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

[Interpreted] Good afternoon, ladies and gentlemen. I'd like to welcome you to the meeting presentation of earnings of PZU Group after Q2 of this year. Our presentation on a standard basis, we split in the following components. So we'll start with a short summary of where the market is, where is our position in this market, what has happened what we would like your attention -- turn your attention to, especially [ we ] move on to the summary financial results. We'll discuss what's been happening in each of the key segments. We will sum up where after the first half of this year, we are at concerning the implementation of the main metrics of key metrics of the strategy. Of course, we are starting with the main accomplishments, major accomplishments of PZU. The growth in sales development of scale and the high profitability. This is according to us, this is what should be the good summary of Q2. In terms of what is happening in the insurance operations, the revenue from [ your ] insurance increased growth in Q2, more than 9%. We are growing practically in each dimension, both in terms of insurance non-life insurance in Poland, more than 10% growth. Also in terms of -- first of all, I would say, the non-motor insurance that is characterized by very strong profitability, very high profitability, what you probably have noticed already, is the continuous growth of -- increase of non-motor insurance in the PZU portfolio. We are growing in terms of our foreign business, very strong growth under the pressure of what's happening on the Ukrainian market. However, excluding the Ukrainian market, this growth is more than 20%. The growth mainly due to a very strong growth rate in terms of motor business, motor insurance. In this case, very strong growth of prices, strong growth of sales in terms of a health insurance business. On the other hand, in terms of life insurance, slightly slower growth. Let me remind you that we are talking about the revenue from the insurance, not as we've done until the end of last year, the written premium. Therefore, especially in terms of the non-life insurance, this is more of a metric that can be referred to the premium and in the -- according to previous plan. In terms of assets under management, what we are drawing your attention to is the fact that we are able to take advantage of the favorable macroeconomic conditions, especially taking into account the interest rate level that creates a very good condition, a very good environment for investments of treasury bonds, maturing treasury bonds portfolio, which are mainly used to cover the liabilities under the insurance here, the main portfolio its result for Q2, PLN 606 million year-over-year. This is a more than 70% growth rate. The increased expansion of scale of operation in terms of assets under management versus last year, very strong growth. Of course, they are mainly in the function of the change of valuation. Last year, very difficult on the asset management market strong declines here, situation this year took -- totally different strong inflows in case of our TFI, PLN 1.3 billion in first half of this year, a very solid result in terms of a health care pillar. We are on a good -- on track to achieve the strategic goal after the first half of this year, PLN 760 million, the growth rate at the level of more than 26%. We are growing in terms of subscriptions. We are growing in terms of insurance products. We are growing in terms of the scale and the access, these are the most important piece of information from a point of view of health care pillar. In terms of second quarter, as we mentioned, a very solid growth rate. As a matter of fact, a very solid continuation of the growth coming from the first quarter. The increase of insurance revenue up to PLN 6.6 billion, more than 9%. First of all, the growth rate observed in the non-life insurance segment with -- in terms of nominal values, we have a growth rate at the level of almost PLN 600 million we had achieved mainly on the side of the Polish -- from the Polish entities where this growth rate is brought about by the growing scale. As we mentioned, the scale, which is, in this case, the derivatives of very strong growth rate achieved last year, in the second half of last year, continued this year. So the non-motor insurance products in both segments, but in particular in the corporate segment in terms of motor insurance products. First of all, the MOD, the growth rate in the region of 17% in the TLP products, slightly less growth, mainly the scale was good. We are growing the MOD, this is a part of motor insurance products that, first of all, is a profitable risk; b, the growing one in terms of from the point of view of saturation in the motor portfolio -- products portfolio. We are growing more than 1.5% in terms of the saturation, this is a very strong growth rate, so on one hand of the scale. On the other hand, in case of MOD, the price is derivative of the increase of value of subject of insurances. So what we are observing on the motor market, vehicle markets in terms of the increase of prices of the vehicles. On the side of life insurance segment increase of the revenue, mainly due to the higher release of CSM, Contractual Service Margin. This is the growth rate in terms of growth rate, additional PLN 