you look at motor TPL, motor own damage, Q4 had a pace of growth of 4%, and this is primarily driven by motor own damage, where the growth year-on-year is in excess of 9%. But all of this has been offset by what's happening in motor TPL, where, on one hand, we have more policies. But at the same time, we have the negative growth of prices. And that means that this segment, in Q4, had -- the total segment has only a 4% growth, despite the potential that was here. The situation, however, is totally different, if we look at nonmotor business. We continue to see double-digit pace of growth, especially for thinking about property and accident insurance. This is a market segment that enables us to grow and to do -- and to grow profitably. But at the same time, we can balance our portfolio. Historically, PZU continues to be an entity that has an overrepresentation of motor products, especially in a market that's so demanding and challenging, where margins are very difficult to generate, especially in motor TPL. And this means that we have, overall, a challenge that we face. And that's why we're so pleased with the ability to tap into the potential offered by the nonmotor market. This is a market where we're growing not only in terms of premium but also in terms of market share and also in terms of the technical result. And we have an increase of 32%. And then we have a 44% share of the technical result. So if we look at motor business, as I said, continues to be under pressure. And the graph portrays that we continue to see decline over the last 4 quarters. One good signal or one that we want to interpret as a good signal, we can see that the decline is flattening, in particular, in December. And despite that, as I mentioned previously, despite the negative technical result in the overall market in motor TPL, well, this is caused by higher frequency of claims and the higher value of claims. These are parameters that are exerting a major negative impact on that segment. And so not only motor TPL is a challenge, but motor own damage also has a dwindling profitability. So it's not the part of the market where you can grow easily, if you measure this through the combined ratio. If we look at other property insurance or property insurance, casualty insurance, we can say that we've talked quite a bit about motor business, where we're growing, particularly because of motor own damage. And as I said, motor TPL is a challenge. And as a company -- that is a responsible company, having in mind its liabilities, we don't want to buy the market by paying for sales with huge losses. That's not how we're going to behave. We don't need to do that. And that's why we're pleased by the growth seen in nonmotor business, chiefly in the mass segment. In the corporate segment, as I've mentioned previously, we have policies that are longer than 12 months that, to some extent, distort the trend and its development over a given reporting period of 1 year and then comparing things quarter-on-quarter, year-on-year. But this is a business, if we look at the earned premium, we can see strong growth here. What's happening on the life insurance market? Well, this market should be seen not as a single, homogenous market, where -- it's a little bit like where we talk about the nonlife market. We have non -- or motor TPL, motor own damage, other things. Well, 80% of the market in life is the gross -- sorry, is the group and individual continued insurance. And so we can basically have these customers serve them and offer them additional products, riders. So this is an area that we're particularly keen upon. And here, the growth we've seen over the last quarters, with respect to protection insurance. And we've added where we've been -- we sold up riders. So these are 2 areas of growth, slightly muffled by savings products. With the periodic premium, we have seen some decline triggered by the situation in Q4. Then we have the single premium products, and we have 2 extremely different histories. On one hand, we have large negative growth rate, where you have unit-linked products, where in Q4, they had a decline of -- in excess of 20%. On the other hand, we have protection insurance, where the growth rate is quite strong in excess of 40%. So in this segment, we're completing the year at nearly 44% the technical result. And so if we look at the various segments in group and individual continued insurance, things are stable despite the headwind caused primarily by coronavirus pandemic as well as the comparability with other players in that market, if we look at the age structure of the portfolio as well as the [ greater assessability ] of this risk, of the health risk coming from coronavirus. So despite that and despite the fact that over the last 2 years, we know what mortality looked like, the survival tables looked like, we're