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

Ladies and gentlemen, I'd like to welcome everyone who has joined us today for our meetings. This is an unprecedented event, and its goal is to make everyone familiar with PZU again. And new events that took place recently and as a result from the first quarter of this year, PZU is publishing its financial statements in a different way according to a different standard, its consolidated results. And this may be not intuitive that when it comes to carrying out the strategy, the relationships with our customers and the way we approach distribution, the way -- the channels to which we reach our customers and the way that we provide value through some of the best products. Here, nothing has changed on this level. The only thing that has changed is the measurement of these events and the way they are presented in the financial statements and the balance sheet of the capital group. So during today's meeting, we'd like to get to let you know about this new model. We are aware that it's not obvious for everyone. So we'd like to let you know how the changes on the regulatory level are impacting the way how we have started to talk to you about our results, this new way. Today's meeting is a workshop. So we'd like for this meeting to be as interactive as possible. So we invite you to ask questions during the meeting. We also have some people participating remotely, but nonetheless, we invite you to try to participate actively in this workshop. And this is because we would like to have an opportunity today to address as many questions and doubts as possible. so that we can make it easier for you to navigate them. And so that from this quarter on, you can have a better understanding of what's happening in PZU and to make it easier for you to discuss it through the lens of how we are reporting this on the outside through our financial statements. Therefore, we have divided today's meeting into 2 parts. So we'll start with the theoretical part. We'll talk about some basic concepts of IFRS 17. We will compare this standard to the previous standard. We will talk about measurement models. We'll talk about how various business segments will be treated in terms of the new standards. We'll talk about methodological aspects, about choices that we've made that will have an essential impact on the shape of the financial statements and the results of individual segments. We'd also discuss how we'll be presenting the segments in the results statement, how they will be measured. We'll also compare our situation compared to our peer group, and we will tell you to what extent the standard is having an impact on our activities. So we will also have an exercise called strategy recalibration. So we're seeing that due to our new strategic challenges, there are a lot of changes happening. That's why we decided to recalibrate certain things. And then we have some key measurements of our ambitions, and we'll try to redefine them. So that's another topic covered in today's meeting. Then we would like to quickly go through certain examples. So we're going to discuss how certain insured events are presented and measured in the financial statement. But in the new financial statement, but also compared to how they were presented and measured by the end of last year. So I think this will be the essence of today's meeting, of today's workshop. And if you feel like this is of interest to you, if you feel that you would like to know more, and I feel that many of you may have this feeling, then I would like to address these topics. So I don't want to compromise due to time limitations or to a need to strictly keep to the agenda, so we won't be going back to the certain aspects quite often. But then we have the second part, and then we'd like to remind you about our results for the first quarter. And we'd like to tell you how through the lens of the whole theoretical knowledge that we'd like to present in the first part, and then through the lens of the theoretical examples and how, in light of them, our Q1 results should be understood. And then we'll have a Q&A session, and we'll end with a summary. But as I said before, because we have a theoretical and then a practical part, we want to talk about insured events through the frame of some specific examples. We want to analyze specific policies, which are characteristic to our business, so as much as possible in light of the remote character of this event, we would like you to participate. So if anything is unclear or not intuitive, please do not hesitate to ask questions. And then we will stop, and we'll try to answer the questions as they appear because it's very important for us to address all your doubts and questions. So this is the agenda for today. As for the workshop itself, we decided to ask our friends and partners from Ernst & Young. So as part of the joint implementation, this company is our point of reference, and it's been supporting us in the implementation of this new standard, especially when it comes to the main company and to subsidiaries. So in my view, these are the best persons and the best partner to discuss these difficult topics in a very clear way. So soon, my colleagues will take the floor, and they will present the first theoretical part. How long will it take? Well, that depends on your curiosity. And here, I don't want to rush through it. So then we'll be going through specific examples. And we'll be going through specific sections in the first part, then we'll take a break. And then we'll move to the second more practical part. So then we'll discuss the results of the PZU Group in the first quarter. So that's all for me. I'd like to welcome all of you again. Thank you for your participation. Thank you for joining us remotely. And I'd also like to thank those who are here on site. I believe that participation in person is even more significant. So we are really grateful to you. So without further ado, the floor is yours.

Thank you. Can you hear me? Good morning, everyone. I'm Radoslaw Kwasnicki. I'm a partner in the EY company in risk consulting. So we've been partnering with the PZU Group for many years now in terms of the implementation of the new accounting standard, both for a large subsidiaries of PZU, PZU SA, PZU [indiscernible] as well as for all the subsidiaries of the PZU Group. So before I'll discuss the implementation, Jania, can you please introduce yourself?

Good morning, ladies and gentlemen. My name is [indiscernible]. I'm also a partner in the same sector, risk consulting as Radoslaw. And along with [indiscernible], we've had the pleasure of supporting the PZU Group in the implementation of IFRS 17. So I'd like to start by thanking representative of PZU Group for inviting our company to cooperate in this difficult project. It's been several years of really hard work. And just to briefly sum up the years, we must say that we are very proud of this project that we've been able to be successful. We faced a lot of challenges. As you know, the portfolio of the PZU Group is very large, it's very complicated. We have a lot of life insurances that reach back to policies from the 1990s. So as a result, we faced many challenges with data availability and methodological challenges. And I believe that we've dealt with all of that quite well. It was also not easy to organize the implementation project in the PZU Group. As you will see in the examples that we show you, IFRS 17 is a standard that requires from accountants to understand actuarial concepts and actuaries, they need to understand accounting elements. Controlling also plays a significant role as well as teams handling financial analysis. So this was a multileveled approach and both on the side of PZU and on our side as the consultants, we've had to engage people of many different skills and competencies, and we've had to coordinate that to create a well-working team. And I believe we've been successful. And there was an additional complication. So we were cooperating, not only with PZU SA and PZU [indiscernible], but also with subsidiaries. And another great challenge was the technological sphere of the implementation. IFRS 17 requires processing of an enormous amount of data. And these are also new data and new concepts that we've not used before, for example, cash flows. So this was also a great difficulty to find a calculating reporting tool, instrument that would be able to process this enormous amount of data and to conduct all the calculations. So this was also a great challenge, but we've been able to do it. So to sum up, we are really proud of this project. You've already seen the first results, but today, we'll focus on explaining the numbers and their meaning. If you were to describe briefly the changes of IFRS 17 compared to the previous standard that we've used to report until December 31 of the past year of insurance contracts, namely IFRS 4, so IFRS 17, first of all, introduces much greater comparability, cohesion, consistency and a clearly defined valuation methodology. IFRS 4 was a very general standard. So as part of IFRS 4 reporting, you had a lot of variety of accounting practices. And you're talking about the measurement of liabilities, most often. So quite often, the different liabilities measurement between different companies were not comparable. IFRS 17 still leaves a lot of leeway for companies, but nonetheless, the valuation methodology is the same for everyone. And where there is some bigger room to shape the parameters and methods and so on, there is an obligation to reveal the choice of methods. So here, the comparability is much greater. And as for some more technical elements of measurement methodology, so something that was not present in IFRS 4, but does appear in IFRS 17 is, first of all, a well-defined and regularly updated assumptions used to measure liabilities and assets related to insurance business. And the widespread use of discounting so the assessment of time value of money and revealing the portfolios of insurances, which are onerous. In IFRS 4, there was no such requirement. So quite often, sometimes onerous portfolios were connected with profitable portfolios so that the loss would not be shown in the presentation and also an open valuation of options and guarantees. This is also present in IFRS 17, and it's a new element compared to IFRS 4. And another new element is that it requires in the moment of the first recognition of the policy, the expected loss or profit of this policy and then to qualify this policy either to the profitable portfolio or to the loss portfolio. And for the profitable portfolios, then we have clearly shown the expected profit from a given policy, which is presented in the balance sheet as a liability. So this obligation to recognize at the very beginning, loss policies, onerous policies and profitable policies, gives us the possibility to track the results over time and then to present onerous policies in a different portfolio, in a different report. On the next slide, you see a comparison of the results according to IFRS 4 and IFRS 17. And here, none of the positions are repeated in both cases. To simplify it a little bit, IFRS 4 first reveals all the sources of revenue, especially premiums, then it presented all the sources of expenses, first of all, claims and benefits, administrative and acquisition costs. And the result was the difference between these 2 positions. Whereas, according to IFRS 17, the presentation is completely different. We are calculating, first of all, revenues from insurance -- from the insurance business, the expenses of the insurance business, then we show the result. Then separately, we show the result of financial activities. And here, it's important to show the discounting effect. And only then do we have a comprehensive result of the insurance business. Hani, would you like to add something?