57 million versus last year. Also strong, greater flows in order to cover the cost of maintenance, administration expenses, acquisition costs, expenses related to maintaining the life portfolio year-over-year, more than PLN 40 million, which translates to the growth rate from the life insurance products in the available of about 5.5%. That's all regarding the top-line results, top-line figures. Let's move on to talking about the profitability of each component, the so-called building blocks in terms of our income statement. First of all, a very strong, very solid earnings, very good profitability rate in terms of core insurance operations, the COR combined operating ratio at the non-life insurance, around 86%. The margin around the group and individual continued, almost 4%, according to the old standard, more than 26% therefore this demonstrates what kind of market we are dealing with. I will elaborate on that further on the presentation. But so very strong profitability [ rates ] in terms of the core operations. in terms of main portfolio, strong growth rate, primarily achieved on the bonds portfolio of interest results goes up by more than 30%. The second growth engine, growth driver is the own real estate -- in-house real estate portfolio, close to similar growth rate, almost 30% in terms of growth rate in this segment. Of course, we are beneficiary of the fact that the maturing historical tranches of a long-term bonds, we're able to refinance at a quite high level and this higher level of interest rates, we are able to extend the maturity for the subsequent years of such high interest rates, very strong growth of a contribution from the banking segment to the earnings for Q2. Let me remind you of what is quite an obvious thing. First of all, it's the interest result. We know what's been happening to the interest rates. On the other hand, to a similar degree, to not a lesser degree the issue of charges in this segment, which was quite strong last year at this time of year. This year, the -- significantly lower levels. We're talking about [indiscernible] bank protection scheme, the BFG, allowances for the FX loans, also of a loan whole relief period. So vis-a-vis events that had an impact upon the nonrepresentative costs for the banks, including the banks owned by the PZU Group. This quarter, the contribution of the banks to the earnings more than PLN 500 million. This all leads to a very strong, very high net profit, PLN 1.54 billion and the ROE rate return on equity more than 20%. We adjusted rate of on -- return on equity. This is what we proposed. We proposed when we recalibrate the strategy in April this year, close to almost 25%. All of that, while maintaining very high security of the operations conducted, very high solvency capital ratio, 20%, 35%. Therefore solvency II ratio, so much higher than the peer group. At the same time, our capital strength and the rating affirmed by the S&P rating agency in June this year, so quite a fresh confirmation. All of that allows us to continue the attractive dividend policy -- attractive for the shareholders dividend policy. Soon the dividend will be paid out from the earnings of last year. The increase of the dividend per share, earnings per share -- dividend per share almost 24%. Our goal is, of course, to grow the business, but a sustainable development, sustainable growth. We want to reduce the variance support the preventive prophylactic activities engaging in their corporate social responsible activities. At the same time, quite strongly getting involved in the fact that the PZU Group, maybe it's not -- we are not yet there, but we want our group to be associated with modern solutions, state-of-the-art solutions, the global that is very strongly changing in the digital arena. Therefore, we are investing in various types of projects we are setting up new teams, the goal of which is still built or to invite artificial intelligence to PZU. So, but for now, a bit on a testing basis, but we want to do first pilot project, the first product based on the totally new technologies. At this point, let's move on to the summary of our operations against the backdrop of the market. And usually, we do it based on the latest available data. This is the data for the first quarter of 2023. And against this background, we will be demonstrating our achievement in terms of non-life insurance market in Poland. That's the segment we are starting with usually in this part of the market at the beginning of the year under a strong growth that you observed, based both on the motor and non-motor insurance markets. The motor market is growing more than 10%, mainly, as I mentioned, thanks to the acceleration in the MOD insurance policies of 21% growth year-over-year. We are talking about that -- 2 parameters at the same time had an impact upon the situation on both the price as well as the scale. On the other hand, slightly lower 4.7%, 4.1% growth on the direct operations the strong growth rate on the TPL portfolio where the market is growing both in terms of the scale. But in this case, we can confirm based on the KNF, Financial Position Authority data growth regarding the average price. The preliminary data after Q2 demonstrates the continuation of what we already observed in Q1. And let me be frank here, we do hope that it's not just a correction of what was