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

Ladies and gentlemen, good morning. It is my pleasure to welcome you today at this conference. We have met to summarize PZU Group's results for 2023. In particular, on the fourth quarter of the previous year. This was quite an active period. Therefore, we have a lot of information that we would like to share with you. Just like we did it before, we divided this meeting into 4 main parts. We'll start by outlining our main achievements. Next, we will compare our operations to what is happening on the market. In the next section, we'll summarize our financial results. And lastly, we'll tell you where we are at as far as it goes to the implementation of our strategy. 2024 is the last period in which the current regulation, this strategy is in force. So this is going to be an important year for us. So we had high revenues, high profitability. The revenue reached almost 9% year-to-year, high profitability at PLN 5.8 billion. We also have good capital position, which allows us to pay out dividends in line with our strategy, and in line with our capital policy. Let me give you more details. Insurance revenue. The main source of insurance revenue for our company in the previous year were non-life insurance, they accounted for about 11%, actually increased by 11%, our sales of non-life insurance and 16% came from sales from abroad. Our life insurance was growing strongly as well. We were measuring it using the fourth standard. The dynamics of investment products affected the written premium. The dynamics of growth is lower given the way they were allocated to individual periods. We're on a very good trajectory as far as achieving our strategic goal goes. We are set to achieve or even exceed the target. We can report a high level of sales, both in our branches and through subscriptions. Because the pillar, the health pillar consists of not only insurance products alone. Last year, we benefited from flows that occurred on the asset management market. Therefore, net sales in our investment products reached PLN 3 billion, which means a significant inflow of capital, an increase of 14% to investment funds. We all remember how skeptical some used to be when we announced that we have a target with that regard. Last year, we recalibrated our targets in the context of the new standard. Today, we can tentatively announce that if there are no adverse events this year, we may achieve the target. Let me remind you that our target value is at PLN 60 billion. And at the end of 2023 -- at the end of 2020, 3 billion. We had a record of BRL 2 billion. We had a record net profit. Our own equity went up by 6 percentage points year-on-year. We also had a very good result in insurance. A nominal increase of the contribution of the investment portfolio is at PLN 300 million year-on-year, including the mask insurance segment and life insurance, both group and individual continued insurance. S&P confirm our rating with a stable outlook. And this rating was estimated after the changes we had at our company. So regardless of these events, our capital position is so strong that the rating agency gave us a very good rating with a stable outlook. This morning, during the press conference, we presented our results. We believe that the results give us a very good base to continue our dividend policy. Not only did we have a 50% of consolidated profit, but we also had a very strong individual single unit profits, which -- and this is actually what determines our potential for dividend payments in our capital group. We're consistently meeting our strategic goals as far as customer relations go. We have a good Net Promoter Score. We also got distinctions for a few of our processes, including how easy it is to open a policy with us. Let me tell you a few words now about business development. We have been operating on the markets that underwent significant changes. I will start with non-life in assurance. There we have 2 segments: motor insurance and non-motor insurance others. As far as motor insurance goes, we have noticed a slowdown. We started 2023 at 10% in quarter 2 and quarter 3, and there was a drop in the dynamics. The reason for this is that the product that historically benefited from the increase in the value of the insured property went down. That is cars are less expensive. And earlier, the cars were more expensive, and that contributed to increased dynamics in motor insurance. In the third quarter, we came back to our previous dynamics that is, old cars were are worth less as it usually is. For this reason, the situation has normalized. As far as third-party liability goes, we end at 6.4%, and MOD at 10%. Non-motor insurance, property insurance, insurance against fire and others, are those products where we had double-digit growth measured with the written premiums. PZU Group is a beneficiary of the improved situation on the market. Our market share has been growing significantly, and it has been growing in that part of the market that is more predictable, less volatile. Less affected by price volatility and offering higher profitability. So, what happened on the market for motor insurance? Third-party liability went up for the first time in 6 years. This is good news. We welcome this increase, although they could have been higher -- the increase could have been higher because there are also costs that offset the growth. And to illustrate it, we used the data from the Central Statistical Office and the police to estimate the number of road accidents as compared to our reference here, that is 2019. And there