Yes, I believe that an important change is life insurance with the unit-linked product before the whole premium collected for such products was presented in the written premium, so in the revenues. Whereas, now in the revenues, we have a premium that the policyholder is paying to the fund. So this mechanism is much more complicated, but this is a simplified version. So we have the premium paid by the policyholder to the fund, and then they can collect it, and this is not presented in the revenues so it's quite an important change because the assumption of the standard is such that this premium does not impact the company's results. So it's an important change in terms of comparison with IFRS 4. So because the measurement methods are completely different, the presentation of the value of liabilities in the balance sheet is also different. I don't want to go into details of IFRS 4 because you're quite familiar with it. But then we have separately presented, in the liabilities, the technical operational provisions as well as other liabilities related to insurance services whereas on the asset side, we have the share of the rare insurer in the provisions as well as insurance liabilities and activated costs of acquisition, which are shown separately and in a clear way. The balance sheet of IFRS 17 may seem less clear at first sight because you have only 4 position related to insurance services. I will use English terms. You can also take a look at the glossary we've included at the end of the presentation. You'll also find the Polish names of the concept there. But after many years, we are quite used to using English terms. It's even easier for us. So we have insurance contract liability and reinsurance contract liability. So this is the obligation from insurance or reinsurance contracts. And on the other side, you have the specific assets. So these are the positions we see in the balance sheet, whereas you will also see the analytics of the position where they are revealed. And there you'll see the components of each of these elements, especially that insurance contract liability. And we see this on the next slide. This is the value where we see the value calculated with actuarial methods in accordance with IFRS 17 standard. This is the value of liabilities in terms of future coverage period. So liability for remaining coverage and the value of already incurred claims. So this is the current claims provision or reserve, LIC in short. And the next component of insurance contract liability is the loss component, which arises when we have a portfolio of onerous contracts, Contractual service margin, CSM. This is the profit, which I mentioned and which is shown in the balance sheet as a liability and is being amortized over time. And we have the so-called risk adjustment. So to put it in simple terms, this is related to security, security margin, which appeared in IFRS 4 as well, but it was not revealed in a clear way. Each insurance company was setting up provisions according to the reserves according to the law in a conservative manner, so the safety margins, of course, we've shown that the IFRS 17 standard requires us to designate this surcharge on the risk, risk adjustment in a clear, open way separately for liabilities due to incurred claims, LIC, and separately on LRC, liabilities for remaining coverage. Let me briefly come back to the previous slide. What is important here, as [indiscernible], mentioned, but this transparency regarding the balance sheet itself, maybe it's not greater according to the new standard because 2 important or 3 important items disappear, in my opinion. First of all, the receivables or pre-premium receivables as well as liabilities such as commission related liabilities. Now everything is shown as part of insurance liabilities. And this is what you need to remember, but look at the insurance liabilities is a look from the point of view of all the expected future revenue under the insurance contracts. So these items are included directly into the measurement of the liabilities. And 1 more maybe comment regarding this topic an additional component that we see in the equity so other comprehensive income. And here, we are presenting the change in the measurement, the valuation of liabilities due to the changes of interest rates. We'll be talking about it more elaborately later, but this is also a new component, new part of the balance sheet that we need to remember. Okay. So the IFRS 17 standard allows free evaluation models for the insurance portfolios. The first method default one for the insurance contracts is the second method presented here on Slide #2, the general measurement model, GMM in short. In a moment, we'll elaborate on more details being a well effect, but unfortunately, that time is running fast, so I'll not be getting into details. But generally, we are measuring the value, the amount of liabilities based on the best estimate of liabilities similar to what now we are calculating and reporting as part of Solvency II. We add to that risk adjustment that I mentioned already. And the other part, what's left as expected profit, CSM margin is the third component of this valuation method of the contractual service margin, CSM. A similar model could be applied with respect to the valuation of portfolios where we have insurance policies with a unit-linked component, which is the variable fee approach. The difference -- the philosophy of measurement is the same, but the difference a bit in the details, technical details for those policies. However, a completely different model, the so-called PAA, premium allocation approach, that's a simplified model that we apply for major elements of the portfolio, simply speaking, of 1-year policies. So for the normal regular insurance, property insurance and non-life insurance business policies. The method is different -- measurement is different under IFRS 4, but the results come out quite similar. One more comment from my side here, the level at which we are conducting this measurement, we are conducting the measurement on a relatively granular level, the so-called insurance contract groups, the so-called insurance contracts. There's also a different approach versus what is done under IFRS 4, where we are looking at the much lower level of granularity at this measurement. However, here, we are looking at this groups of insurance contracts, where, first of all, our group, according to the moment of commencing the contract and one group cannot contain the contracts that began within a period of longer than 1 year. So we are talking at least about the so-called 1-year cohorts of contracts. To that, we had profitability, the yield element that [indiscernible] mentioned before, that we have to separate the onerous from non-onerous contracts, and we are also grouped separately, and we also have to make sure that those contracts have a similar risk characteristics that are jointly managed. So only at this level of a group of contracts, we are carrying out the appropriate valuation, appropriate measurement. And this is also has an implication of the fact that the risk the losses and profits from the individual groups cannot offset each one another. Therefore, those groups at the level of which we are conducting the calculations, so we arrived at several hundred groups as a matter of fact, as a result. And this is -- this order of granularity and results in the PZU Group, as you can see, due to the size of PZU SA joint stock company, the largest part of the business is measured according to the simplified method. Definitely, the standard allows for that, but 1/3 roughly is the -- measured according to the general method. The unit-linked insurance contracts mainly link -- do not make up an important -- a significant portion of this portfolio. Okay. A few words -- a few more words about just repeating myself a bit, what we already said. But if we were to select one of the most important slides of our presentation, so let's maybe stop for a moment, looking at the definition of general model, which, as I just mentioned, is very important from PZU's standpoint. Let me repeat. Our measurement of insurance portfolio starts with setting, determining the best estimate value, so best estimate of liabilities due under this portfolio as of the day of beginning of coverage under this portfolio. So we said the best -- we established the best estimate of liabilities similar to the value of the provision of a reserve, but we are displaying in the Solvency II report. We had a risk adjustment to that. And what's left is the contractual service margin. These 3 components make up the amount, the value of insurance liability, LRC, which is a counterpart of today's margin -- premium reserve. We are at the beginning of a coverage period, where there is no damage has happened, no claims have been paid out, the time is running. So out of this portfolio the losses and claims are being paid out. And the subsequent reporting date once the claims have reason, we will be showing the LIC valuation so the liability for incurred loss claims. So this is a counterpart of claims reserve according to the IFRS 4 and the Polish accounting standard. Of course, there is a component for the reported claims, and we have measurement evaluation based on the expected cash flow revenue under these claims and the appropriate risk adjustment. So protection against the fact if the payouts are actually made in the future were to be higher or lower, but it would be a variance versus the expectations that we adopted under the actuarial methods, okay? So what [indiscernible] has briefly already described, the general measurement model, we also have a simplified model, and the simplified model I think can be summed up as a valuation as a measurement of a liability that is closest to what we've been observing under the old standard, the IFRS 4. And on one hand, the valuation -- the measurement of this liability for incurred claims is practically similar, the same as in the case of the general measurement model, so we are looking at the future expected payments under the incurred losses -- incurred claims. So we had the safety margins such as a risk adjustment. However, regarding the part related to the claims that have not incurred, so the future coverage, futures protections of LRC component, liability for remaining coverage, is measured is valued at a very similar level as we see today under IFRS 4. And I think that in the most simple terms, you can think about this component as reserve -- UPR reserves reduced by the premium liabilities, premium receivables. So this is definitely a simplified model, which is closest to what we observed using the old standard. Now a few words about the risk adjustment. So standard actuarial joke says that the probability of the actual payments will be equal to what we determined to be the best estimate is equal 0. We don't think we know it definitely is going to be come through. So where the need to determine to value the risk adjustments, so the amount the value that will provide a protection hedging versus the situation where the future payouts will in particular, will exceed the assumed cash flows. Due to the fact that we have available historic data, historical data on the payouts in relation to our assumptions regarding the expected value of a distribution of payouts, we are able to calibrate the probability distribution graphs and determine those risk adjustments accordingly. Generally in practice, 2 type -- 2 methods are used. This is either confidentiality level method or the cost of capital method due to the availability of data and certain technical details related to the calculations, the assumption has been made. It is assumed that the confidence level approach is used more in case of non-life insurance, where the property insurance, whereas the cost of capital method is used in case of life insurance business. An important thing is that the standard requires disclosure, which quantile of distribution of future payouts under claims is corresponding to the risk adjustment. So in brief, in simple terms, whatever assumptions we make regarding the risk adjustment, the standard doesn't define, doesn't impose that, but you need to disclose it. You need to show it. What level of risk adjustment you include in your provisions in your reserves. So once the payouts are made, of course, the risk adjustment is released and it enters the appropriate item of the income statement. And what is important here is also the fact that this risk adjustment, we have to disclose this method. But under the old standard, of course, the reserves also included a certain part of safety margin or risk adjustment. But first of all, it was not openly disclosed. On the other hand, it didn't have to be released over time. Whereas the new standard requires that. So once our payout and the claims are carried out in accordance with our projections, then this risk adjustment is released in the income statement as our revenue. So I think this is our significant change. Additionally, what is important is we could, of course, think about this risk adjustment that we can freely apply or assume any safety margin, so risk adjustment so as to control the results on our reserves. But due to the disclosure obligation, it's not possible. That's one thing. Second aspect is such where the risk adjustment also evolves in the assessment of the profitability of our contract. The higher risk adjustment we take into account, also we will show more on more onerous contracts in our portfolio. So there is this thin line that we are balancing when we are determining the risk adjustment. And new component of liabilities, the so-called CSM, contractual service margin, this is the component that's a part of measurement -- for the overall measurement model at PZU Group. First of all, these are traditional life insurance products. This component of the balance sheet is measured as a difference between the expected premiums and the expected expenses and benefits, of course, adjusted by the discount rate and the safety margins of this risk adjustment, so this a counterpart our future expected profit. So this measurement must be made, we must make as of starting the contract, commencing the contact. So this is also a new obligation. So far, the valuation of the measurement of liabilities was performed only and solely as of reporting date here. For each contract, we have to make this measurement as of initial recognition moment. And what is important, if there's no profit, so our contract is onerous, so then we recognize the so-called loss component. If this is not a part of our balance sheet, it's a loss that is immediately recognized in the income statement. So there is no symmetry between recognizing the profit and losses under the new standard. The profits are recognized throughout the period of providing the insurance service coverage period, whereas the losses are recognized as of zero date and only later technically amortized without having an impact on the results on the earnings in the subsequent periods. The CSM for the subsequent valuation days, measurement days, was important, the sequence of actions taken. And it is adjusted, first of all, by unwinding the discount effect because it's also part of the balance sheet that's also subject to discounting. And then the contractual service margin from previous reporting periods, the contractual service margin is added due to the new contract in the given insurance group, then, subsequently, this item is adjusted by the changes in the actuarial assumptions of this is what's important is the sequence of taking these actions. So if our estimates for the future regarding the future cash flows change as of reporting date, then we adjust our contractual service margin only in the subsequent step. We release a part of a contractual service margin and place it into the result, into the profit. So this element, this CSM release, this is a component, the part that's finally shown as revenue in the income statement, whereas the entire CSM amount, before recognizing this revenue, takes into account the changes of actuarial assumptions. So we will be -- in these specific on the detailed examples what we'll be discussing. But what's important is the changes of actuarial assumptions are not recognized right away immediately, they recognize step-by-step gradually by releasing the contractual service margin over time. A few words about discounting. We'll not be wasting too much time on that because time is running out. But the standard allows 2 methods for determining the discount rate. One has to remember that in contrast to the requirements of [indiscernible], insurance company determines the discount rate for its portfolio on its own for reporting under IFRS 17. The standard allows 2 methods, the top-down and the bottom-up methods. In the top-down method, basically, we start by replicating the cash flows from liabilities with cash flow -- cash inflows due to the portfolio of assets, but replicating these cash flows, and we include the risk of default, the risk of bankruptcy, which is potentially included in the measurement of its portfolio of assets. Because it's not applicable to the portfolio of liabilities. The PZU Group decided to implement the second method. So the bottom-up method where the discount rate is determined or said a sum of risk-free curves, risk free rates [indiscernible] and liquidity, illiquidity premium. The main reason was we need to be consistent with valuation of portfolios applied for Solvency II reporting needs. But as you can see, the standard IFRS 17 allows for increasing the discount rate by illiquidity premium. The point is that to take into account the value of money, the fact should be taken into account for [indiscernible] our portfolios that are very liquid, such as unit-linked portfolios where cash flow can take place any time at any amount, and also where our portfolios where the cash flows are much more predictable, well planned, and this is where the discount rate can be increased by the illiquidity premium. Let me add that the discount rates are an important part of impacting the value of our liability. If discount rates change significantly I think we were witnessing such material changes over time. At that time, the amount of the lability may change also materially. Under the new standard, the insurance companies have a choice between recognizing this change either directly in the profit, in the result, or by recognizing this change in the amount of liabilities in the capital. So here, PZU Group chose the second option in order to stabilize the result which is presented in the profit and loss statement. The next element is opening balance sheet valuations of a transition. The standard requires determining the opening balance in a way as if the standard will have always been in place, has always been in effect. So we are applying the number 8 [ IIS, IIS ] 8. What it means in practice? It means that we have to go back in time to the time when the policy that we now have in our portfolio was issued and began -- took effect. And we need to measure the value of the best estimate of liabilities, the risk adjustment and the contractual service margins for this policy as of the date that this policy was concluded, was signed, and then moving over time, amortized according to the requirements of the standard these elements so as to arrive at the CSM, value CSM. There's also a reporting date. It's a difficult task especially as we mentioned in the case of PZU Group where we have major -- a significant portion of the portfolio has several, more than dozen or more than 20 years old. As I mentioned, one of the successes of this [indiscernible] is the fact that we managed to prepare such data and to carryout such measurements, such a valuation going to quiet the standard in a situation where such an approach is not possible, the standard allows for the so-called modified approach, modified retrospective approach. This approach, briefly speaking, consists in the fact that the precise actual projection as of the date of concluding the policy and the subsequent periods. We can replace with a database on the actual implementation of those cash flows. In a situation where such data is not available, a third option would be to use the fair value approach, which measures the CSM as of today without the need for retrospectively backtracking to the day the policy was concluded. We can estimate the CSM as of today as a difference between the fair value of the portfolio, the so-called fulfillment cash flows. So the amount of the best estimate and the risk adjustment for this portfolio of insurance contracts. In practice, fair value is very close to this value amount of cash flows. There is certain technical differences. So CSM estimated this way is frequently close to 0. So I can say the standard punishes in a way,[indiscernible] the insurance companies that do not have a historical book to the data so as to use it to value the transition according to the historical respective approaches. So summing up, the most important changes regarding the accounting policy of PZU Group, we can focus on 5 aspects. So first of all, the selection of interest rates, we mentioned already that. So the PZU Group decided to use the top -- bottom-up approach. So to apply the risk-free rate plus illiquidity premium for -- regarding the liabilities. And this approach also was chosen because in order to maintain consistency with the Solvency II regime and the measurement of liabilities for the needs of the new standard because the so-called risk-free rate is basically the same rate that is applied for discounting the liabilities under Solvency II regime framework. The other important element is the recognition of value of changes in liabilities due to the changes in the discount rate and the way the changes are recognized. And as I mentioned before, the PZU Group decided to recognize those changes by changes in capital -- cost of capital, then not taking into account the changes directly in the income statement. I think this is also the most frequently chose an option by the insurance group due to wish to maintain best ability of results presented in the profit and loss statement. The next aspect, the risk adjustment. There is adjustment due to risk to [indiscernible] cost of capital for the Life business and confidence level approach in case of non-life business operations. Also, this is consistent -- the approach is consistent to what we've been observing in the market, this is a market practice, most often -- most frequently chosen by insurance groups. The next element is the split into insurance groups based on the level of which the measurement of liabilities takes place. I mentioned it briefly before, but the split has to be very granular in the case of PZU Group, in case of life operations, life business, the group decided to apply the annual cohorts. So we combine, we group all the contracts with the initial recognition date falls within a single year. Whereas for the non-life business, this is the split into quarterly cohorts. The split is more granular due to the fact that the group wants to keep observing the profitability of the individual groups of contracts quarterly and monitoring this profitability on an ongoing basis. And the final element, so the transition approach, [indiscernible] mentioned already 3 methods, the PZU group most frequently applies method is the full retrospective approach, where the default method in fact. Whenever it was possible, the full retrospective approach was applied. So as if the standard had always been in place in case this approach was not impractical and obtaining first of all, all actuarial projections as of the date -- earlier days, I don't know, maybe beginning of the '90s or the '90s in general, it was impractical and didn't have a material impact upon the results. The PZU Group decided to apply the modified retrospective approach, namely the approach where the expected cash flow revenues were replaced with the actual earned revenues, obtained revenue. The third approach [indiscernible] mentioned it as well, that this is the most often approach that leads to the fact that we can't recognize the contractual service margin in the balance sheet. It was supplied in very few cases, in fact, when the use of any of the previous project was not practical anymore. So to sum up the theoretical part, we'd like to tell you about how from our perspective, the implementation of IFRS 17 impacted financial results reported in some European countries by different companies. So the PZU Group was also comparing the impact on its own financial statement with the way it was taking place in different companies. So most countries in Europe use the simplified method, so PAA to the measurement of contracts related to future financial statements and reporting periods. So the value and significance of the change of the measurement method for the equity of insurance companies depends on a large basis on the previous reserving policy that was carried out under IFRS 4. So we are dealing with 2 cases or 2 groups of companies. So the countries marked in the dark blue color that you see on the slide are countries where even before the reserving policy was such that the valuation was close to the best estimates. Well, maybe in addition with some risk adjustment. So the new risk valuation and new standard did not really make a big difference in the reporting on the balance sheet. Whereas the countries marked with the light blue color represent a situation where the previous way of evaluating liabilities were characterized with a more conservative approach. And there, the introduction of IFRS limited the value of the accounted liabilities. So to the decrease of LIC, so this had an a result of increase of equity in such countries. And what's interesting if a more conservative measurement methods were used before we did not have a discounting of liabilities. Right now, the liabilities are discounted, that's also one of the reasons why they are smaller. But the fact that they will be discounted makes the equity value, not only change as to its value, but also in the future, it will be much more volatile. Because discounting rates, especially in the past months, have a tendency to change. So if the company uses the OCI option, then, of course, it will impact the equity. And if not, then directly in the statement result and accounting. That's where it will be seen. That's all when it comes to non-life business. And this vulnerability of discounting rates, it could be also adjusted by the change of valuation on the assets side. So if there is a change of the valuation of assets and if it would be recognized in the equity and capital then we would have a zero change in the discounting portfolio. But if there is a mismatch for any reason, and here I also mean the chosen methods of valuation, for example, valued by the amortized expenses, then there is a lack of symmetry. On the liability side, we have volatility because of these changes, and on the asset side, lack of volatility. So this is also an important element. As for life business, the introduction of this standard also impacted the value of capital. This is similar to the case of non-life business, and it depends on the reserving policy under the old standard. So again, in this case, the countries marked in the dark blue color, these are countries where this reserving policy was less conservative so it was closer to the best estimate of reserves. And because the standard introduces a new element of liabilities in the shape of CMS -- CSM, then in these countries, actually, we've seen a decrease in capital as a result of the introduction of this new element. And in cases where the reserving policy was more conservative, then we had a mathematical reserve being created then the transition to the new standard has the consequence of a significant increase of equity. As to the Life business, we should mention the long-term character and the influence on the recognition of profit over time. So not only balance sheet values, but also how we recognize our profits over time. In the previous standard, this recognition could be much more -- could vary to a greater extent, also because of a more prudent approach for the creation of a large mathematic reserve with the greatest risk adjustment. In the first period, we could recognize the loss, so some low results. And then in subsequent years, this loss was compensated with higher results. Whereas under the new standard, the introduction of the mechanism of recognition of CSM really stabilizes the result. So the result is recognized in an even way over time and as long as its actual fulfillment matches our expectations, our expectations as to the behavior of future cash flows.