happening over the last few quarters, but it is the beginning of a new trend. And we do strongly wish ourselves that this comes true. Further growth in terms of non-motor insurance products more than 16%, mainly the group's [ 8% ], [ 9% ]. So property insurance, almost 18%, TPL general, TPL assistance products, these are the areas where the market has been growing most strongly against this market drop, we are growing in terms of share of attributable premium almost 32% in terms of share in the profit pool, the technical profit pool of markets, we are at the region of the level of 43.5%. In terms of what is happening on the motor insurance market in Poland, first of all, as I mentioned, a change in the average price, which you can see on this chart in the upper part of slide confirmed in Q2, this is not a very strong growth, but definitely, it's a growth rate, but we do hope finish the artificially extended up to almost 6 years, the cycle -- the period of price adjustments, price corrections, which due to the pandemic, due to the fact that this pandemic had a strong impact upon the changes in the frequency regarding the motor-related claims allowed for maintaining the situation for a very long period of time. And these quite low frequencies, as you can see, are staying with us, we are not returning to the levels from before the pandemic, one can try to explain it by such fact that, first of all, the way -- the change of way of life, the work life balance, work model hybrid solutions, improvement of the quality of the road changes to tariffs, of the fines, the penalty points, all the issues related to topics related to the inflation development, which translates into the cost of [ fuel ]. These are the parameters that had an impact recently on the shape of distribution of the frequency -- claim frequency on the Polish market. What is makes us happy as a fact, but Q2 over time continues at lower levels after slight correction taking place in Q1. Against this market backdrop, the PZU Group measured based on the written premium that I will explain to you in a moment why this is not a representative metric, is growing at the rate of 5.6%. And this growth rate, you can observe mainly in the MOD insurance, in the TPL, the growth less than 5% [ Y-o-Y basis ], it's not a representative metric. As you have seen on the previous chart, we are growing in terms of revenue from insurance measures according to the new stand at the region of around 10%. This is not a representative metric in case of the PZU Group. We already mentioned the number of times due to the growing portfolio of contracts agreements longer than 12 months, which are concluded by the corporate segment by our subsidiary of the distribution channel PZU-2, which in very many cases, is concluding contracts, the coverage period being 18 months plus. This is what happened in the second quarter of last year, above 4 in order to bring some comparability to this information would have to adjust last year by about PLN 150 million. This is the scale of the business that is not recurring after 12 months, it will be recurring or renewing partly this year, partly next year and next year will also be the year where there will be accumulation of events that were excluded from the renewals in 2023 due to fact that the duration of our coverage is -- period is 18 months. Therefore, we adjusted values. I'm quick to provide this information from the point of view of the growth rates achieved this year on the adjusted portfolio non-motor portfolio is more than 10%, and the entire portfolio of the growth rate in the region of 9.6%. In line with the ones observed or measured according to the new standard. As you can see, the saturation MOD to TPL is growing, which from the point of Przyszlosc product is a very good piece of information. From the point of view of the product initiatives, we would like to draw your attention to, first of all, to the further process of integrating with central register of vehicles and drivers is very important from the point of view, better alignment between the price and the risk, and the quotation processes and sales processes. Today, this is not just our data -- system data, but also the data that we are trying to acquire from third-party sources in order to provide better quotation, still better quotations and be even better from the point of view of price but the price that guarantees profitability to be even better provider of solutions for our customers. On the non-motor -- in the non-motor segment, two piece of information, PZU Dom, PZU House and Wojazer be in terms of PZU Dom, take into account the scale of the developments in terms of the risk, flood risk and all the things that are happening as far as the investigation of large claims, large disasters, natural disaster, we introduced a 30-day grace period in terms of a flood risk, but at the same time, we are increasing the scope of assistance for the customers. So the scope of assistance services provided, we introduced the digressive tariff in terms of movables, home movables. So the price -- when the insurance sum goes up, so the price could be as attractive as possible for our customers. In terms of trends on the life insurance market in Poland. The market is growing both in terms of the periodic premium products as well as the single premium product in the case of