showing increases. Well, this is because we've worked on the portfolio. We've been selling up riders, new products. Here, malignant tumor, we're trying to respond to our clients' expectations to the greatest extent possible. And that's why we have such a broad offering of insurance riders. If we move on to individual life, we have a decline -- this decline linked to these single, one-off investment products, usually sold through banks. So this is the case amongst distributors from outside the group. While having in mind the recommendations given by the Polish FSA, they've decided not to be exposed to a certain amount of risk in this area of operations. And then having in mind other challenges they have in this market segment, we are pleased by the growth in protection insurance or savings products. So investment products were -- regular savings products are offered, and this makes it possible to have a long-term relationship and cultivate that relationship with customers for the long run. If we look at the health area, we are on a good line towards achieving our strategic target of generating PLN 1.7 billion in revenue by 2024. And so I think, this year, the market, if we can use this word, will be conducive to us, having in mind the growing awareness and the demand for this product or these type of products. Here, we're reporting more of the same. We're selling more. We're attracting more contracts. We have more contracts and people in our books. And so we have growing coverage, and then accessibility is also growing across Poland. So we're capable of delivering the proper [ prophyletic ] health prevention services to our customers. Then we have assets under management. We see growth in our TFI as well as in the banking TFIs, so we're very pleased by this. Having in mind the strategy and the targets laid down in the strategy, there's not that much new I could say here. We're trying to enrich our offering, in terms of passive solutions. We have new strategies being added to the platform. If we look at the character of the products we offer as PZU, these are products featuring a regular savings-plan approach. We're capable of delivering value to our customers that contributes to this [ value ], despite the external turbulence on the various markets in -- having in mind, asset classes. If we look at our cooperation with banks in turn, we can say that we have more of the same. We're growing in nonlife insurance protection, life insurance investment. So we have higher sales year-on-year, more than 75% up. So our product's in all major lines of the banks. So basically, this relationship is generating strong growth, and we're growing across the [ banking ] channel. So it's up 22% year-on-year. So this is a scale that pleases us. If we look at assurbanking, we're trying to sell banking products through our networks, so PKO, products through the cash platform, we have Alior, and we're trying to reach and build that reach to large numbers of customers. More than 100,000 employees, I think it was 200,000 employees in the SMEs, and so this builds our -- it strengthens our partnership relationship. So now I'll try to sum up our financial results, which I've already addressed to a large extent. And of course, these results are a source of great satisfaction. And that is true, in terms of sales as well as the income and basically, the income attributable to the equity holders of the parent. And then across the various segments, what I would like to draw your attention to, is the profitability of our nonlife products. So in 4Q alone -- so fourth quarter alone, on top of what we said about motor products, so we have 87.8% ratio -- combined ratio. So I don't think anybody would have suggested that in the next 12 months, PZU could achieve such a low combined ratio. And so we're all the more proud to be able to report those figures. We have growth in the life business. We talked about that. So it's our hope that in 2022, we're going to have an even better year for life insurance and that the coronavirus and its translation or its impact on driving extra mortality, is something that will be purely historical in nature. What resounds from these results? We see growing costs, in particular, distribution costs. We're making conscious decisions about repositioning ourselves in the field of sales, and so we're exiting our comfortable zone. So utilizing primarily own channels. We have bigger appetites. We have an appetite for growth. We're starting to utilize third-party channels. And so we have the multiagency channels. And basically, they have higher distribution costs. And that's one of the reasons why we have higher costs in Q4, and they've grown successfully over or steadily over 2021. And so basically, Q4 is a type of summary of that. If we look at admin expenses, we see that there is pressure