And that was the theoretical part, an introduction to the examples. Are there any questions? If there are no questions, then let's move to our examples. We'll show you 2 sets of examples. The first related to the simplified method, so to the premium allocation approach. And then we'll show you examples related to the general measurement model or GMM. And we've constructed the examples in such a way as to show you the key elements of the mechanics of IFRS 17 -- of the IFRS 17 standard to show you how certain events that we can see, for example, changes in the assumptions or changes in rates, how that is being recognized and how that influences the financial results? But before we move to the examples, let us discuss this slide, and we want to show you the detailed list of different results. As I said at the beginning, insurance service result is made of different components. So as we take a look at them, each of them separately makes -- contribute to the results. And I guess we can analyze each point and say once again how the result of IFRS 17 is being construed. First, let's analyze the revenue side. So the first position that you see here is amortization of LRC, liability for remaining coverage. This is significant only for the simplified version for the premium allocation approach PAA. So we should think about this position as the premium that was earned minus the -- some other elements. And I guess we should look at this in the context of the previous standards. So this is for the simplified method. And now as for the general method, then the view changes completely. On the revenue side, we have these elements. First of all. The expected future claims and benefits. So here, we see the amount of claims and benefits that we expected in the valuation of our liability for the previous reporting period. So the liabilities and expenses that we expected that for them, the payment will occur in the given period. And then we have the release of our CSM. So here, we are recognizing the revenue over time, and we also show this on the revenue side. And the next element is the release of risk adjustment for the period. So this also falls on the revenue. And the last more presentational element is the recognition of insurance acquisition expenses over time. This is on the expenses side. So it does not impact the results. It is also a presentation now to separate the cost of acquisition and to show you how they are being amortized over time, but it has no impact on the results because they are in a way amortized by CSM. And let me just add, we are talking about revenue. So expected claims and benefits expected expenses. This is the revenue side. So contrary to IFRS forward, the premium was the revenue here in the general method, GMM, we construct the revenue from the elements of what the premium is dedicated for. Some of it will be dedicated for claims, some for expenses, some for CSM for our profits, some for risk adjustment. So these are all components of our revenue. So from the perspective of the whole coverage period, our revenue from insurance services are equal to the premium, which we've actually collected from the policyholders. So this amount is the actual premium payment that we observe in our portfolio. And now let's move to the expense side. So first of all, claims incurred in the period. This is one of the elements. So here, we show claims for a specific reporting period, both the ones already paid as well as adding to the claims reserve. And the same goes for expenses then changes related to the claims reserve, but the one created for previous periods. So in the 2 previous lines, we have the recognition of the new claims reserve for the new claims period and the changes in the past claims reserve according to actuarial assumptions are presented in a separate line. And another important element is related to onerous contracts. We said that the loss for such onerous contract is recognized immediately in the results accounting, and this is being recognized in the new loss components recognized. So here, we have the whole amount of loss for the given contracts, whereas the line related to amortization is the presentational line of amortization of the loss component, which was recognized in previous periods -- previous reporting periods. And the sum of our insurance revenues and the expenses gives us, in sum, the insurance results. We also have reinsurance. Reinsurance can be presented simply as a loss or gain, net gain or loss from reinsurance in one line. But in the bust financial statement, you'll also see some more detailed distinction into revenues and expenses also for reinsurance position. and new elements related with discounting, which appear in the finance income section. So the impact from discounting of reserves and the same applies to CSM. This is presented in 2 positions, insurance finance income and the reinsurance finance income.

And let's also mention 2 important elements. Maybe they will give you a better view of the results according to IFRS 17 and how it's being construed. It's a bit of a simplification, but if the actual paid claims and expenses were equal to the expected ones then they would level out. And then our whole result will be built through the release of CSM and risk adjustments. So if we simplify it this way, then it's easy to see in a conceptual way how the result in IFRS 17 is construed, so we account for the whole value of liabilities in the balance sheet, set by the element of future revenue and risk adjustments and then when the claims are being paid, are equal to the ones planned according to the best estimate. And then our result is the effect of the release of CSM. The same goes for discounting. If discounting rates assumed for discounting liabilities are quite close to the rates of return from investment activities from the asset portfolio and to 2 elements, level each other out in the results, and we have no additional elements related to investments because we've already recognized this element by measuring, evaluating future risks and CSM. So we've discounted all the cash flows. And under the assumption that in the future, we'll get returns from portfolio in -- the investment portfolio that we use for this sake.

And now let's move to the first set of examples for the simplified method. So PAA, we'll look at the non-life contract, a 1-year MTPL product. And our measure takes place in a yearly cycle. So we are looking at yearly reporting dates. For this policy, the premium is paid upfront. And to simplify the example, we are not assuming any risk adjustments. And we are considering deferred acquisition costs. So we'll take a look at several examples. We'll start with a basic one. So how to look at revenues and expenses for such a contract? And then we look at the modifications of the most simple example, starting with the impact on the results statements of the situation when our expected cash flow differ from the actual ones. We'll also take a look at the policy where the beginning is not January 1 of the reporting year, but July 1. So we have a policy where the coverage period includes 2 reporting years, we'll also take a look at the onerous policy. And we'll show you the impact on the results of discounting, and we'll also take a look at the reinsurance elements. So starting with the most simple example. We have contracts where the gross written premium according to IFRS 4 Standards is [ PLN 1,000 ], loss ratio is 60%. So the sum of expected claims payment is PLN 600 and the acquisition ratio is 10%, so PLN 100. The earnings pattern is that the policy starts on January 1. So in the first reporting year, we already have the closing of the insurance contract and the whole period is already earned in the first reporting year. As for payment claims payment. It happens in the first period in the amount of 70% in the second period, it's 30%. So if you look at cash flows, then the assumptions are reflected here. So the premium is paid at the beginning in the first payment period. At first is PLN 600 spread over 2 periods, and acquisition costs are also paid upfront. And now looking at the income statement, the simplest one under the new standard. Because it's a simplified method. So on the revenue side, we have to look at 2 positions. First of all, amortization of LRC and we recognized this amortization in the amount of PLN 900. So as I mentioned before, we have to look at this position as an earned premium minus the amortization of acquisition expenses. So the amortization expenses are reported separately in a different line. That's why in amortization of value received, we have PLN 900. And in the second line, we have PLN 100. And on the expenses side, we have a similar cost of acquisition, which are also separated. So in the whole coverage period, our revenue from the insurance contract amounts to the premium collected. And as for the expense side, then we have the expenses, the claims incurred in that period, which are recognized in the first reporting year. And this is the sum of actually paid claims in the amount of PLN 420 and then the addition of the claims reserve, so PLN 180. So the payment of the claims that we expect in the subsequent period. And it all is fulfilled according to our expectations and assumptions, then in subsequent periods, we have no impact on the result. We have no influence on the results. And here, we have IFRS 4, so we are showing you how it's looked under the previous standard. So the simple recognition of such non-life insurance was quite similar. Presentationally, it looked different. So we had the gross written premium of PLN 1,000. Payment of claims, which could be separated from the state of reserves. So claims payment of PLN 420, changes in the claim reserves then acquisition costs, which were also fully amortized in the first period. So the result is exactly the same as under IFRS 17. And the second example. So here, by the end of the first reporting year, we expected that our claims payables would be PLN 180, just like in the previous example. But actually, the actual situation varies from our projection. So the actual value in the second period is not PLN 180, but PLN 230. So the difference compared to the previous example, is being observed for the second reporting year. So the whole difference is presented in the line item changes related to past service because this is actually a change related to the previous claims period. So we actually paid PLN 230, contrary to our expectations. So we present this whole amount in this one line in expenses side. And this difference is being recognized in the results. In IFRS 4, we have a similar situation. So paid claims, PLN 230. As for the claims reserve created at the end of the first year, PLN 180. And here, we are talking about the results statement for the second reporting year, a loss of PLN 250 recognizing the results. So there is no difference compared to IFRS 17. And now let's take a look at the policy that does not start on January 1. So we have 2 overlapping reporting periods for the coverage periods. And as for the assumptions for the premium, the loss ratio and acquisition ratio are the same, but the earning pattern is different. So right now, it's been earned proportionally for 2 reporting years. 50% of the premium in the first year, 50% in the second year. So the payment pattern, if you look at the coverage period is similar, so 35%. But compared to comparable reporting years, this pattern changes. So now as for the income statement according to IFRS 17, so the PLN 900 that we saw in the previous example is being amortized over 2 periods. So we have amortization 2x PLN 450 and the amortization of acquisition costs, so it's equally spread over 2 reporting periods. The amount of PLN 900 and PLN 100. So the total sum of the collected premium is PLN 1,000. And as for the expenses side, the situation is similar. So claims incurred in the period and the amortization of the claims reserve for the first year -- for the first reporting years. So the half of the year of the coverage of the specific policy in the first period, the amount is PLN 900. So in the middle of the year of the coverage, we expect payment of claims of PLN 90 to PLN 110 of claims have already been paid. So in claims incurred in the period, we see the sum of the 2 factors. In the subsequent period, it's similar the amortization of acquisition expenses. And what's important here and what changes compared to the previous one, we have a spread over time, but also the adding of the LRC reserve that was not there before. So the reserve for the future coverage period, which for the end of the first year, amounts to PLN 450.

So in all the examples, we are showing at the top cash flows, and they do not differ in both standards. So this is quite obvious because cash flows are actual cash flows. So on the accounting standard that we use does not influence the value of cash flows, but the differences happen in accounting recognition, and we will see that in the subsequent examples, which are a little bit more complicated.

And a similar situation according to IFRS 4. So here, we would recognize the -- in the first reporting year a gross written premium of PLN 1,000, but we would have the [ UPL ] by the end of the first reporting period of PLN 500. So the earned premium would be PLN 500 in the first and in the second reporting period claims paid according to the way they were fulfilled and also the change in claim reserves by the end of the second period, this reserve has not changed in terms of the value. So we have PLN 90 and PLN 90. So there is no change in the reserves in the second period. Amortization of acquisition costs over time is being spread evenly and proportionally to the way that the premium is being earned. The profit is exactly the same as under IFRS 17. So I think that here, we can see what we mentioned before that our reserve for future coverage in the old standard, we could look at it as our reserve of the premium in the old standard minus assets related to acquisition expenses before we had one of the value of PLN 450, whereas under IFRS 4, we had a separation of this amount.

And in this simplified example, the only difference occurs in the change in the value of liabilities. So intentionally, we are not going into matters of the leak change of valuation related to already incurred claims because here, the aim of this example is to focus on the parts of the remaining coverage period, whereas this difference even in the case of some simple contracts, 1-year contracts would also happen in the lead period.

Okay. I think let's move on to more interesting example. So what has happened in case our policy brings losses is onerous. First, we're dealing with non-onerous policies, not here. The assumptions are changing regarding the policy and looking at the loss ratio, which is 110%. So after adding the acquisition cost, in fact, we know that our policy will be generating PLN 200 in losses. So what to do in such a case? Here, the revenue side doesn't change. So we are looking at the revenue side and nothing changes on this side. And regarding the expenses side, we are recognizing this loss right away, at the 0-point in time in the new components recognized item. This is minus PLN 200, and we are amortizing appropriately this loss over time in a separate item, amortization of the loss component. And what can also -- it's worth noting here is the fact that the payment -- the claims incurred in the period where we have the amortization of the loss component, in fact, switched off presented in a separate line item. So the loss recognized immediately in the first -- in the initial period. And under IFRS 4, we have an example here that shows that this recognition could be similar, but we would like to draw attention to effect that it's very much dependent upon the accounting policy also of a given insurance company. In this case, we know that this is an onerous policies under IFRS 4, we had a possibility to tie a so-called above premium client reserve above the UPL, we are able to add with the so-called here, adding this reserve in the first few takes plans. So outside of adding premium reserve in PLN 500. We are also adding the urea unexpired risk reserve in the amount of PLN 100. So only because of that, the recognizing of this profit is same as similar as in case of IFRS 17, whereas this reserves related policy, as a matter of fact, reserving policy was under the old standard up to insurance companies, and the level -- the amount that the [indiscernible] reserve was recognized also was up to the insurance companies. So it frequently happened. But as a matter of fact, the onerous and non-onerous contracts at a higher level. The impact of this loss was, as a matter of fact, offset by the impact of non-onerous contracts. So this reserve was not added. So when recognizing of this profit over time would be different versus what we are observing under the IFRS 17.