periodic premium products, which is the majority of this market, mostly 80% of the market is growing by 3.8%, mainly with respect to the riders, those increases in the range of 7.6%. And the base product a bit lower, everything under the pressure of the insurance tied to the unit-linked insurance products. So the insurance products that are characterized by very strong investment part, investment component. In terms of the single premium products, the breakthrough of downward trend that has been observed over a long time now. The downward trend that was due to the unit-linked insurance products, investment-type insurance products. But in terms of the protection products, the growth quite -- rate quite strong, more than 50%, which make up offset the premiums on the side of unit-linked insurance products against this growing changing market, the share of PZU may continues to stay above 40%, 42.3%. In terms of growth of our portfolio, the group in the [ Zurich ] continued the written premium. This is very important. One should remember that the Polish market, the standard hasn't changed all the times. Therefore, we are talking about it and we're measuring the revenue level in the insurance based on the written premium, therefore, the growth on our portfolio more than 3% in terms of most important for segment, the growth of health care-related insurance, growth of riders, sales of the riders contracts, both in the group and individual continued insurance products. These are the components that have an impact upon the growth, drive the growth plus acquisition of new contracts. This is very important for us. So maintaining the largest possible number of risk in our portfolio on the side of individual insurance products, the growth of protection insurance portfolio, even percent year-over-year growth rate, strong sales of life insurance and endowment products granted some of insurance both those in the developing and the in-house channels with the banking channel, taking account the volumes and all of that under the pressure of -- in unit-linked investment type insurance products, we offer both in our in-house channel as well as in the bank channels. On the product side, once again, we are drawing your attention to the protection and unit-linked insurance products with a high rate of return. This is the time where we're taking advantage of opportunities due to the availability of true instruments that are characterized by higher yields, we are able to develop to prepare great products that have a very attractive alternative for instance, for savings products offered by other banking channels. In terms of the health pillar activities, we already discussed the revenue. The most important thing is that we are observing during this period, very strong growth in terms of the insurance products, more than 35% growth rate, the increase of scale measured by the number of contract -- active contracts, active agreements. At this point, more than 3 million -- 370,000 contracts. The growth rate of coverage and the availability of PZU at our in-house outlets, the growth in terms of the number of specialties available, medical specialties available at each outlet, at each center on the revenue side, it's a very important thing. We want to create, and that's -- our policy is to create the largest possible network of our in-house, our own centers, our own outlet. So we believe that this has an impact not only on the quality we are offering, but also on the average cost of medical procedure, which from the point of view of medical inflation rate that we observed on the market is especially important for us, even more so, we are happy to see that the interest -- the fraction of the percentage of online appointments via remote channels, My PZU, of stable show of a telemedicine consultations, which again, has an impact upon the availability access and allows us to maintain to control the cost, maintain the cost at a relatively acceptable level. Access under management. We already discussed it. Let me just remind you very strong growth rate, both in terms of the new sales and the valuation of the portfolio the increase of assets under PPK. At the end of Q2, it's PLN 3.5 billion in terms of the product offering in the banking channel the growth rate, growth of the sales as part of the cooperation with banks that are part of our group, almost 70% year-over-year. This is of course, we do realize this is partly the base -- low base effect, the written premium in total with all the banks, not only intra group is growing at the rate of more than 50%. Now the time has come to sum up the earnings, financial results. We already spoke a lot about revenue. Let me remind you, this is a very strong growth rate. And here, a few words, a few comments, the gross revenue from insurance versus the written premium. Quite often, we can see your comments saying the following: PZU Group with a lower growth rate over written premium, all that quite often, a lot of people out of us, people that follow the earnings of our group, are still operating under the old standard. At the same time, the group has surprised by the strong growth rate of the earned premium. Why was the difference comes from? Well, one can live without the other. You cannot have high premium and selling less. Let me do attach it to that fact. And let me do attach it to