generated by inflation, by minimum wage and everything that's indexed against minimum wage. So basically, employee benefits are an issue here, and the company has to respond to this growth off here in PZU and in the banks, so nothing surprising here. What please -- what pleases us, however, to a large extent, we've been able to add rapidly growing sales. And at the end of the day, despite this pressure, we're able to deliver and show you very good margins, in terms of our [ underwriting ] business. And once again, I can say that today, we have an 87.7% combined ratio in Q4. So essentially, the same level we saw 12 months ago in Q4 2020. So we have very robust, stable margins in our mass insurance business. We have a slight improvement in corporate business, regardless of what's happening in corporate business and TPL. We have improved profitability in life insurance in both segments, so in the individual lines as well as some group lines. And this means that today, we've been able to wrap up Q4 with nearly PLN 730 million net of the banks. And that's an increase year-on-year of more than 15% quarter-on-quarter. It's an increase of 25%. And so that means that we have very strong growth. So it seems to me that the bulk of the topics applicable to various insurance segments, we've discussed. And so I'm just going to click through them without discussing them. And we're now in the section concerning life insurance. And I want to tell you a little bit about how we built our margin in nonlife in Q4. What we see here is improvement in the loss ratio, which is linked to the frequency of deaths in the overall population, we're representative here. And so the decline in loss ratio, the growth in the margin was basically an amalgamation of 2 events with a different vector. So we saw a decline in deaths in the protection business, to a small extent, but even so, it did happen. Then it was eclipsed by health. And then we had the return of our clients to the medical centers and the greater utilization of subscription plans, which, year-on-year, is up by 3.6%, in terms of the profitability in this segment. So this is not something that's a surprise. This is something that we've prepared for well. We're going to be able to talk about that in greater detail. It's basically a reflection of what we saw in 2020. Let me remind you that we saw a situation in which there was a high level of mortality, and then we had better results on health products, and that's because of the distribution of behavior. So everybody who could -- didn't go to physicians to take life to take -- participate in planned procedures, they were waiting for the pandemic to end, especially if there were customers who had accompanying morbidities. And they didn't want to put themselves in the risk of catching coronavirus, which if their comorbidities were to take place, they could actually have a tragic result. Now, these topics are coming back, but we can say, that [ isn't ] overutilization, compared to the positive period in the past and then coupled with the extra mortality. So if we look at our investment result, I wouldn't conceal that this is an especially strong reason for us. Well, if it's not a return to anything, basically, we continue to do more of the same. And so we're consistent here, and we're ramping up the quarter with PLN 650 million, if that's a return on the main portfolio. We have a very stable contribution, in terms of the interest margin. And we have it slightly adjusted because of the measurement, having in mind what's happening on the interest rates. We all know what happened in Q4. And we have equity instruments that were quite stable. Well, we don't have the topics like we had in Q4 or in the first quarter of this year and fourth of this year, we had a lot of growth, with big exposure to a logistics entity. Here, we had a strong contribution from private equity funds and certain exposures with smaller volumes. So for them to be attractive to us -- as an attractive addition and depending on what's going to happen on the various markets, this has been able to offset some of the adverse events. And then we had a very high result on the investment portfolio. I think everybody's [ wrote ] about that, so I'm not going to dwell on that. We are very consistent, in terms of pursuing our strategy here. We have an appetite to do more than just rental income, when possible. When we identify such a potential, we enter development projects, and then we're able to generate an additional margin. Traditionally, that wouldn't be possible for us. But here, this is something that we're doing in Q4 of this year. So the cost effectiveness is under a lot of pressure. Q4 saw some seasonality because people, after more than 1.5 years, had been putting things back in time. Now, they're starting to revisit their former activities. So