Exactly this requirement of segmenting interesting the segmentation of the policies into the onerous and nonuse policies under IFRS 17 is a situation of a loss component in this case will be identified and will be included in the financial statement accordingly. But as [indiscernible] mentioned, most frequently, the unexpired risk reserve was established if at all, it was established at quite a high level of aggregation of the portfolio in insurance portfolios. Therefore, in this case, definitely would be dealing with a difference in the amount of the liabilities.

Okay. Briefly, let's have a look at the -- including the discounting effect we include the discounting effect only into a single item on the simplified method, and this element is the claim reserves. So under the claim reserve, we're not showing the nominal value, but in the discounted amount. In the previous case, we saw the amount of this reserve of [ PLN 180 billion ]. Here, we have discounted value, which is [ PLN 171 billion ] in the balance sheet. So what is happening to the income statement the claims incurred in the period change. So this -- so adding lines the discounted amount is already presented by in the subsequent period. There's an unwinding of this discount effect -- discounting effect will be shown in the insurance, finance income and expense in the amount of minus 9%. So this is what we'd like to draw your attention to. But this discounting effect is explicitly shown in the income statement. Here, it is shown more in detail where these figures come from the 5%. You can see exactly how it was calculated. But under IFRS 4, the discount was not in place. So in our case, nothing changes. And the last example in this part related to the simplified method, Reinsurance. We are dealing with reinsure, proportional reinsurance. We included in this example, the discounting effect, the reinsurance proportional rate insurance, reinsurance, the 40% transfer -- what is the income statement? What does it look like under IFRS 17? With respect to the insurance part, of course, there are no changes. So the revenue side amortization of [ PLN 900 ]. The amortization of positioning expenses at 100 claims incurred in the period, but total flows in the period and including a discounted claim reserve in [ PLN 591 ] and the amortization cost of [ PLN 100 ]. We have no changes on this side. Regarding the reinsurance part, similar amounts are presented simply separately in the real and related part. We can see the recoveries of claims incurred in the period. So we have a share of reinsurer in the claims paid out. And in our claim reserve in the amount of what we are observing on the gross side. So in the amount, PLN 237. However, in the revenue side, this is simply share over reinsurer in our premium, so this is 40% out of PLN 1,400. This is the way it is done. And of course, this discounting effect, but I mentioned in the previous example also is being observed in the reinsurance related parts of unwinding of discounting the subsequent peers. So unwinding both on the gross section as well as reserve or share of reinsurers takes place in the subsequent period.

Okay. So we have arrived to the end of examples for the simplified model. Do we have any questions at this point?

Okay. So we can move on to the Life business. In the Life business, we'll be presenting examples for the 2-year contract we have a policy. We would like to -- we didn't want to extend the coverage period because of simplicity and the transparency of examples. With specific assumption is also to this policy is the linear amortization of a contractual service margin and the cost of acquisitions over time. So pro rata proportions over time will be dealing with the amortization of our expected future revenue. linear amortization of loss component as well. We will not be discussing this element related to a risk adjustment, risk doesn't some and we'll be seeing the discounting effect only in the last 2 examples. And similar in case of a simplified model, we will start with a basic view of income statement for the general measurement model. And then we move on to the onerous policy. We will see what is happening -- what's happening when the actual claims paid differ from our expectations. We also see what happens if the change of actuarial assumptions and what impact on the income statements will be visible due to those changes. If we have time, we also look at the discount effect, but will be relatively similar to what we have seen in case of simplified math.

But one more comment because we haven't mentioned that, I haven't spoken about it too much in the [ circa ] part regarding the amortization of contractual service margin. According to the standard requirements, CSM should be amortized importing proportion to the insurance service provided at the given time of constant insurance service is not a measurable value or in any clear way defined therefore, when we use the standard in practice, the insurance companies themselves have defined how they understand the insurance service and what measures will be applied for the amortization of a contractual service margin. These measures are related to insurance amounts, insurance sums. Sometimes they include the discounting, sometimes they do not include it. You could spend a lot of time discussing that here. But however, adoption of linear amortization is obviously a certain simplification of ovens example. In practice, this amortization will be taking into account the size, magnitude of insurance service provided by the company in the given reporting period.

Okay. So let's move on to the simplest example. I think I will try to discuss it in detail because this is a more complicated view of what we saw when we discussed is simply about method. So first of all, in the general measurement method, we have to remember that the valuation of the measurement of this contract hardly performed at the moment of the first date of recognizing the contract. So this is a major change versus the previous standard of the accounting IFRS 4, where we are looking also only of the specific days, reporting days, specific reporting days, here at the time when, for example, we have the beginning of a coverage period on January 1 when -- as of January 1, we should value measures such a contract may perform such a measurement. How has this measurement performed? It's a measurement based on the expected cash flows using the actuarial methods. So we are looking at the expected premium amount. In this case, we have a premium paid right away, upfront in the amount of PLN 1,000. This is the cash flow we expect. We expect the payment of claims in the first period of in the second period in the amount of [ PLN 200 ]. Since this is a life policy, we are not looking into -- including the -- or setting up reserve for the claims payment and the claim is the same. So it's also worth mentioning and the expenses payable in line with benefits into reporting periods. The acquisition cost is similar as premium paid upfront. So what we have to do as of initial recognition date, we have to value -- measure our liability, and we have to measure the contractual service margin. So the contractual service margin, simply saying, it's a difference between our inflows and outflows, revenue and expenses, so the difference between the premiums and all kinds of expenses, so the claims, administrative costs or the acquisition costs. And the difference is the initial recognition date is PLN 200. In this specific example, the actual implementation of the cash flows is in line with what we expected as of the initial recognition date. So we have no -- any difference here. Here, you can see clearly, let me...

Excuse me, for interrupting. You can see that CSM is a balancing item for the cash flows positive and negative ones. So that's why the need in the retrospective approaches to backtrack to the time of issuing the policy, the full retrospective approach, that's the main idea. That's what it's based upon. But with value that we measure by CSM amount as of the beginning of insurance policy taking effect and then we amortize this amount to up to the current balancing date. And we cannot arrive at this result in any other way. So it's not possible to write this amount, not without backtracking to the time of issuing the policy.

When we look at the balance sheet items, we can see that of initiation date, we have establishing of contractual service margin at PLN 200, the best estimate of the liability of minus PLN 200. So here, the obligations of a 0 date is PLN 0, whereas in the subsequent reporting period we can see also this amortization proportionate linear amortization of CSM. So we are stuck with CSM margin at the end of the first reporting period and with the amount of liability, which is equal to the total of our expected inflows. So as of the end of first year, we are expecting the payout of benefits and costs in the amount of PLN 300. And now moving on to our income statement. So here, we don't have this amortization of [ LLC ] item, which is also only used in case of a simplified method we are looking now as expected cash flows. So the first item here, we are presenting what inflows we have expected in our actuarial valuation due to the cost due to the claims and the subsequent revenue item is the release of the contractual service margin. So in proportionately portion over time, the CSM is released from the insurance revenue into account of revenue and also presenting the cost of acquisitions which is similar as in the case of a simplified approach, also are presented on the expenses side in the same amount. If we talk about the expense side here, there's no big differences versus the simplified abroad. There are no set major differences because the same items are also material for general measurement method, general approach. And here, we are presenting the claims included in the period. in the amount of PLN 200, so in line with our actual implementation or performance and also expenses also in the amount of minus PLN 100, also in line with our actual performance. And here, you can see very clearly on this specific example, what [indiscernible] mentioned before, but if the actual performance is exactly the same as our estimates actuarial estimates of the result comes down to releasing of contractual service margin over time. So we expect it expenses and the actual expenses basically in the income statement offset each other, and our result is the release of contract service -- contractual service margin, we estimated as of the initial recognize listing of this margin over time.

We had a risk adjustment using this example. The result will be some the total of the release of CSM and the risk adjustment.

Okay. So looking, however, at a similar view on the IFRS 4, the situation looked a bit different. So we were dealing -- we didn't have the stability of recognizing revenue over time. The recognition of revenue over time was to that extent, dependent upon our accounting policy. On the first element that had an impact upon recognition of this result over time was a fact whether the acquisition expenses, question costs are deferred or not. And here, you can see on the right-hand side of this example, the income statement in 2 cases. In the first case, when the acquisition costs are not deferred. And the second case when the acquisition expenses are deferred. As you can see, the recognition of this result over time could have differed significantly depending upon whether we did defer or did not defer acquisition cost. This was the first element had an impact on how the profit was recognized over time. The second important element, maybe I will discuss it on the next slide is the reserving policy. So now we have an obligation to establish our liability and the amount of the expected cash flow -- inflows, whereas under IFRS 4, as a matter of fact, we were establishing a mathematical reserves and this arithmetic reserve could have included in itself, any risk adjustment depending upon the accounting policy of the company. And we can see also the fact how this risk adjustment was included, had an impact upon the recognition on the WAVE results were recognized over time. What you can see here is 2 variants of setting up the medical reserve in the first variant we set up this reserve in the amount of PLN 900. in the second variant, PLN 1,500. These are some risk adjustments regarding the expected cash flows, but they are not so much explicitly included here. Therefore, the recognition of results over time may significantly differ. As you can see in the variant 1, we have resulted in the first period of PLN 50, in the second period, PLN 150. Whereas in the second variant, we recognize the loss as a matter of fact. So in case of -- including a very high arithmetic reserve we recognized a loss in the subsequent period, this loss is unwound, it's reversed. IFRS 17, basically did not allow for client such mechanism.

As we mentioned in the beginning, certain freedom, certain leeway in establishing liability amount allows for the possibility of adopting any quantile that the risk adjustment is -- to correspond to where the standard says, as we already mentioned here, the insurance company that adopted a certain level of quantile should disclose. It's therefore, in financial statements, you will be able to see clearly whether the reserving policy is highly conservative, medium conservative or less conservative. And this result, it will be possible to read correctly in the context of this information to what quantile the risk adjustment belongs to.

Okay. So we have discussed the example of non-onerous policy. Now let's focus a bit what is happening on what is happening when we have -- dealing with an onerous policy. The projection of cash flows as of initial recognition date changes. And now we are dealing with a much higher benefits payments in the first and second period and higher expenses. So the expected future outflows are much higher the inflows when our premium received. The difference in the amount of PLN 400, we expect PLN 400 worth of losses. In this specific case, the performance of payments -- actual performance of payments also takes place in line with our expectations and the actuarial valuation. If you look at the balance sheet items, we are not using applying the risk adjustments. The cost of service margin, excuse me, because there's a loss on the contract of this element doesn't appear. So element that the line with the peers in the balance sheet is the loss component, the so-called loss component, which is shown as the initial recognition date is amortized over time. And also the best estimate of the reserves. And what I'd like to note here is the fact that at the end of the first period, we're expecting those reserves -- excuse me, we're expecting the future revenue in the amount of PLN 600 ,whereas we can see this component the amount of PLN 200. So this reserve is reduced by the loss components. So for presentation purposes of the loss component, we are presenting the amount of PLN 200, whereas the reserve itself alone of PLN 400, and the total of these 2 components means future expected payments. So this is worth noting here that for presentation purposes, this approach differs. And now if we talk about the income statement now. Well, a very important element that changes also on the revenue side is the reduction of our revenue also by this element related to the amortization of loss component. Please take note that in the example, we can see the expected payment of claims in the amount of PLN 400, PLN 400, accordingly in the first and second period. And the expected payments, of course, in the amount of PLN 200 , PLN 20, what we are presenting. However, in the income statement, the amount respectively PLN 300 and PLN 300 and PLN 100 and PLN 100. This is due to the fact that those amounts are reduced by the amortization of those components. And explicitly in the income statement, we cannot see that, but you have to remember about that [ bal ] in the balance sheet, the liability is reduced by the loss component as well as in the income statement. This revenue side also by the amortization of the last component of the revenue side is reduced here.

A comment also. Of course, one may look at Wells component in a way as a negative contractual service margin, you can be tempted to do that because in the example, recognition the initial execution started the same way, but you just have to remember, as [indiscernible] mentioned, the loss fully is recognized immediately in the income statement. This trick or showing the amortization of a loss component is only for presentation purposes. However, in the case of a contractual service margin, that is positive. That's true. We recognize the contractual service margin in the income statement gradually as we provide the insurance service.

Yes. and recognition of a loss component takes place as of a 0 date. So we can see what the full loss is recognized in the initial reporting period, the new loss component is recognized in the new component recognized. Amortization of this loss component on the expense side is separately listed. So we are presenting the claims paid in the full amount. The expenses paid out in the full amount and the amortization of the loss component on the expense side, we are showing in an explicit way. So on the revenue side was including in the expected costs and benefits whereas on the cost side, expenses side, this amortization is explicitly listed. Okay. So how it was done under IFRS 4? Let me repeat what I already said before that recognition of profit over time as well as recognition of loss over time in case of such onerous policies was strongly dependent upon our reserving policy and upon the safety margin or risk adjustment. In this case, we have 2 variants of establishing the arithmetical reserve more and less conservative at the end of the first year, the establishment of this arithmetical reserve in the amount of PLN 900, PLN 1,200. Let me just mention here that -- so there's no -- you're not misled here, but as of a 0 day, 0 moment, in fact, there is no such obligation to measure to value this reserve. So this reserve was not valued under IFRS 4. Here, we are showing it only for percent purposes this PLN 1,800 and PLN 2,400 amounts. But in fact, for the first time, this reserve was valued actuarially as of the end of the first year reporting year. So this amount PLN 900, PLN 1,200. And you can see also that in the income statement, so adding the reserve in the first variant in the amount of PLN 900 in the second vending of the reserve PLN 1,200 over the entire reporting period. So depending upon this safety margin or risk adjustment, that's what was the release of this result over time done. So we could initially report very high loss and then this loss reverse unwind this loss of the source could have been lower. It could have been if the reserve was not done in a safe manner. We didn't have to recognize this lot at all. And of course, over the entire period of policy coverage period result is similar to what we can see under IFRS 17 only the [indiscernible] over time is different.