fact, but the situation with the often mentioned is a derivative of the outcome of the long contracts, long agreements, especially under the corporate portfolio as part of the corporate portfolio. We are acquiring, but they are characterized in a [ same ] case by effect, but they don't -- not only they are appearing in the quarter-over-quarter, but not also year-over-year comparisons. If just happens so but the day -- maturity days the 18 months, for instance, skips, misses the entire calendar year. Let me draw your attention to the fact because this appears in many comments, but continuing the gross revenue from insurance growth, PLN 555 million that we already mentioned, mainly in the property insurance, non-life insurance, including the Polish subsidiary, PLN 370 million, the foreign market, PLN 85 million. On the side of life insurance products, these are growth rates, growth of about PLN 103 million in terms of growth year-over-year. What has made us happy is the fact that the large growth year-over-year is also continued quarter-over-quarter. However, from the quarterly growth, Q2 versus Q1 of this year. First of all, the property portfolios, non-life portfolio both on this market as well as the foreign markets where the growth is -- rate is almost 6%. Net revenue from insurance. We are talking here about the reinsurance component already, as you can see the growth rate a bit lower, which is a relative effect what I already mentioned, the growing portfolio of large corporate agreements, large contracts, or change is a slow change but still already visible for some time for a long period of time, the change of the structure of the portfolio on the non-life insurance. Talking about the motor and non-motor insurance products. This is a very good piece of information, a very good direction of this change. Additionally, this year, additional coverage related to the disasters to cut catastrophe, which had an impact upon the revenue from the reinsurance shares of reinsurance premium, which is definitely justified, I think in account of a sudden climate changes. A lot is being talked about that. We want the best possible way -- in the best possible way, we want to protect ourselves again the consequence of a very sad and very strong phenomena that have a very massive in nature. In terms of claims and the net benefits, the growth, first of all, caused by the cost of the claims in the mass insurance products, we are talking mainly about the scale of the portfolio here. At the same time, this is a very important piece of information, smaller accretion of loss component, both year-over-year and quarter-over-quarter, which demonstrates that in case of high MO depreciation, the creation rate, we are talking about the improvement of the quality of the profitability of portfolio, which is particularly important and visible on -- in the mass motor insurance products. Administrative expenses are going up. We can see the strong inflation rate on the cost side. However, in the second quarter of this year, we recognized the inflation of wages of the compensation of the PZU employees were covered by the programs of compensation hikes based on inflation rate. So in Q2, we recognized the effect of Q1 because this was the campaign that took place in Q2, including the compensation payment for Q1. So Q2 is charge -- is burdened with this effect in a bigger way. But of course, it's not the only element of growth of costs. We are also growing in terms of the higher IT cost, both in terms of development, expansion, maintenance, indexing of the contracts, maintenance of the real estate assets, indexing of rent cost and these were the components that have an important -- factors that contribute -- have a major contribution to the increase of the cost. As far as the increase of the cost of [indiscernible] side, these are the results from the scale but on the other hand, the saturation in terms of the products that are characterized by the higher distribution costs. So first of all, the non-motor products also the motor product, but in third-party channels, multichannel dealer broker, these are the areas we observed increases in Q2. In terms of net financial revenue, let me remind you under this item, we are presenting the surplus of placement operations. Placement activity which is generated on those portfolios that collateral, that protect the insurance claims liabilities above financial costs, which is the flow the cost of money over time. This is the place where we recognize the discount -- discounting effect, all the cash flows in the income statement, that is discounted, so therefore, so a change or shift over time leads to the need to release of this discount. What's very important is that the main portfolio should be able to cover the appropriate surplus of those financial costs. This is what's happening in this case. Therefore, thanks to also this element, we are able to close Q2 with the operating results in the amount of PLN 1.47 billion with a net profit attributable to the owners of the parent company, excluding the banking segment in at the level of PLN 1.39 billion. This is more than a 30% growth rate year-over-year. I think on the high contribution of banking segment. We are closing the quarter of PLN 1.454 billion very strong growth rate year-over-year, quarter-over-quarter that lead to a very strong high