they're basically becoming more active, business-wise, starting to drive, starting to participate, motivation things, follow their business activities. I don't want to say in a classic fashion, but it's more of a hybrid fashion, and it's a little more costly. And so this is one of the examples that translates into higher admin expenses, but we can say that we should look at this growth as something that fills out the low ratios we saw in Q3 as opposed to something that is a major upswing in growth. We understand that costs will be a challenge for us, and that's why we're very keen on having higher volumes. We have a high level, if we look at operating cash flows. So it's not a -- these aren't paper-based results. This is genuine cash flow on operating business and then investment business, and it's been adjusted, having in mind the safety approach. And so we assume a dividend level. So we don't want to make any suggestions of a non -- of a over-representative level of payment at a given moment in time. We'll take into mind, all of the major cash flows are -- in the next 12 months, and so the dividend is one of those major cash flows. So I'd like to wrap up with a recap. This recap is about strategy execution. Where are we after the full first year? So a record-breaking year, in terms of sales, and this could suggest that our target for 2024 was not very ambitious. Let me remind you, when the strategy was written, it was presented to -- in an environment, in which there was a lot of uncertainty and volatility. But having in mind the potential we see in the market, and we can see that potential today to think about overrunning this objective. If we look at revenue in PZU Zdrowie, we're following our approach, very strongly, to reach that PLN 1.7 billion in revenue by 2024, so we're on target here. Then we have the net earnings and basically, the return on equity, the contribution by banks to the PZU Group's net result, hard to compare some of these years, as you can see. Then this feeds into a high level of solvency ratios. So at this point in time, it's worthwhile to say a few words about our exposure to the Ukrainian market. And here, in contrary to what we talked about in the first part of the presentation of what is happening and during -- how it can affect us as the PZU Group, we have insurance operations, both for life and nonlife. And the situation that is transpiring there in Ukraine, is something we're all familiar with. And so basically, we operate there. Just like as in coronavirus, we have a crisis management team. We have specific risk zones that have been -- or areas of risks that have been defined for the various types of activity and for individual bits and pieces of business, both on the income side, revenue side, the cost side, on portfolio, assets liabilities and stuff from the very beginning. Before the conflict broke out, we anticipated certain things quite well, and were able to be well prepared. In my assessment, we've done a lot, a great amount, but we're not able to foresee how this war, this armed conflict is going to come to an end. So we have to reckon with a situation, in which our operations in that part of Europe will not be capable of delivering on their business expectations, the business expectations we have with them. I think any other statement would be a risky thing. So we have to -- we're surprised. We have to better understand what direction things are going in. We have to grapple with the question, what that will mean to us, in terms of a potential impairment on these assets? So a couple of words about this subject. What type of scale are we talking about. Here, we're talking about our total net assets of the 3 companies operating in Ukraine. So some PLN 70 million. So the consolidated assets are a total of PLN 554 million, and we have financial instruments of some PLN 300 million, of which half of these are term deposits. We also have a structure, in which PLN 134 million of the provisions are covered by the reinsurers. And so our share as PZU, where we give a guarantee in the case of loss, well, is only PLN 47 million. What is good information is that we were able to react at the right time. And all of the exposure to the papers, securities traded, the ones that had been issued by Russia or Belarus, we were able to sell them while the markets were still open. So we have very limited risk. Everything depends on what's going to happen with the operating business in the future, but the scale of these challenges in the [ event of ] impairments. Of course, it's obvious that you can ask questions about that. We're trying to recap that on this slide. So this is a slide that I'd like to end our presentation with. And I'd like to go on to any questions in a Q&A formula. If you're going to have any questions that you'd like to pose at this time.