Okay. So 10 or 15 minutes break, where we convene after the break. [Break]

Okay. So we're back after the break and let's continue with example number two. So I have one additional remark. So I mentioned that on the revenue side. We are adjusting the expected payments of benefits and claims by the amortization of the loss component, but I did not mention why we are doing this. And this is an important element. So after the adjustment, our revenues are still equal to the premiums, and this is very important that the revenues over the whole coverage period must be equal to the premium. And if you would show the whole amount of expected claims and costs and expenses, then we wouldn't show the amount of the expected premium, but the whole PLN 1,400 of our outflows. So it's a very important element that we must keep in mind that over the whole coverage period of an insurance contract, that amount is equal to the paid premium. And now let's move on to the next example. So we are going back to a non-onerous policy. But here, we have a difference between the actual payments and our expectations at the time of the initial recognition. So on the emission recognition in the first period, we expected cost of claims of PLN 200 and expenses of PLN 100, whereas the actual payments of claims were PLN 300, and the actual payments of expenses were PLN 200. So there was an increase both in the benefits and expenses by PLN 100 each, so in some PLN 200 not in the positive direction. As how will this impact our statement -- our income statement? We have changes in claims incurred in the period in the actual amount of PLN 300 and the expenses incurred in the period of PLN 200. And the impact on the results will be seen already in this period. So in the example where we did not have this variance, we recognize the result of PLN 100 in the first reporting period, whereas now in the first reporting period, we have the result of minus PLN 100. So we've amortized our CSM, we have -- that we've recognized at the initial recognition in the amount of PLN 100, but we've also recognized this negative change in the actual payments of claims and expenses in the amount of minus PLN 200. So the final result is minus PLN 100. In the second period, everything is actually fulfilled according to our expectations. So this does not affect our results. Whereas under IFRS 4, the situation was quite similar when it comes to recognizing the difference, the variance, in the actual payment of claims and expenses. So we showed this directly in the income statement. So the impact on the income statement was also recognized immediately directly -- so in this specific example, so in the actual costs and benefits regarding our expectations for a given period, there are no differences between the 2 standards. And now the next example, so we also have certain changes, but not in the actually paid benefits and expenses, but changes in the future assumptions. So in the initial recognition actuarial valuation, we projected that in the first and second period, we would pay PLN 200 of claims and the PLN 100 each of expenses for us now during the reporting period after the first period, our expectations for the future change. So now we expect that in the second period, we will pay PLN 100 of benefits more than we planned in our initial valuation of the contract. So we have changes in actuarial assumptions. And here, we have a different situation than what we've seen before. So the change in actuarial assumptions, it will not impact the whole result, but it will be recognized through CSM. So through our contractual service margin, and this change will be shown in the results of the first and second period and not directly in the period when this change took place. So this is very important. And what's the reason for this? So this stems from the mechanism of calculating CSM for the next reporting date. So on initial recognition, nothing changed. We still have CSM in the amount of PLN 200. So we expect PLN 1,000 premiums claims and benefits, and acquisition costs PLN 200. So our expected future revenue in CSM amounts to PLN 200, whereas as we move into the next reporting period. So if you think about the development of CSM, so we have the initial bid PLN 200, then we take into account the negative change in assumptions of PLN 100. So our CSM is now PLN 200 minus PLN 100, which is PLN 100. And only in the next step, we amortized the contractual service margin of CSM seem into our income statement. So on the revenue side, you will see that the release of CSM is in the amount of PLN 50 already in the first reporting period. So the change in trial assumptions impact what parts of the CSM will be released in the first period, but it also impacts the second period. So this change of PLN 100 is spread proportionally over time or proportionally to how CSM is being released over time. So this is a very significant change compared to what we've observed under IFRS 4. And I'll mention this briefly. Would you like to add something?

Yes, just 2 remarks. So first of all, the impact of changes in actuarial assumptions on the value of liabilities go through CSM. And this stems directly from the provisions of the standard. So it's CSM and not the income statement absorbs the possible losses or sometimes some positive changes and the impact of the changes of actuarial assumptions. And another remark that the order of performing the actions on CSM is -- are also defined by the standard. This may seem nonintuitive that, first, we changed the value of CSM by the income of -- by the effect of the change of assumptions and only then we do the amortization. We could imagine a different order of the actions. So first, we amortize CSM. And then from what is left is potentially absorbed -- potentially absorbs the change of assumptions. So a discussion was taking place regarding this -- these possibilities during the creation of the standard, but they decided that some of the changes of assumptions that we are mentioning here are also impacting the current period services provided in the current period, that's why they made such a decision regarding the order of performing the actions. And how about IFRS 4? So under that standard, we have a creation of a new reserve. So we are creating a new reserve for the second period in the amount of PLN 600 in total. And in the second period, it's the addition of PLN 150. This is seen in the different line items. So we have the initial reserve and the release of the reserve in the period and then the change in the reserve in the amount of PLN 450 and then a creation of another in the amount of PLN 150. This is a very theoretical example. It would not happen like this in practice because the full reserve in the amount of PLN 600 would be included in the first reporting period in the -- on the initial date, but the creation of the reserve in the amount of PLN 600 was immediately recognized in the results. So we had an immediate recognition in the result. So -- it was not spread over time. So you saw the result in the amount of PLN 550, and here is minus PLN 100 , in the next period, PLN 200. So the whole amount of the created reserve was recognized directly in the income statement. That was under IFRS 4. And the next example, I think it's quite interesting, the change in the profitability of the policy according to our actuarial assumptions. So we expected that it would be a nononerous policy at the initial recognition. So we recognize CSM in the amount of PLN 200. But at the end of the first reporting period, our estimates changed. And the result is that the policy becomes onerous. So the total amount of all the inflows is lower than the amount of outflows. And how does this translate into our income statement? So first of all, we recognized the loss component in the amount of PLN 200. So the whole loss on this given policy in the amount of PLN 200 is being recognized in the first period, and we see the creation of the loss component in the line item, new loss component recognized. And what happens on the revenue side. So even though at the beginning on initial recognition, we recognize CSM in the amount of PLN 200. Then on the reporting date, CSM, in total, disappears because we have a loss. So here, our expectations for the future change. So CSM is reduced to 0. So we have a direct recognition of a loss. So on the revenue side, we do not see a release of CSM. We see the whole recognized on the expenses cost as a loss components item. And what's also important is the element of the adjustment when it comes to expected claims or the payment of benefits and expenses and also the adjustments related to amortization of the loss component, which is also included in the revenue amount. And it's the same and that I've mentioned. So the sum, the total of all the revenues in the whole coverage period, and it has to equal the paid premium. It should not exceed this amount. So the adjustment of the expectations regarding payment of claims and expectations is required here. And the remark regarding classification of policies into non-onerous policies or portfolios and onerous one. So if you have a policy that at the beginning that is classified as non-onerous so it receives this label that is in the portfolio of non-onerous policies, even if you have a situation like the one in this example, so there is a change in our expectations regarding future claims and benefits, which made the policy or portfolio non-onerous, there is no change of the label. There is no change in the portfolio that the policy is falling under and it belongs to. So once the policy is categorized under a given portfolio, it remains there because it would be an operational nightmare if you had to change the categorization of policies into different portfolios every time. So this decision is and important for the readability and accessibility of financial statements. As for IFRS 4, I don't want to go into details. The situation is similar to regular changes into actual assumptions at the end of the first reporting period. So the whole amount of the created reserve is seen already in the results. So I don't want to go into details. And we'd like to very briefly discuss the situation in which we have a discounting effect. So we have our LRC reserve, which is being discounted. But there is also an element of the balance sheet, which is discounted under the CSM. So we must remember that it's not only the best estimate in terms of reserves, but it's also CSM. And similarly to what we've seen in the simplified method, we recognize the discounted values of the 2 items in the balance sheet. But the reversal of the discounting effect is placed in the insurance finance income and expenses item. And this is the sum of the reversal of the discounting on 2 components, both in the CSM component and the best estimate of future liability estimates. So this component -- so we don't have an additional element in the income statement. And as for other items, other line items, so we don't have many changes. So we have nominal values of the expected payments. The actual payments are presented in nominal values and the release of CSM is also provided here in nominal values. So already after the reversal of the discounting effect, which is presented separately. And here, we have a very detailed calculation. And the last example in this category, so what happens when the discounting changes? So this is what we've mentioned before, if you have a lot of challenges in discounting rates that influences the valuation of liabilities. So we have a change in the second period. So interest rates have increased from 1% to 3% in the second period. So we have a change on the valuation of liabilities. So the previous valuation at the end of the first reporting period would be PLN 297. We see this in the second table to the left, whereas after the change of the discounting rates after the increase in interest rates and increasing of the discounting effects, the valuation of this liability at the end of the first reporting period is PLN 291. So this change stems only from this effect. So the decrease of the reserve by PLN 6, this is not presented anywhere in the income statement. So we don't see this directly, but this is a change that directly impacts other OCI, which are presented in the capital part. So we must remember about that the fluctuations in rates will not impact the results of the PZU Group but will impact the amount of the capital. And I guess that's the end of the examples. Are there any questions? Maybe we could talk about the relation of the revenues to the premium. We said that they have to match. We have an example where they are not the same, so what has to be adjusted to make sure they are equal? This stems from the discounting effects that we see in this margin. Here, we are showing CSM in every period, so we are reversing this effect, and it is compensated by what we are showing on the insurance finance income and expense item. So in this specific example, the difference in terms of the discounting effect. Are there any questions?

There are no questions. So thank you very much. And now let's give the floor to Tomek.

Thank you very much. Do we need a technical break just so we can regroup and you can maybe get some coffee or tea? How about a 5-minute break? Okay. So a short 5-minute break, and let's reconvene in 5 minutes. [Break]