profitability rate in terms of equity, return on equity. A few words about the earnings of individual segments. In terms of non-life insurance mass segment. We already discussed a very strong growth rate of revenue, almost 8% in terms of the mass segment, mainly MOD, non-motor to [indiscernible] margin growth rate is 5.7%. Once again, let me repeat along with growing MOD to TPL ratio, which is and was particularly visible on the cost of insurance service is the decline of -- in the lost component creation versus the amortization. The lost component from the previous period and the positive effect of that in the total amount of PLN 68 million in Q2, which has an impact upon the operating result slight adjustment in terms of the absolute values, PLN 504 million. In terms of deterioration of the result on the insurance services, this is the deterioration mainly in the non-motor segment, due to the slightly higher year-over-year number of claims of mass nature, slightly higher. That's why this collection is small. When we look at the improvement of the TPL segment, along with simultaneous decline of results generated by MOD segment, whereas the contribution of the entire motor in line at a similar level year-over-year. In terms of the corporate segment, here, very strong growth rates. Here, we can really see what we already discussed during this presentation, the 18% growth rate, almost 25% growth rate in the non-motor products. With a growing allocation of reinsurance premiums. This is what you can see very well on these charts. Taking into account a relatively stable cost of insurance services, leads to the situation where the operating result is going up year-over-year in this segment by 40%, more than 40%. From the point of view of group and individually continued insurance products, we already discussed the higher lease of contractual service margin. CSM as a result of the positive impact of everything that is comes from our experience and most probably this is how it's going to stay in the future, the departure from this pandemic period, today's fatality rates are at a slightly lower level than in the period before the pandemic. So the 2017, 2019 time frame, let's put it this way. The question is to what extent this is a transitional period, which canvas any cumulative effects that we already observed over the last 2 years. But of course, it has an impact, as I already mentioned, upon the higher release of the contractual service margin, and of course, on the higher -- on the allocation of a higher partial -- portion of the revenue to cover the costs above the claims and benefits as well as the administrative overhead costs -- overhead expenses. As a result of the increase of personnel costs, wages cost, cost of distribution, in terms of indirect costs, mainly on the side of the cost of handling of insurance policies, the costs are a little bit flat year-over-year, but Q2 is characterized by similar in terms of amounts levels, which is a natural implication of the increase of the operating result, the margin of these results, almost 24%. In terms of the individual protection insurance policies, products similar in the case of the group products, a higher release -- bigger release of the contractual service margin as a consequence of everything thing that we've been observing in terms of the growth of development of claims mainly based on the fatality rates, fatality rates that are declining. It's all being adjusted slightly, we show it on a separate chart by the medical risks. That's why it's so important from the point of view of PZU parameter is to keep the medical inflation at a lowest possible level. In terms of the cost of insurance services here, as you can see, a similar growth rate as in case of revenue, which allows us to generate slightly higher operating results in this segment, a growth rate of more than 16%. A very important piece of information regarding what is happening to the contractual service margin, CSM, namely the margin that will be by PZU left as of the balance sheet as of June 30 this year or has been retained as of the balance sheet date of March 31. This year was recognized and allocated to the corresponding period. These are the values that could be treated, could be regarded of the future profits that will be realized during -- as the individual insurance contracts individual segments progress in terms of the group and usually continued insurance policies, increase of margin up to PLN 7,267 billion, where CSM from the new business is PLN 237 million. Additionally upselling of the new contracts are either increasing future profits shown in this segment change of assumptions and variances in the amount of PLN 35 million. Accrued interest, let me remind you, we are talking about the discounted cash flow, PLN 80 million, the release of contractual service margin, CSM into the income statement for the current period, PLN 306 million. Similar reasons of changes in terms of individual insurance products here have increased up to PLN [ 1.15 billion ] from PLN 81 million at the end of Q1. The possibility rate of individual segments, by operating segments, let me draw your attention to the continued low COR combined operating ratio in terms -- regarding TPL insurance products or even the slight improvement on the mass and even stronger improvement on the corporate