So I'll open up a neutral slide. Profitability by operating segments. So let's go ahead and kick off. What's your exposure to Ukraine? Should we anticipate impairment losses? I think I've responded to that question. So I'll go on to the next question. This piece that you plan to adjust, its technical rate, having in mind the rising interest rates, so it's going to move up from 10 to 5 bps? And what sort of loss should we anticipate in Ukraine for nonlife? What's your base scenario? And your pessimistic scenario? What contributed to the results of PZU SA in Q4? Will you maximize your dividend, having in mind guidelines given by the Polish FSA? Well, there's a lot of questions there, ladies and gentlemen. In terms of the technical rate, I would like to say one thing. The technical rate is linked to products distributed at a given moment in time, and it's not a single value for the overall portfolio. We can say that the weighted average for the entire portfolio is X, but it's kind of a mosaic of all the products that were sold in a given year. And then we have capital instruments put in place to guarantee them. So depending on what we were dealing with, we went through one major exercise, in terms of what the rates of return were. And so I can respond to that question in this manner. Today, we don't have such plans at all. And from the point of view, well, having how and which products are related to these assets that generate rates of returns. So I mean, what could happen here? And perhaps, this is a response to your question. If we're going to have a 5% rate, then we'll adjust to that through our products. Let me remind you what happened in the endowment product market. We were strongly represented, when the [indiscernible] the rates were around 5%, 6%. We were able to construe products, where that if the insurance event didn't take place at the end, we were able to give back the sum of premiums paid. And on top of that, there is a type of profit sharing on those premiums. And basically, this was because of the underlying financial instruments that formed a guarantee. That was how it was working. When the interest rate started to decline, however, that the sales decision -- position was more and more difficult, and we weren't able to prepare our sales narration. In a way, it was still attractive. But at the end of the day, we would give back the total sum of premiums paid but without any bonus because there wasn't really any product where we could earn a bonus, because we had to cover the insurance risk. You have to pay for that insurance risk. And we were giving back 100% of the premiums paid today. As interest rates are on the rise, this gives us an opportunity to revisit that narration and offer products, which, on one hand, could, have in mind, not only the full recovery or reimbursement for the cost of -- in the form of the paid premiums, that's something that also costs. But on top of that, we might be able to offer some additional growth. We have some product ideas, some new ideas. And at the proper time, we'll speak to you about that. I guess, there are more questions here. So Ukraine, I think we can treat that subject as something that's been covered. Why do we have a low result in PZU in Q4? Does PZU want to maximize the dividend in 2022? Well, the low result in Q4. Basically, it was the measurement of our equity stakes in the banks and the exposure of these banks to that instruments from the state treasury. So in terms of the increased interest rates -- and this was something that was posted to the result in Q4. So even though on the underwriting results in Q4, we had a very high return and that we were a sufficient entity in the Q4, whereas the overall impact generated by the underwriting business was then reversed through our exposure to the banking segment. Do we intend to maximize the dividend? Well, I'd like to be able to respond to that in the positive. We know what the maximum dividend would be. We recall how it works. Basically, the payer of the dividend is PZU SA on a standalone basis. So if we have in mind the maximum dividend or the maximum amount that you can -- the maximum dividend you can pay is based on the standalone result of PZU SA, so we can calculate what the maximum dividend -- what does maximizing the dividend mean? Well, it's hard for me to guess what the person posing the question has in mind, but I can respond to this question a little bit playfully. We want to optimize the dividend yield. So today, even if this were not a limitation, what I mean is the standalone results, if we could pay out PLN 3.3 billion because that would be the distribution of the entire result generated by the group. Having in mind the very turbulent period we have linked to the armed situation in Ukraine. And this translates directly into a lack of positive sentiment to this part of Europe. And then we have basically a yield curve that's changed. So our equity, if you look at Solvency II, we have a market measure here of our equity position. I'm missing the word, it's not an accounting result but a market results. So everything is mark-to-market. So it depends on what's going to happen, and we have to scrutinize the situation, and we have to behave in the proper context. So even if we were to turn out that we don't -- sorry, even if we weren't to have any limitations and we could pay out 100% of that result of the group in the form of a dividend, we have to have in mind what actually took place on the market. The market is highly volatile, and we can't leap to a situation in which in 12 months from today, I don't know when, our solvency ratio would