Ladies and gentlemen, we've had a short technical break. We've rearranged the setting. So we'd like to kind of sum up what our colleagues discussed in the first part. And we'd like to show you again, our results after this technical introduction, maybe more things will be more obvious to you. There will be less questions. It will be more intuitive or at least, we are convinced that we are on the right path when it comes to helping those who like to understand the 2 are new. They are on the right path to building a more intuitive reading understanding of the numbers. So we would like to go over the differences between the old and the new standard. Once again, we would like to show how especially taking into account life insurance, we can try to build this bridge between the old and new world. And we have a good information. We have more non-life insurance in PZU. So it makes it a bit easier when it comes to different components. When it comes to life insurance, then we have to try to look at it separately because if we try to have a specific building of this bridge, this may be problematic. But let's start with nonlife insurance. And let's remember, I will repeat this, but I'm assuming that this was said many times before, so this is a different standard. The first one recognized revenues and expenses in a different way. The first difference is that between the value of revenue based on [indiscernible]. So the revenues we've recognized over the given period, there are differences. And the differences are different in the case of a portfolio or a situation when a company has a similar level of revenues year-to-year or quarter-to-quarter the differences are a bit bigger if you are recognizing a portfolio, which is increasing or decreasing for obvious reasons. So in each situation where we have dynamic changes, this will impact the greater differences in revenues in both standards. So starting with the value of the gross written premium. So this is the written premium that we would have recognized in the first quarter of this year under the old standard, it would be PLN 4.1 billion. So as my colleague said before, the first change is the attempt to reduce to this to the value, which in principle is similar to the earned premium. And then we have to adjust the value for the premium reserve. And this is not a theoretical but a practical, and all these are the results of PLN in a Polish companies. So PZU SA linked that and [indiscernible]. So this comes down to the value of PLN 302 million. So after the adjustment, we are on a very similar amount of PLN 3.774 billion. So when I say, but the differences are very small. And the differences are made up of, on the one hand, of the earned reassurance commissions, which should be adjusted. We should also adjust the base between the [indiscernible]. So the value of PLN 3.790 billion, this is the [indiscernible] value. So through the way in one -- and how there was a change between the written premium and the value of the earned premium and the cash flows that we recognized in the given period adjusted by the value of the written off due to bad loans and also additional remuneration. Based on the fact that maybe some customers have delayed payments, so we have some interest stemming from delayed or deferred payments. So this is all from the viewpoint of comparing the [indiscernible] and [indiscernible] on the base on the proxy earned premium, and this is reduced to the -- in the first quarter to the value of the adjustment in the amount of PLN 12 million. And there is one additional value that my colleagues mentioned in the first part, and this is a value that appears first of all, in life insurance, and we mention this soon from the viewpoint of its amount and it's a significant -- on the side of non-life insurance, this appears on a smaller scale. So this is a value that the company will recognize as a deduction regardless of the form of this. We can think about this in this way, in nonlife insurance. So here, the value amounts to the reserve for premiums and rebates that will be paid either in the form of premiums or rebates if the insurance will take place not accordingly to the contract, then maybe there will be an increased claim factor. So in the first quarter, there is an adjustment that we should recognize. With this regard, this is PLN 1 billion, and we have additional reinsurance costs related to the so-called sliding scale. So the progressive methods, so scale commission. And this all brings us to a full comparability. So here, we have the value of the gross revenue insurance services. And this is according to what we recognized in the first quarter for PLN linked [indiscernible] and TUW. So as my colleague mentioned, on the revenue side, this value for presentation purposes is being adjusted for the acquisition cost for the given period, and they are not the acquisition costs that have been paid, but they are the earned acquisition costs. So under the old standard, they are the cost of acquisition adjusted by the value of cost of acquisition incurred over time. So here on this slide, you can see them on the right-hand side, and they are marked in the light blue color, whereas the dark blue color represents the estimated value of the insurance liabilities. So after covering the costs of ascribing a given portfolio to the whole portfolio of insurance contracts. Now as to life insurance, here, as I said, the situation is completely different because it's difficult to build such a transition. This is not the simplified model. We have the full model being used here. But as we try to achieve comparability, of course, we start with the gross written premium, which amounted for the needs of this presentation. For this slide, this is just [indiscernible]. It was PLN 2.06 billion. So this value is being adjusted by what will also go to our policyholders. But as of today, we must say that we don't know, just as in case of non-life contracts or what will be the ultimate format -- shape of the cash flow. So as when it comes to life insurance, this is the value of the fund that is being created from the payments of the policyholders in policies. We have the investment element as you remember from the first part, this is not an integral part of the revenue from insurance services. So this is different than in the local standard, as it used to be under IFRS 4, we are not recognizing in the some of revenues, the value, which is, by definition, a value, which creates the equity fund. So this is the fund that will be paid to the policyholder either at the end of the insurance coverage period or in the case of an insured event, in the shape of cash flows of paying claims and benefits. So this is the substantial element and the important difference between the 2 worlds. This way, we are arriving at the premium earned adjusted by the investment element component, which is called under the standard non-distinct investment component. So this is the not separated investment component. And I haven't mentioned that when I was discussing the non-life insurance because in contrast to the live business, it doesn't have a investment-related relationship or connotation. Continuing the differences and similarity in the standards, when they say that this is the similarities end and all the rest is a totally different approach to the revenue from the point of view of how -- and how we want to allocate the premiums, how we see that we should allocate the premiums that are not only today paid to us, but will be paid to us throughout the entire customer life cycle relationship and will be attributed to a given period and will be during that period allocated according to our best estimate to cover the cost, cover the expenses, cover the capital, claims, benefits, to cover the costs related to attributing the contracts to the portfolio. And all the -- that's left as a difference between the inflows and outflows will be made up of 2 components, will be made up of the contractual service margin adjusted by the asset and the element or the premium for uncertainty -- the payment for uncertainty. We know with contracts in life is life. We are for -- according to our best estimate, it could be accompanied by completely different actual performance of those cash flows, both in terms of timing as well as values and amounts for various reasons, sometimes irrespective of abilities of both parties and wishes of both parties. In this way, spreading -- by spreading over the entire life cycle. The total revenue and the total expenses versus the initial coverage period. The element, component of insurance service, which in case of the PZU is allocated here on -- the based on the insurance sum as well as far as the main contract is concerned on the [ riders ], this way, those components are allocated to a specific period, quarter, year. And this way also recognize the release of the main component, which is -- the main component shaping or impacting the results as far as the live business companies are concerned. So contractual service margin adjusted by the risk premium risk payment risk adjustment. At this point, we would like to move or discuss -- walk you over the comparison and the allocation of individual attribution of individual components that you discussed during the previous part of the presentation, either on the examples or by walking over the assumptions of standard general. Many I would like to attribute them to specific components, insurance components, to applicable insurance segments. Going to our segments. Now I'll mention a few words about what has an impact upon the changes of individual amounts between periods. What influences the potential change during the period year-over-year change has impacted in -- an example of PZU upon the individual amounts and values and how to best read it and understand it. Let's start with non-life business. So [indiscernible] this is for remaining coverage, which is valued using the premium allocation approach or a simplified model, a model that allows to build practically the full transition versus the standard [ 4 ]. And here, we have -- the total of all those amounts, all those values. Accordingly in the individual accounts, we are showing various insurance segments for which this value -- this amount is applicable. So in case of the amortization of liabilities for remaining coverage when you take into account the simplified model, the [ PAA ] model, which is applicable with respect to the policies that have the coverage period up to 12 months or a bit longer. However, the ones that -- the results of which are recognized according to the simplified model versus a full model give us quite a good approximation. We are talking mainly here about the property-related contracts, which are of course used in the corporate insurance, non-life, in the mass reinsurance, in the insurance that are part of our operations in the Baltic countries and in Ukraine. These are those areas where we are conducting operations from the point of view of insurance liabilities is covered and measured value using this simplified model. You have the appropriate values listed for the first 2 quarters. So Q1 '23 and the same period of the previous year, the total of all these amounts in the first quarter, of PLN 3.520 billion, quite a big increase, an increase, which when you look at the total of the Polish subsidiaries year-over-year which is almost 12%, a bit more, even if we look in a total -- including Polish and foreign subsidiaries. And what the biggest impact on that? The biggest impact comes not as in case of a standard 4 or standard -- local standard, the sales reported in the given period, but this is impacted the fact how and at what growth rate of sales, the company was characterized or the group was characterized over the last 12 months. The last 12 months, because let me remind you, we are talking about the simplified approach. So the one that is applicable as a principle with respect to the short-term policies. So in this case, property and property-related insurance contracts are calculated by the coverage period where majority of this coverage period is 12 months. A similar approach, a similar understanding, should be applied with respect to shareholder reinsurer in the revenue from insurance. So here, we are talking about how [indiscernible] using exactly the same methodology, the same approach, the same mechanism for reconciliations, which we had earlier shown with respect to item -- gross item. We could achieve and apply with respect to the amount which in the previous world was called the amount of a [ shareholder ] reinsuring the premium. Here, we should try to stay in the earned premium. Therefore, as you can see here, it's going up, up to PLN 380 million. And it's got a strong growth. And this is growth Is again influenced by the fact what was our activity like with respect to the policies that we were allocating to -- attributing to the portfolio, but we are reinsured by the PLN over the last 12 months. Therefore, not so much -- this is important, not so much what has happened in the given quarter, but much more important is what by what was happening over the last 12 months. And let me remind you that with respect to this specific value of a specific amount, especially after last year, we were dealing with a very deeply reinsured contracts that we were recognizing both on the PZU USA on the corporate side account as well as in terms of operations under TUW, which from the point of view of a segment-based reporting is also a part of corporate business -- corporate insurance. These amounts, as we were showing on the previous slides, are of course adjusted for presentation purposes by adding the acquisition expenses that our revenue to cover the acquisition cost for presentation purposes. Here, there is no difference that is shown in case of live business, the one that actually occur or appear. That's so much regarding the non-life business and also how this part of our revenue is being developed. Regarding the life business, mainly the general approach, general model. In terms of [ VFA ], as my colleagues presented in the first part of our presentation, less than 1%, taking into account the contribution of the segment to consolidated results. That's how much is measured at PZU in this method. So the lion's share of the life business is not even a simplification, it's sort of truth. It's being measured using the general approach. A similar logic as on the previous slide. So the general method was used to measure in the group, individually contributed insurance, protective insurance, individual protective insurance, investment insurance, operations as part of Baltic countries, and the operations in Ukraine. In terms of this component of our revenue, as you remember, ladies and gentlemen, this is this part of revenue, which according to our best estimate should reflect the expected at a given period costs related to the claims and benefits that the revenue from the insurance contracts on -- in the life business should be allocated used in the given period. So let me come back to one thing and draw your attention to several issues that probably we will be talking about repeatedly, we'll be coming back to about a number of times, the issues related to -- with mortality. We are talking here about the payout of claims and benefits of the risk that remained to large -- the large extent determines the value under this item. So as you remember, distribution of mortality over the year is not a permanent distribution. There are quite significant differences in terms of the number of fatalities of personal disease in case of PZU. There are not just fatalities of deaths of main insured person, also the coinsured persons. Therefore, total amount payout of benefits per one insurance policy is not one-to-one relationship, but want to many in a number of cases for that were reason. And this distribution plan is characterized by the heightened elevated mortality, elevated number of deaths that we can observe in Q1 later on. There's an improvement in the fatality on mortality rate. If we can just use this term improvement or a decline of the number of deaths that we're observing in [indiscernible] in Q2 and Q3 and return, but not so strong, but still to a high rates -- to high rate of mortality in terms of Q4. And this distribution, that's the distribution like before the pandemic and that's most probably the distribution will be same from a point of view of seasonality once the pandemic element has been fully eliminated. And I think we are close to such a situation, but we already mentioned when we are presenting the Q1 earnings. However, we should remember that the mortality rates, especially the COVID related all over mortality, elevated mortality that we linger for the last 3 years had a major impact upon those distributions, and had quite a strong impact upon the way this additional expands due to the fact that we were dealing with a pandemic that was harvesting "its -- the deaths." So was accounted for recognizing individual quarters. I'm talking about this because depending upon what our company's expectations regarding what was going to happen in its environment, so namely, how and when we will be observing, realizing the additional expenses related to the pandemic. And in the corresponding way the company developed its revenue in the parts allocated to cover the claims and benefits. It might not be obvious, but if you put it this way, but there's a normal distribution that somehow characterizes by its normal during the year. Normal distribution but it changes significantly when our flows, our cash flows and the way, how these additional expenses should be covered in the appropriate according periods. These assumptions should be adjusted, which, of course, took place in 2022 and would have taken place in 2021 had the 2021 been governed by the new standard. However, taking into account that in the each successive quarter, we are getting closer to the return to normal situation, with each successive quarter, we are seeing more and more common features between the period or the periods that we are discussing now in the periods from before pandemic. Therefore, on an ongoing basis, we are adjusting the premium related cash flow that are allocated to cover the expected claims due to the mortality rate in this expect in this case, the over mortality including the subsequent period. So that might lead to the super unobvious situation where during a highly -- with high claim buyouts, so the highly COVID year that the company has such expectations. Our revenue is higher than in the period when the situation is totally different. And the company to cover the expected claims and benefits is allocating accordingly smaller amounts due to the fact that accordingly, smaller claims should be realized, for instance, in Q2 and Q3. So one can say the following way, that at such a time, we are dealing with such a nonintuitive situation, which is worth mentioning and remembering when in situation where we are recognizing an improvement in the environment we are operating in. Our revenue could be an extreme case lower than the revenue what we post and are recognized during the period characterized by higher expenses, including the expenses related to the claims and benefits exactly due to the fact how the expected cash flows are allocated to the individual periods, of course. However, this phenomenon on the other hand, should be accompanied accordingly higher release of a contractual service margin that we were also dealing with in the first quarter, mainly due to the fact that as a principle, we are expecting lower expenses of claims and benefits, administrative expenses, the costs related to the assignment allocation attribution of the policy to the portfolio. Then we should expect over the entire life cycle of our customer relation, an accordingly higher margin that is through the so-called coverage units in our case. These are some insured allocated to get in period. Maybe it's not intuitive. This could impact the ease of the understanding, ease to understand the value of this amount over time, especially if we compare your 2023. As I said, the year, when we see quite a substantial improvement and the departure from this COVID-related higher mortality rates after year -- versus year 2022 which with this additional element was characterized by element of the additional higher mortality rates that translated into higher benefits paid out. The expected expenses, similar as in the example related to the claims and benefits. Also in this case, in this example, in this line item, we are only talking about insurance measured using the general model. So group individual protective continued in Baltic, Ukraine life investment insurance. But talking of the life business in the Ukraine, the value of these expenses is below this materiality levels of threshold. So it's not so that they are not being measured under this item. So again, we are talking to you about our expectation, expectation of the actual performance due to the fact how and in what way -- what we are dealing with in a given period, both with