side, slightly adjusted by what is happening in the MOD portfolio. We'll discuss that. Comparing quarter-over-quarter shows a slight deterioration, but of a very low COR combined operating ratio, we are finishing the quarter below 87.9% in terms of the life business, both individual as well as from the point of view of group individual continued. Very high margins in terms of Baltic countries, again, very solid growth rates. However, still this is not the scale yet, which could be comparable to the non-life insurance segment on the Polish market, but solid decent growth rates more than 20% from -- with very good profitability rates. In terms of the pandemics and versus claims in life insurance products. As I mentioned, we are in a situation where year-over-year, the number of deaths measured quarter-by-quarter, dropped below 90,000 down from 105,000 this time and 130,000 during this period during the period of most negative in terms of the impact on the accounts of life insurance companies. Therefore, this is a situation where we are dealing most likely on a transitory basis, which is the result of the net cumulative effect of a negative occurrences over recent 2 years. But as we showed before, quite big additional claims, like COVID related claims. So today, we are a beneficiary of this reversal of the trend or maybe new distribution that will be visible for some time. In terms of in terms of claims, as you can see, the group individually continued segment for that very reason, is reporting 5% lower percentage points claim ratios, which is the consequence of following developments. On the debt side, the impact on this ratio is 4.6, it is under the influence and the pressure from the health care products. In terms of the other risks, we are talking about such things as giving birth a child assistance, ADD, permanent disability, permanent damage, also positive a positive impact upon the claims ratio year-over-year. In terms of investment results from the main portfolio, very strong growth. There is increase of results, earnings generated by the main portfolio by more than 17% versus Q2 last year. Very strong impact the growth on the side of interest income. We already mentioned that, very good performance of real estate portfolio, both in terms of increase of rents, rent rates as well as revenue from FX hedging instruments. What makes us particularly happy is the fact that in terms of acquisitions purchases that we carried out in this first half of the year to the bond portfolios and the portfolios kept until maturity, we're able to improve weighted average profitability rate, thanks to the high operating cash flows that were feeding the main portfolio. Today, the main portfolio is PLN 47 billion. And thanks to that, we were able to making these new acquisitions, new purchase of the tranches of instruments at higher valuations. We are able to raise the weighted average profitability by almost 20 bp basis points. And freezed it, locked it for the subsequent periods. So a very good piece of information, high level of the group's solvency. We already discussed that we are growing in terms of our in-house funds, not growing as the same rate in terms of solvency requirement. In terms of respect of implementation of strategic goals, the gross revenue from insurance when we recalibrated our strategy, we set ourself with very ambitious goal in topping PLN 20 billion in terms of gross insurance revenue different than the written premium. There is no 18-months element, factoring of a random factor. It's a systematic increase of scale. We do believe that this KPI is still within our reach. We do believe that this year, the market also in the second half of the year will continue to grow. And the increases, the growth rate in the market will top 10% in terms of the non-life insurance market on the health care pillar size, consequent. The growth rate on a good way to this PLN 1.7 billion to go over the high solvency and the high contribution of the banks that leads to the above average earnings of the growth of first half of this year and a very strong rate on equity both ROE and the adjusted ROE that eliminates strips out the [ FX ] liabilities in terms of the oscillations or fluctuations of discounting rates. Ladies and gentlemen, that's all in terms of the summary of the earnings. So let me be frank, it took me a bit longer than I expected. And this is probably the time when, if you had any questions to the presentation, to our report, to our to what has been happening in PZU Group. So I'd like to very warmly invite you to ask your questions now, especially another fact, but today, we've been visited but this quite large group of visitors here on site physically. So we are very happy to see them. Welcome and now is the time for segment of questions and answers.

[Interpreted] Andre [indiscernible] from Bank Handlowy. My question would be for the investment result. Outlook for the subsequent quarters or years with the consensus that gradually the interest rates will be declining in Poland. And how should one look at this result of these earnings in the future, what should be the outlook?