be under a lot of pressure. That's not something we want to happen. We have a call on our bonds, and this is part of the equity. And so we have to behave rationally and prudently. So if you have inflation of 10%, how will that affect PZU? It affects PZU the same way it affects all other entities in the market. And so you know what our cost account looks like. That's basically what the question boils down to. And what components? And how much those components weigh? I understand that you're fully aware that inflation affects not just cost, admin expenses, but also the cost of insurance benefits and claims paid. If we look at commissions, I hope that we're going to be able to address this with the properly adjusted rates, and they'll have to change as a result of inflation, and we want to reflect the real coverage of a given exposure. And so this is something that could be addressed automatically in the acquisition expenses. But if we look at admin expenses and then the cost of claims and benefits paid here, we're going to have pressure. We have certain ideas about what we can do. And that's good because they represent 70% of our technical result. Whereas if we look at admin challenges, we're working to have to do the same thing as in the market. The average salary in PZU and the insurance business can grow slower than inflation. This is a question which could be rearticulated and it would be the following. Is it possible for the average salary in the insurance sector or the overall financial sector, can it grow more slowly than inflation? If, to such a question, the response is positive, well, then with respect to the question from [ Sander ], then I would respond in the positive. As we shape our salary programs, we have 2 parts. The first part is fixed. And then we had variable remuneration for certain achievements and attitudes. And then we have something that gradually becomes a fixed element. I'm not sure if that's the correct way of saying it. It's a type of profit-sharing bonus. And this is something we'd like to maintain. So as long as we continue to grow in terms of our results, then we'll continue sharing those results with our employees. And so if this is above or below inflation, that's going to be a secondary parameter. What results did PZU generate on the bonds from Russia and Belarus? The ones you sold? I don't have that information with me, so we'll share that information with you offline. What cost would it generate to close the Ukrainian companies? I think we already responded to that question. Sometimes the questions are jumping on the screen. So before I start to read them, we have new questions on the screen. So I'm sorry for my odd reaction because you're observing my face, perhaps, and you might see some surprise. The strong results you have comes from what property development market project? So well, we don't talk about individual exposures in insurance business, I don't think we're going to say anything that it's going to be a warehouse and the town of ABC. I don't think that's sensible for us to talk about specific exposures in that way. It is true that we do have a desire to work in a way that's not a one-off approach. It's difficult to build these type of projects into your business, as usual, for this effect to show up in every single quarter. But we do see potential coming from this marketplace, especially in terms of logistics, we're ratcheting up our exposure. We'll talk about that more than once, I'm sure. So we want to continue benefiting from these type of business opportunities. Whenever they appear, we will participate to earn money not only on rental fees but also to tap into, basically, the developer margins and participate in those movements and measurements. So what -- if we look at the sales of products, what type of products can you use to replace some of the gaps that appear? I don't know if this question is properly posed. Today, we've not left this market. We haven't verified our products, especially in terms of the value for customers. We're going to continue selling unit-linked products. The fact that some distributors for a variety of reasons, image-related perhaps, maybe other difficulties they have with their own businesses and so on and so forth. That doesn't mean that we're withdrawing from this market and that we have to catch something. What we're going to try to grow here, and we're going to try to grow by cooperating with our partners in the banking segment. So the products we have are characterized by adjoint attributes. Basically, they -- when markets are growing, they stimulate your imagination and then customers try to convert into something else or exit those products into other assets, when things -- bad things are happening like today, like the conflict in Ukraine or coronavirus, or when the virus showed up. We said quite openly, we talked quite openly about what's happening, how customers are converting their investments as they track something else, something that's going to be representing value for them, then and there, and not thinking about the long term. And now we're in a similar situation. And that means that, that behavior is repeating itself, there's no hole in sales per se. We're not talking about products that are highly profitable. They have very high cost of distribution, however. So I wouldn't treat them, so we have to be able to maintain the status quo for our profitability. So why is your -- I'm not sure why the question is about the model being more expensive than it is. I was trying to explain why we have changes in Q4 versus Q2. And in mind of to -- Q3 having a year-to-year, with