respect to the development of the portfolio for the maintaining of portfolio of policies and the new acquisition operation during the given period, which had an impact upon how we consider this line to be shaped for now on a theoretical line. And how theoretically the expected inflow should be allocated to cover the expenses expected in the given period to occur. Of course, the same is in case of claims and benefits. Also in this case, one should take into account the potential onerous contracts, remembering about the fact that -- again, let me refer to the first part of operation, in this case, we are talking about only, solely and exclusively, about the value upto 100% of expected inflows. Then the amount of the outflow is above 100% of expected inflows allocated to given period is shown as this surplus that for presentation purposes is listed as a loss components so the onerous contracts. The release of contractual service margin release. We're still in the Life business. So the same segment as previously, and as we mentioned to you before, the value -- the amount of this contractual service margin, which from the point of view about approaching the life business represents the majority as far as the result. And that's determining profitability, the contribution of this segment to the consolidated results because then the earnings is going up. It's growing versus Q1 last year, up to PLN 350 million level, which is related to the fact, how mainly 2 parameters were changing. On one hand, the way claims allocated to the segments we are discussing were going up. And here, one could differentiate 2 types of causes, of reasons, that had an impact on that. We already one. We mentioned the reduced mortality rate, which was also confirmed in Q1 by the distribution of mortality throughout the entire population in Poland. On the other hand, by something that's on a working basis, more and more often is called as a health-related death. So the additional utilization of the benefits, medical benefits, on those medical risks that are mainly recognized on the side of the group and individually continued insurance. More even so the group ones taking into account the fact how and in what way in the form of insurance policies. So we performing our operations in the health protection segment, which is on a working basis called PZU Health. What is shaping the release of this contractual service margin? I assume that you already understand it very well at this point in time. However, let me draw attention to one thing that I already mentioned, namely what is the basis for the allocation of total amount of contractual service margin initially recognized at the point of allocating the policy to the portfolio to a given period. And this amount that we decided to allocate to which we decided to allocate in time margin to [indiscernible] periods that could represent 20 years or more is exactly the sum of sums with respect to the -- that is including also the riders. So this is the amount that, in our opinion, is the best reflection of the risk that we care, we bear, in the given period. Let's move on. The release of a contractual service margin. And what is this margin made up of both from the results point of view, but also from the point of view -- of the balance sheet point of view, which I again I assume you know much more about after -- before the break, taking the account to most material, most important segments of group and individual protective. Accordingly, as of December 1, the total cumulative amount to be recognized over contract service margin to be recognized in the future based on the -- under the policy of the day were attributed to the portfolio. You represented million EUR 7 million -- EUR 800 million as far as the individual insurance concerns to protective nature. And what happened during the first quarter -- during the first quarter, we were selling a lot. Our sales were doing good. We are informing on ongoing basis, what do the sales look like, both on one -- on the other side, which means that we are recognizing an additional CSM to be amortized in the given period in the period that we are providing the insurance service under the contract. So the period during which based on the sum of sums, we will allocate recording a value of expected margin, but for the entire coverage period was on the balance sheet recognized. And here is increase as part of the balance sheet item, [indiscernible] EUR 240 million on the group and continues on less than EUR 40 million with respect to the individual protective insurance. Then we have something that is called the change of the assumptions and the variance due to the fact how and in what way versus the original assumptions our advantage of our customers is actually performing. So here we are dealing with 2 types of changes. The first one, which is a derivative of the fact that maybe our assumptions, actual assumptions with respect to what the characters will be of a portfolio that was as of December 31 in our hands. What will be the characteristic of subsequent periods. So what will be the distribution of key assumptions that will be affecting and impacting the CSM in the subsequent year. This is the first piece. The second piece is the operations that characterized as PZU probably to a much larger extent that its competitors. So we are trying to derive value from 2 types of operations, the attribution of a customer to the portfolio then to offering the customer additional products rider products, additional additions. But for various reasons, we upsell, we additionally sell not at the moment of the original acquisition customer acquisition, but we are saturating the customer with further products during the life cycle of a product for very seasonal strategic tactical. However, this is vis-à-vis operations that part of PZU's DNA on the life business side. So out of the 2 cubes, 164 and 78 aid, major part is the recognition of a new business, not in the form of a new business. But in addition to the policies that have already been assigned to the portfolio. And in terms of group and continued insurance out of this value is EUR 103 million. On the other side, of the individual protective insurance, it is the amount of EUR 25 million. I'm mentioning this because I want to draw attention and not to try to draw an inappropriate conclusion from the following comparative locations. As of December 31, now let me use the example only related to the group insurance CSM. Balance sheet value is EUR 7.14 billion and we assigned as part of a new acquisition of CSM to be recognized in the future. EUR 240 million, and we consumed EUR 290 million, but it means that we are folding -- more folding than except if it wasn't for the positive events that we recognize in our environment. And as a principle, we are consuming more than we are creating. So therefore, it's highly undesirable situation because it would mean the narrowing down of our field of operations and not so much the other way around. So let me do attention to the fact that this understanding of this is incorrect and taking into count our distribution model, we should read these 2 -- these 2 first steps partly in a joint -- in a combined manner. The third item 74 and 7 visas accrue interest. And this way, we are arriving and was constituting the basis for generating the result in the given period, namely very lease on one hand of the CSM, but was available as of December 31, 2022, but also partly CSM that was attributed as a new business in the new quarter, of course, in proportion to the coverage period in proportion pro rata versus the risk, how is the risk is priced as we already discussed. The next element that constitutes a certain type of revenue component is the release of margin of -- uncertainty margin or risk adjustment which is related to the fact that in spite of -- let me refer to the job with my colleagues use and despite the fact -- in spite of fact, this is the best estimate often and is the best because done by PZU obviously. However, the hit rate is never 100%. Therefore, we have to realize that to cover those differences between the actually performed amount and the estimated amount so that it might happen in a given period. the estimates to those estimates involve a certain estimate or despite the fact that these estimates are best that it can be truly, therefore, in order to cover them, must find something they take in the counts we are an insurance company and depending on the fact that an insurance company and the principle of accounting is accompanied by the principle of prudency measurement, prudent prevaluation and so on and so on. We have also, as part of the revenue out of those cash flows that we are performing implementing the customer we have to recognize the additional component, which is the component, which is the premium for uncertainty, which is due to the risk profile of the effect, what are the cash flows at what amount, what is the duration of a contract, whether it's a long-term contract or a short-term contract. Here in a very simple way, one can think about as follows. If something is characterized by higher risk than the adjustment, the risk adjustment should be higher if the lesser lower risk investment and something has given a higher cash flow. The adjustment is higher lesser the less. The coverage period is longer. The adjustment is higher, the less -- the shorter -- the lower risk investment, I understand this is acquired intuitive relationships and the more volatility element is higher. At the same time, the uncertainty elements reflected in the income statement in the form of adjustments were to be set should be higher. Michelin's [indiscernible] So those worth mentioning how this value is being built? So it's being built similarly as to the equity requirement as a sum of components adjusted by the diversification element if this element materializes as the risk on the one hand, then it will level out other risks that have a different direction when it comes to their joint appearance. So at the end, it's the sum of components adjusted by the diversifying elements. The one that diversifies the severance components when it comes to the risks that are -- that have the same characteristics. And the release of the margin in the first quarter, I think it's quite intuitive considering the lower risk margin because of the environment also because the adjustment in terms of COVID expectations. So that's why we have a small adjustment on a year-to-year scale. And the final value represents acquisition costs. And here, we have the volume, the volume ascribed to a given period. But in non-life policies also in the previous periods, which is adjusted by all the costs related to the recognition and the acquiring of the contract and ascribing them to the portfolio. So here just as in the case of revenue values, we are recognizing both the gross acquisition costs as well as the acquisition costs on the parts of the reinsurer. And what we must remember here is that you will find exactly the same value on the revenue and the expense side. This is not the expected value, but the already fulfilled value. So from the viewpoint of the presentation consequences, maybe this is not so visible. But in this part, we would also like to show that this expense is being incurred Net loss always take part in the recognition of the cells and ascribing a policy to a given portfolio. And in the way that it was shaped, so we can adjust the other components in terms of the actual real value. And here is the last factor. Maybe it's not so essential. But this is a factor that 90% is shaped by the difference in what we expected and what is actually happening. So the variance experience variance. So the comparison between our expectations and then how the business is behaving in terms of revenue. So if we have a certain discrepancy between life models in terms of how they treat and predict the reality and how reality actually behaves. So we can say that we have a reversal of the scale of revenue on the group level, EUR 6.4 billion and the value of a statistical error. And here, we are moving to our experiences. So these are not estimates, but actually our calculations based on the experiences in the given period. So just as on the revenue side, when it comes to insurance company, let's start with claims and benefits that were recognized in the given period. Again, without the investment component, so this is the difference between the current and the previous situation. So we have the element that is recognized as a cost and expense in all insurance segments. As well as in other segments that in terms of coverage, are characterized by a reinsurance coverage. So these are not only growth values, but also values related to the share of the reinsurer. And these are the amounts that we've recognized in a given period as outflow and as the best estimate of reserves, so the potential claims that took place, but they have not been reflected yet in terms of cash flows. And they will materialize in cash form in subsequent periods. And just a few words about amounts. So let's remember, we are talking about only the value of new claims and benefits when it comes to the development of the reserve from previous years, it's represented in other amounts. We'll talk about this soon. But here's the decrease of the value over the first quarter compared to the previous quarter. So the first quarter of the previous year, 3 and EUR 800 million in last year, it was EUR 902 million. So this is the impact of greater claims frequency when it comes to motor insurance in a land life insurance in both segments, the corporate and the mass one and the lower claims frequency claims ratio in the mostly mass segment. When it comes to mass claims related to, for example, weather phenomenon weather phenomenon that we've observed quite frequently in the first half of the previous year. Let me remind you that was the time when we had a lot of storms over Poland and that increased the claim ratio by over 6% in the given period. And now on the life side, there is a lower increase in mortality in terms of COVID risk and a greater claims ratio when it comes to medical services. In light of what we said before, that is the COVID debt. And the next item expenses incurred. For the sake of this discussion, we can call them technical or administrative expenses related to insurance service. And contrary to the previous standard, here, these expenses are related only to the actual activity, so the maintenance and development of the portfolio but they do not contain certain elements, which according to the regulation of the Minister of Finance regarding accounting for insurers were allowed in local standards as well as under standard 4. So some of the main reasons, some of the main differences in these 2 standards is the equivalent of administrative expenses ascribed to different insurance segments. So we do not have PR costs. We don't have the costs related to brands to the brand or to oversight or to expenses related to different stocks in activity, for example, due to the COVID-19 pandemics. So due to different factors, sometimes we have periods when we cannot carry out our activities, for example, just like in the risks related to COVID in the previous standards, we did not have such factors. So the expenses are occurring and they will be occurring. Standard 17 is characterized by a somewhat greater technical matching to different categories of the expenses accounts compared to the general and the insurance report. So it limits the allocation of expenses to the insurance results. And that is only to the expenses that you can see here in the description. So those which are directly related to the actual activity to the maintenance and development of the portfolio. So as a principle, the expenses in the perspective of 12 months should be slightly lower. Let's move on. Runoff. This item tells us to an extent, what you witnessed in a given period has already been reflected in our estimates related to claims that have been recognized in the shape of the best estimate because this is positive in the previous period. And how this estimate changed over time. And here, we have a nonintuitive behavior in the sector of corporate customers, both in the share of the reinsurer and in the growth value. So we have a large value, EUR 1.216 billion, EUR 1.234 billion. And this is the sum of what we've recognized in a given period. And on what -- on the one hand, we did not have reserves in the opening balance sheet or in the situation that the reserves due to the prudence level were slightly overestimated. So here, as you can see, we have a situation that describes a large claim in a corporate client from previous years that was not estimated in the reserves in the opening balance sheet. We did not expect it, but it's a claim that was deeply reinsured. So as for its impact on the net result and the contribution of the segment of corporate insurance, it doesn't have a big impact. But as a principle, both on the side of gross value and the share of the reinsurer in these values, it's quite a large event. It's an event related to a claim of one of the very large corporate clients from the energy sector. So that's how it was recognized in the first quarter. And that's how we should understand that amortization of loss components. So as you see, the values recognizing basically all the segments, both in this and the previous quarter, and as a whole, this is the value that we have recognized in the balance sheet as of December 31, it was recognized as the value of the loss component. But it was a value that when it was fulfilled. If I may say so, it was fulfilled both on the expenses and the revenue side. So here, we are describing how a value that was an expected surplus of the sum of expenses over revenues and it was recognized at the time of the initial ascription of the policy of the contracts to a given portfolio and how this was fulfilled over time in the first quarter? So here we may say that this value was growing luckily not a lot but it was growing as a consequence of what this value in the balance sheet was growing over the course of the past 12 months. And then how this increased value that, as I said, stems from the historic surplus of expenses over revenues. So how it was recognized accordingly in the quarters of this year and the previous year. The recognition of the new loss component. So this value is the same in all the insurance segments. And over the course of the past 12 months, it has increased by EUR 46 million. So this is a value that describes our expectations. This is not the fulfillment of this expectation. This is in the previous amount that we've discussed a second ago, but this is our expectation as to how the policies and portfolios that were ascribed in a given quarter. So we are talking about the current cohorts. So how they are characterized by the spread of expected revenues and expenses? And then how much? And then how large is this expected surplus of expenses and revenues. And as you already know, in line with prudence, we have to take into account the surplus in our income statement in the recognition of the policy. And here, we are not doing any comparison. So -- and guess the cost from this contract, if they are higher than the revenues, then we have to recognize the surplus and ascribe to the result value as a loss component. So this is the very significant difference compared to the previous standard, which, as you know very well, the offsetting is happening naturally. And especially as we analyze the need of creating an additional results component, which is the reserve for unexpired risk. So to other extent, in a given segment, we recognized the sum of negative values over the sum of positive volumes. But if one covers the others so they are offsetting each other, then it's all okay, and then we don't have to create an additional reserve. So in this case, the rule of prudency makes us do it immediately after we recognize such a situation. So we have to deal with the situation, and we have to report this fact. And the next value is already outside of the insurance result. So the previous one was the last component related to the insurance result. And the next 2 values will complete the results of the segment of insurance. But this is the noninsurance part. And we have the expenses of the time value of money and the results of location activities in the part related to the covering of the technical and insurance provision. So it has a dual character. So its first feature and it should be well matched in terms of the strategy carried out in the portfolio, which should be securing the liabilities for the technical and insurance provisions, so it should cover the cost of activities, which are recognized and the reversal of the discount into of the value of money over time. And on the other hand, and this is the local characteristic of [indiscernible] because [indiscernible] differently than in the expectation of the creators of the standard was not able to implement symmetrically this implementation on the side of assets and liabilities. So as