[Interpreted] Well, in terms of the main portfolio. As I already mentioned, this is PLN 48 billion out of which the bonds portfolio -- treasury bonds portfolio amortized cost is PLN 23 billion. Therefore, almost half of our portfolio will be the beneficiary of -- has happened before. Before, quite strong, quite a high blended yield. I'm mentioning this because it's a resultant of all those tranches that are historic. They are also purchased during the downturn period where the interest rates were quite shallow. And now taking into account the liquidity surpluses and operating cash flow, we're able to supplemented and improve this yield profitability by about 20 basis points. So on one hand, this is one thing. I do not know if I want to use the amount or the amount, what can expect in absolute terms because the devil is in the details and although there is a consensus that the interest rates will be getting normalized, so most probably taking around all the factors, one should expect we will be declining. However, I'm saying that the devil is in the details because here, the biggest unknown is the rate, the rate of the deceleration of a decline of interest rates. On one hand, it will be definitely what is our and will be our frozen or locked up profitability in terms of treasury bonds. We'll be keeping them until maturity. As far as enough significant area of growth is the fact that we assume, but in spite of declines that will be taking place, we continue -- we will be continue to maintain in a proper manner, shield related to the corporate debt today. Again, we are a beneficiary of these high interest rates and definitely in spite of the fact that this trend will reverse, we're thinking about 17% share of our portfolio. Still over time, the situation will continue like that. In terms of real estate, here, we have the opinion that this -- all the time, there is a potential, there's a room for growth. For now, it's less than 10%. That's the share of real estate portfolio. We want to expand this portfolio in a very responsible manner. Therefore, as you can see, it is not some crazy policy of creating and developing something strange we want to rotate this portfolio in the fast and be a beneficiary or possibly to a larger degree of developers' margins that will allow us to increase the weighted average profitability rate of this portfolio. From the point of view of equity instruments. The majority of this portfolio, except for some transitory short-term fluctuations, here, I'm referring to our nonstandard I would call them exposures in this portfolio, mainly these other portfolios built based on private equity on very low individual exposures built in a consistent manner. And therefore, this portfolio is more than PLN 1 billion who are contributing on a seasonal basis, this portfolio is related, of course, to the equity markets and reflects to a certain degree of sentiment on the equities market, depending on what is going to happen, what's going to be happening is potentially -- this area taking into account the strategic as well as tactical allocation of the assets. We can try to saturate this portfolio to a large extent. I'm not saying this is going to happen, it all depends upon what is happening on the market. But definitely we will not be doing anything here, things that I'm looking for a good word to controversial, I would say, we are an insurance company and it's investment operations, investment -- investing activities is quite visible very well in this chart to a much larger degree dedicated to insurance needs then due to the fact that is being carried out with a higher -- with a high degree of aggressiveness of higher greater appetite for risk, would allow to have an impact up on a large growth on the surplus portion. This is not the case. And this is a very good chart that demonstrates that. But taking this into account, given the fact that we are an insurance company, we want to grow because of our scale trying of the longest possible time frame, I think the expected interest rate declines. We want to continue to maintain but today achieved profitability rates. This is the time when, I guess, yes, this is the time. Okay. And not too many. Now we have reached for the questions asked on our website. What level of a benchmark and the p rate -- prime rate, you assume to at the end of '23, beginning of '24? I'm thinking how to answer this question and whether it's a question to me. I think it's a question to the National Bank of Poland. Let me answer this way. Because this is the question, how do you estimate that the NDP will be right or wrong. That's how I'm reading it, I think it's best to direct this question to our colleagues from the National Bank of Poland. I think it would not be very nice from my side to [ replace ] them in this answer or [indiscernible] them answering this question. So I will not be doing that. So I understand that our more and more informative presentation, but not only we deliver more information on the same topic, but in a greater number of dimensions. In the under old the dimensions, newest dimension, based on new segments, therefore, there's a lot of information, a lot of information about of new quality. I assume that any hunger for information, we managed to satisfy. So this is the time, and I'd like to thank you very much for today, and I would like to invite you also to visit us physically on site for the conference that we will be summing up the earnings for Q3. I'd like to thank you very much. See you next time. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]