respect to our admin expense ratio measured against premium. So the hybrid model is not more expensive than the traditional model, and it's certainly less expensive than the traditional. Maybe it's more expensive than 100% remote model. Well, basically, there are quality barriers, if you have a 100% remote model, especially if you're not talking about recurring business in very repetitive activities. So here, when we talk about effectiveness, I wouldn't think solely about the price for a given process that's done in a hybrid fashion. And I would think more about the value generated by one or another method of operation. And then I think that this discussion would be complete. I believe that the hybrid model -- if you have the right participation of the classic or the standard approach, I think it's the optimum solution. Certainly, a solution that will continue to use -- utilize for a long period. Well, these questions keep popping up, and I'm trying to find a -- why are you changing your approach to valuation? You're planning to roll your mission as opposed to redeem the issuance. We never said definitively that we will redeem the bonds without rolling -- well, rolling them over is actually an overstatement. Well, we have to submit a request to the Polish FSA that we want to exercise an early call option. We realize that process. There's an issue. The issue is completed, and then we're able to say whether or not it was successful or not, and then we have to present additional documents to the Polish FSA that our capital strength will not be deteriorated or diminished as a result of a consent. And only then will the consent be given. That's the sequence of events. What happened in the recent months or quarters and what is affecting our solvency? Here, once again, I'm referring to the circumstances linked to the yield curve on bonds, where we can say that it's become much more steep at the short end. And at the long end, it's falling. So it has an inverse -- inverted position or shape, compared to the standard one. And having in mind our structure of assets and liabilities. So our shorter-line assets in the economic model, mark-to-market, are discounted at a higher rate, discount rate, which means that we have to recognize higher declines, whereas the technical provisions, which are long, are discounted at a lower discount rate. Well, today, paradoxically it's a lower discount rate, and this is something that's very negative to us. And I'm mentioning this because we're dealing with the situation at present. And this is something that should -- well, it says that we're not going simply to be able to buy back the bonds and show 230 as the solvency ratio immediately after that event. So this is the -- business model hasn't changed. That's the whole reason for doing the [indiscernible].

Motor market trend, and you have seen so far this year, sorry. Do you see any signs of motor market rates to have bottomed out?

So I think I'll respond to this question, not because I'm malicious, but it's a little bit -- as a player in the market, I have to be a little bit furtive about it. And so I'll break this down into a few things. What we do see on the market and what's happened in December, where prices were flattening and we didn't see further decline, this, for us, was a signal that perhaps -- that people are starting to understand they've gone too far, and the technical loss was an argument for them to do that in the Q4 period. However, the overall market in 2021 had a technical result. The overall market had a technical result above 0, which is good information, continues to be good information. Then 2022 started, and it started in such a way where we saw a lot more penalties for violating motor things. So for example, if you exceed the speed limit, we can say that the fines are much higher, 5x to 6x higher than what we saw up till the 31st of December. Sometimes those fines are so high as PLN 30,000. If somebody has violated several rules at the same time, for example, you're in excess of the speed limit and you drive on the crosswalk, and that means that drivers have started to drive differently. They're driving in slow motion, you might say. So that's one thing that's happened. In addition, we have fuel prices that have skyrocketed. And perhaps we're not at the end of that price hike, and we'll observe this further through the year. And perhaps, this means that some of us will be forced or compelled because of inflationary pressure. Maybe because of our disposable income, we might have to leave the car at home a little earlier. And we'll have to utilize urban transport more frequently, and this will affect the frequency of claims. Well, these are drivers, which, perhaps, could lead to a situation, in which, during the first quarter, first half of the year, we'll have a little bit of breathing room. But if that happens, in my opinion, this is only going to be an artificial deferral in time of what's inevitable. So that's why I said, my response is a little bit furtive. Basically, the insurance market, it's a little bit backward looking. It's historical. Of course, I respect my colleagues but more in terms of how they look through the rearview mirror as opposed to the way they're looking through the windshield. Well, 2021 was -- had a profit that's good, even though Q4 and even though there were some symptoms that should have implied a slightly different way of thinking. And once again, if the same happens in Q1 for the reasons I mentioned, well, then I would dare to think that these changes will not transpire, maybe because of how the brains work or maybe