we were implementing standard did not introduce the right adjustment compared to Standard 9, which showed the valuation of financial instruments in our valuation, so that the value of assets and liabilities in terms of their valuation in the volatile environment, mostly in the environment of volatile interest rates so that it can react symmetrically. So we were not able to implement that. And why? Because we had to take into account also the local requirements stemming, among others, from the necessity to maintain and to keep the local technical rate. So that's why we were not able to have a situation where one or the other company would face a situation where a change of the investment strategy, which is reflected in the value strategy would lead to some short-term gaps. So it would lead to the necessity of a top-up and to have an additional write-off. So we did not want to have that. And as you may have heard, the Perdido Group made a decision according to which we will see these mismatches. First of all, in terms of differences when it comes to the value of insurance liabilities between the current rate and the historic rate. And what we see in the income statement is the valuation of liabilities with the historic rate, and this will be completed in the reports on the all comprehensible income. So we will mention this situation again. In terms of an index, we will talk about this discrepancy in terms of the index that we wanted to propose as best as a better measure, which can track the profitability of one's equity. And since the revenue from investment activities on the portfolio, would secure the liabilities have the dual character and dedication. So first of all, covering the technical rate and then covering the cost of money over time. So we have changed this [indiscernible] as we implemented the new standard. We also changed the method of allocation of the results of location activities compared to other insurance results. But we have to take into account that we discount cash flows as we move to the next period, we are recognizing the cost of the discount, and this is best shown in this chart on the right-hand side of the slide. So if you have the sum of payment in, let's say, the year 3 plus, this is the large dark blue bar. It's being discounted, minus 1 or 2 or 3 years. Then we have the small blue bar to the time of the initial recognition in the balance sheet. So here, we have the wide bar. And this covers the 3 years of discounting between the day of the valuation and the day of the expected appearance of this cash flow. So moving from 0.3 to 0.1 from 0.1 to 0.2 and so on, we have to recognize the value of the discount as a certain additional expense. And this is an expense related to the time value of money and this has increased appropriately between the first quarter of this year and the first quarter of the previous year. It has grown by EUR 30 million. You can ask why here we see EUR 400 million and something where do you get the EUR 300 million from? Well, it's a very special character of policies with the unit-linked product. So when we have a change in valuation in the unit linked that as a role is not the value of [indiscernible] and the result on this fund is not the result of[indiscernible] , but of its clients, which is carried out in their strategies based on the platform and the policy solutions, which are being sold by [indiscernible]. So here, we have 2 different aspects. On the one hand, we have a grow or a loss of the value of this fund if the fund is growing, then we have to give back more to our customers in the future. So we have a situation when we have additional insurance expenses. So financial insurance expenses. And if we have a contrary situation, so our customers are very aggressive on financial markets. But maybe this aggressiveness is not always accompanied with the right intuition about the market changes. So it leads to losses. So if this fund is shrinking because our customers based on their strategies are incurring losses. Then we, in the future, based on the -- today's value, we have to give back the funds, but in a smaller amount. And this was the situation in this quarter and the previous quarter. As you may remember, the past quarters and the whole year 2022, we had a situation when especially in 2022, it was a period when basically no investment strategy was able to guarantee a positive return rate, even the strategies that as a rule, are seeing a safe strategy. So based on the financial market or debt, securities and so on and debt instruments, even when interest rates are growing. So there was a loss in valuation. So the portfolios and the assets were shrinking. This amount, which is responsible for the revaluation of the value of those assets of our customers. So their investments, in fact, shrunk last year by the amount of about EUR 200 million. And the 4 should be interpreted as follows. But EUR 42 million was the deflated value, reduced value by EUR 200 million. Why EUR 200 million? Because since this amount shrank by EUR 200 million, we have to return less, and we had more. And the principle, this is a negative financing cost. Therefore, this adjusted amount is EUR 240 million let's say, EUR 5 million. In this quarter, we had a completely different situation, not so much different regarding the direction, but the magnitude as well because during this quarter this year, the impact of the performance of both portfolios and that change in relation to the closing balance sheet is PLN 21 million for PLN 375 million minus PLN 212 million since this is the amount that the value of this fund went up. So by so much, we have to give back a return of that fund, which is translating to the cost, but we need to recognize. This is PLN 475 million, but the adjusted amount by the PLN 212 million, but accordingly, the amount of PLN 406 million. And therefore, the difference year-over-year adjusted by stripping out the single component is to PLN 20 plus million. And this is 20-something. And this is what was our cost versus the amount, adjusted amount, this component of financial costs allocated in the gross amount to the insurance operations. Of course, copied goes to the share of a reinsurer the change of investment policy from the point of view of how we allocate the results to the insurance operations, how we allocate the results to the investment operations to the investment segment. As you remember, the model introduced in the beginning by PZU, the so-called the risk-free rate model was based on this following assumption. The is from the point of view of investment type operations using the money it receives to be for management that has to use this amount to coverage expenses and payout as benefits, we receive those amounts for some time, like a float, but so is to manage it best in a way, but we have a guaranteed return of that money irrespective of market situation in the services to the insured and either in the form of a fund or benefits or any other form. So we have to have maintained in line with this model. We have to perform and behaving now with this model to be ready to pay back at any time. So that was the idea behind the investment result allocation to insurance components originally. So we're saying, we are getting the money for management to manage this amount of money using this money, we can buy very safe, very wise because we can't resist money. We have to paid back a very safe financial instrument, and this is the bonds, statutory bonds, where we will invest our money in. And this amount of the return on those bonds on the individual segments will be allocated to the investment segments. The problem is that, as you know, the insurance instruments are frequently long-term instruments, 24 years of obligations, [indiscernible] are long term. For instance, annuities. For instance, in the extreme case, the beneficiary of an annuity benefit is child -- until the end of the child's live, which we can may take 70, 80 years even while financial instruments do not exist to such a duration. Therefore, after the certain period of time in the best case, 10 years, this is what the debt instrument maturity is still available, and this model goes into a super theoretical phase, which took place last couple years ago and maintaining this more such point certification becomes completely theoretical. It is responding definitely, not accounting for what's happening in the company from the point of view of asset management and the coverage of liabilities by assets. Therefore, we changed our investment policy, allocating to the portfolios of liabilities in transit specific and name by name, investment portfolios. And starting from this year, not less, no more. The results of those portfolios will be the amount allocated to the business segment of the insurance, corporate insurance segment, from the investment activities, revenue again a segment of investment revenue realized earned on the asset portfolio to cover the obligations related to insurance opportunity an important change from the point of view of the model from a point of view of maintaining it more intuitive definitely much easier to maintain and much easier in terms of explaining over time the reasons for the changes, increases, decreases of value over time. And this is how -- where we ended the analysis of the components in the segment result is made up of. A few words about how we want to measure in the new world, the efficiency of the effectiveness of the insurance operations here would like to stick to something that is a new value of a combined ratio -- a new combined ratio, operating ratio, which is in the nominator we have the total insurance expenses of claims payout, runoff recognition and loss component, the recognized cost and the amortization of equation costs related to the net revenue from insurance. As you remember, this value for the first quarter is 85.7%. This is the best proxy of what we all got used to under the previous standard. And that this is our best proposal. And this way, we would like to track the profitability of our insurance operations in the new world in terms of the operating margin. This is, again, similar to standard the results on the segment made up of insurance results adjusted by financing costs and investment revenue allocated to in the ideal insurance segment, refer to -- related to the revenue insurance revenue that we all remember very well are made up of the expected claims benefits released. Amount of this revenue, which is insurance margin and contractual service margin, CSM adjusted by the elements related to uncertainties. So the risk adjustment referred to related to the segment result. In contrast to what was done in the previous well results posted by the segment related to the written premium amount due to what we discussed a number of times in this part and the previous part, PZU taking into account the methodology-related decisions decided to recognize the revaluation of the reserves in terms of the current rate that's dominating in the income statement versus the spot rate by -- up to the other comprehensive income. So below the income statement. So it especially taking on this [indiscernible] and [indiscernible] and the fact that we we're not able to adjust the implementation of standard 9 somatically versus implementation of Standard 17. We actually recognize it in the comprehensive income, namely in fact, in the change in the capital over time. And again, this amount will be impacted 1.7 as shown on the graphic mainly will be affected by changes in our environment related to the changes in its interest rates that have an impact upon the valuation of our liabilities and which due to the reasons that we described should not constitute the assessment type of element regarding whether PZU is able to carry out, implement accomplish its main strategic goals. In this case, the strategic objectives related to the return on equity. Why? Because -- exactly because in spite of the fact that we are trying to be -- to impact this market in a very responsible manner, we are not able to take responsibility in any way for the fact how over time the interest rates are changing over time? And how as a result, in light of those changes, the valuation of our balance sheet, looks like it comes in at. So if I'm talking about the return on equity, when we talk about to wear to adjust it by risk component, which is completely outside of our reach, our control beyond our control and completely remaining outside the ability to offset it by the fact how in what manner we could if we were to pro valuation of vessels differently in a different way, we could shape our investment type operations. Let me remind you, we are not able to do that due to the [ dichotomy ] that we exist in and the fact that at the same time, we have to comply with road traffic regulation traffic costs, one local one and the other -- and being local and a being international, the pics of the company or the group which is locally listed on the Polish exchange. So valued according to initiate the same time, subject to the regime framing of loan accounting on accounting and the ordinance regulation related to the insurance companies. And this is basically everything that we have prepared as of today. I understand that from the point of view of information you have received quite a lot to digest to absorb over a 4-hour time frame and maybe that's why you will not have many questions. Of course, if there are questions, of course. One, yes? More related to the numerical parts, more -- let me hand over in a moment the floor to my -- anybody from the audience, nothing from the audience, but there is one question that I know that came up, and I'd like to answer it. The question we to the fact whether -- we will tell you how in individual quarters, you looked like in the previous years. Yes and no. Yes, of course, we'll tell you what our business position in 2022, and this will be comparative data for 2023. And this will have to do because this is comparable data, and there's nothing we can we can do about it. However, we will not be going back further into the past because of the fact that, a, this is impractical and b, it's a gigantic effort of the entire group. But from the point of view of implementing the standard would be also burdened with quite distortion elements due to the fact that the transition date is the first of January 2022. So from that time onwards, you should view the group in a new way. As we mentioned to you. And here, I'd like to again emphasize then. This was our obligation. Over the next 12 months, so over the next 4 quarters, we'll be showing you information according to 2 standards, 4 and 17, 4 nonexisting and the 117 one million the new one in order to try to develop in the most responsible way for you and with you this bridge between the old world and the new world. Of course, we'll give you all the comparative data for 2022. However, that's all regarding our obligation and commitment to help you. So as to make it easier job easier, visit those workshop. The goal of this workshop. I'm at any time ready to spend time with you and talk to you how to understand what would have happened, what could, what if and so on because I understand how non obvious or quite complicated matter we are dealing with, especially not every one of you who is not after all an actuary. However, I'm not able to take on to myself responsibility regarding 2021 and the previous year since this question was posed, this is how we are planning to answer this question and to address this need on an ongoing basis. Moving on. So we have a question to the new medical part. So thank you very much for your attention. I will now hand over the floor to Jan understand you -- let me ask the question -- read this question. Is that any slide, but I should -- this is the question regarding the first part of the example of 6,7 of a general approach, which Slide? 46. The question is in example 6, the operating result is PLN 200 million in example, the total of the operating result in OCI stood 6. Shouldn't it be the same in both cases since we are looking at the -- after the contract expiration and did the same contract, they it more equity? No. What we are looking at is, in fact, the operating result in the amount of PLN 200 million. However, the line that we see below is the balance sheet amount. This is what you should take note of what's presented in the balance sheet on the capital side. However, if we wanted to look at the our comprehensive income statement, then you would have the situation of adding of time establishing 6 and sold in minus the subsequent periods, so we out any final effect upon the amount of equity of capital. So in both cases, the impact on the capital is exactly the same and the operating result is PLN 200 million. And a second question was just posed. Can we quantify the impact of discounting on the combined ratio of 85.7%? And at what rate we expanding the discounting regarding the assets. Well, I think it's more of a question to me because it's not related to the vertical part, it's related to the actual part. So I'm not able to give you now what the actual interest rate and towards this account rate will be. The discounting will be unwound because here we are talking about the property insurance in case of non-life insurance, the main discounting element or reserves, claims reserves, which in particular are important in case of annuities, portfolio. And this is where the impact of this component is higher, the strongest on the results of correspondingly the mass insurance and the corporate insurance. I'm not able to give you the amount of values. So what locked in value taking into account of the portfolio that we have built the annuities portfolio. And therefore, what would be the station if and so and so on. So I understand when in the off-line mode, we will respond to person asked me the question, providing the amount, the value he's asking Second question was in person, can we present any guidance regarding the how this impact of discounting can shape evolve over the future? Yes and no, because we will say what factors have an impact upon the today's situation. So on one hand, we all know what the Zenuity portfolio looks like. We will also say what is the combined created over time value of rate. On the other -- on the third everyone knows what economy we are dealing with on the 4 factor, Here, we're getting into the models. As a matter of fact, so the form factor, what and in what way what is distribution of claims and the split between the property and personal harm or claims and the ones who are specialist, let me refer to the quarterly date of the financial [indiscernible] ,in public sector name, you can see what changes over time. And let me refer to the quarterly date of financial so KNF in publish acronym, we can see what are the changes over time and what are the proportions between those figures. So I invite you to look into that, the way how we expect that on 1 hand, we'll be capitalizing annuities portfolio. So we'll bring up about the situation with this amount, this amount of the future discounted cash flows for a given point in time. in the form of those annuities, but frequently adjudicated verified raised by the courts, how it converts into a one of benefits. So what is the conversion process? What does it look like with conversion process? We will not be telling you that in detail. Here, let me leave this to your judgment, your assessment. This is not a parameter. This is not a behavior but differs it's a difference between the 2 standards what's the difference because stands the valuation, the measurement of these 2 events as part of the results of segments, the insurance result. And this is all. But I assume the same as you by the 31st of December last year, you had been trying to estimate this component related to personal claims personal related claims and its impact on the property related risks and the TPL. The same way you will be doing it starting from January 1 this year because from the point of view, what operations we are conducting the way we are conducting it, nothing has changed. What has changed is the value, the amount of valuation of the measurement of these events, both in the balance sheet as well as in the P&L statement. So we will provide those elements, the data that needs to be complement and supplemented in order to make your modeling easier, but we will not tell you what will be the distribution over time. Okay. Since there's no more questions, I'd like to very accordingly, you thank everyone, although they have endured today's meeting. I assume the questions will still be coming. So I encourage and invite you to feel free to contact us, but I thank you very much today. I thank our -- on one hand, advisers. On the other hand, I can say our -- definitely partners. I can call them, thanks to whom we've been able frequently during the difficult times, maintain a strong component of positive emotions, I think, for that as well. I think for today, and see you next time. Thank you very much. Thank you. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]