how people act, when not wanting to make decisions, in terms of leadership premium that they want to turn that into a negative bonus. So price hikes have to be initiated not by somebody who has a 1% market share but by a player who's capable of influencing the market and to ensure that the market share is following the same fashion. So it's difficult because the top-3 players have a combined market share of 70%. And the third layer of my response is as follows: small insurance undertakings have already utilized these solutions. They've verified their price lists and their price -- their transaction prices, and we can see those changes. Those changes where they are using higher prices. But in my feeling, as long as there is no major impulse on the market, it's going to be hard to expect that prices would move up strongly as they did in 2015, 2016. What is the situation linked to the issuance of subordinated bonds? Are you going to do the same thing as Alior and forgo that? Are you thinking about any, sort of, release placement instruments? I don't want to talk about what Alior is going to do. We're working together with a consortium of banks, and we're cooperating with them. We want to be ready, if the market is conducive. And so our work is ongoing at full steam ahead. And so we treat this in the form of scenarios. So the market might be green or yellow or red or black. When it's black, then we're not going to think about it. When it's red, probably we're not thinking about that market, where we might end up with nothing. But in yellow and green, so in green, we'll want to go forward. And with yellow, we'll make a decision at the very last moment. That's sort of our approach. And so if we think about the armed conflict, well, this is going to inform our decision, and the decision will be made at the end of Q2. What sort of alternative financing methods are being considered, while alternative financing methods don't exist? So I want to be quite open and we've already talked about that. So the call option that's in the instrument, how can it be executed? We have to ask the regulator. Then we start the issue. And then the regulator says, yes or no, then we have to be able to show and demonstrate that we're capable as of the date after the payout, that we're able to maintain our capital position. Otherwise, solvency position, it's hard to imagine that the regulator would agree to allow us to do this because if the regulator gives an approval of green light to PZU, this is an approval or greenlight given to 40% of the market. And so if the market is black or red, regardless of how we call these colors, then we wouldn't receive that consent from the Polish FSA. And so this parameter is strongly described in the issuance, and that means the option won't be executed. And in my thinking, with respect to this instrument, there is no other option. What's the frequency of claims at the beginning of the year? Has it revisited the original levels? And will this trigger price hikes in motor insurance? As I've mentioned already, January was the opposite of what we've seen in the question because of Omicron and other threats that were out there. Were there additional changes in the motor traffic law? Well, basically, because of those changes, we can say that -- we can say that those decisions haven't been triggered yet because of the level of fines, because of the changes to the law.

Group and continued life margin in 2022, given yields are up and COVID mortality impact appears limited. Can it reach pre-pandemic levels?

So we're thinking or we want to think about this in the following fashion that 2022 is starting to be the return to the level from prior to the pandemic. Whether or not in 2022, we're going to be capable of reaching that 20% watermark? I would be reticent here. Why? And we've talked about that in the results for Q4. There's a certain type of a negative impact, is the health debt and everything that's happening in the health service. For 1.5 years or 2 years, we haven't visited physicians. And if you have a cold or maybe the flu, that's maybe not a big change or a big risk, but if you have a chronic disease or if you're not taking care of yourself, then if it's not something where you need to risk your life and your health, but all of these things were deferred, pushed back. And so it's not to bring about a situation, in which we go to a doctor and then we catch the coronavirus, and we inflame things. Well, we're in a situation today that we've basically tamed coronavirus mentally. It's, for many people, it's not treated as something that's a major challenge. We have a higher level of vaccination. Maybe it's not as high as it could be, but it's higher than it was 1.5 years ago or even 1 year ago. So I assume that this year, we won't have major improvements here in the loss ratio. Q4 showed -- for some period of time, we will have to deal with a higher loss ratio in some services products that are paramedical in nature for the reason I just mentioned. So before we come back to the pre-pandemic levels, we're going to have to pay back that health debt. That's what I call it. And that was the last question that I received from you, in terms of the ones that are popping up on my screen. I'd like to thank you for all your questions. I'd like to thank you for the time that you've allocated to me, to us, and we're going to wrap up now. And I'll invite you to be in contact with us, on an ongoing basis, through our traditional channels. And in May of this year, we'll have the next round of earnings conference. So thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]