has been like a strong change in the general tendencies on that market. In the third quarter, we have observed a significant increase in the number of damages and claims. There was also an increase in the number of road accidents, but of course, not all road accidents leads to claims, especially in December and January. In December and January, we had some heavy snowfalls, and that, of course, leads to an increased number of claims, but these claims do not result from road accidents, but from minor collisions. So, therefore, the cost now looks worse because of the fact that the number of rolled collisions has skyrocketed. So now, let's have a look at the chart. Minus EUR 20 million, minus EUR 30 million versus the reference year 2019. These were the frequencies that we could witness on the market. But the problem is that at the same time, the value of the average -- the average value of claim went up. So it has went up by over 30%. As a result, as the prices haven't changed that much, the number is not that up, you can't go beyond 0 plus. Now, a deep dive in the motor market. Speaking of profitability. You can see that MOD remains quite profitable, well, maybe not as profitable as in the previous year. And MTPL is under a growing pressure, especially in Q4 with a loss compared to the earned premium. We all realized the following, that if there is no increase in the prices this information will be confirmed by the financial provision authority. And the situation will continue in the first 6 months of this year. And now, the PZU, we are speaking now about the recent premium. You can see that in Q4, it went up by over 12% as compared to the reference market. So I mean, our competitors. This is an estimate, but this relies on the PZU data. And you can see that the growth rate for our competitors was around 9%. This hasn't yet been confirmed because we don't have the full statistical data for the whole year. It will be available at the end of March. But we can already say that these partial data covered around 96% of the population. And we can say now that this is a second quarter in the draw where our competitors' growth rate hasn't been as high as ours. As I've said, we have seen some higher profitability, not in the motor market, in the motor insurance market, MOD and the MTPL remains flat. And also, our ratio between MTPL and MOD has been consistent. And last year, the growth was 1.5%. This is the percentage of drivers who have taken out MOD together with their MTPL policy. So this is very good for growth generation. Now, speaking about products. I can say briefly that we have some extra products and broader coverage tires, and new riders towing. You can run the replacement car, new cars, ambulances, RVs, motorcycles, motor bikes. So here, we would like to develop a competitive edge in the long run. This is because we believe that this will boost our sales and generate value for the whole group. Autoshyba, which is about wind screens and also this has seen some changes. We have also made changes in other products related to housing industry and farmers insurance? We have a new product for corporate customers, which is an insurance for environmental liability insurance. This has been introduced to meet the customers' needs. It doesn't mean that we are encouraging anyone to pollute the environment. Now, the trends in life insurance. So let's have a look at the whole market. And the data we have at our disposal cover 3 quarters -- 3 last quarters. So Q3 insurance with regular premium was going up, and we ended at the level of almost 6%. There was also a higher growth rate for Group 1 products, 0.4%. This has been supported by a good growth in riders. Therefore, we end up at a level of 5.8%. This growth largely hinges on the replacement. This is all linked to the inflation right. So it's about redefining the prices. It's not only about acquiring new customers and having offered new insurance policies. Now, speaking about the insurance of Single premium, the dynamics look the same, but mainly thanks to additional riders. The growth rate year-to-year is around 80%. Speaking about the basics, it's practically flat. Group 1 minus PLN 4.8 million compared to the previous year. Let me highlight one thing here. Unit-linked products for 18 months, the drops were very serious. Sometimes even minus 70%, 80%. In Q3, it has improved significantly, plus 36%. This is the dynamics. Hence, the final result for the quarter is of almost 11%. Now, the share of life products in the periodic premium market, this is very important for us, and it's 42.3%. Let me also mention a growing share in the single premium market. And this is thanks to a product we launched at the end of 2022. As a result, our market share got up to 27%. And in 2022, it was only 18%. And in '23, the sales of these products exceeded PLN 440 million. So this is important. Now, the life insurance portfolio, a 4% growth in group insurance and individual continued insurance. Also if you measure this with riders. And price changes, especially concerning the health care products. And this is because here, the cost of medical services have been growing quite a lot. Now, individual insurance. Here, a strong growth in production products, over 40% year-on-year. This is thanks to all branches, but also thanks to sales and the banks from our group. I mean Alior in the first place here. And this is also because now people are taking out more loans in banks, and this trend started in the second half of 2023. Now, we have a new flexible product, which is adjusted to many different age groups and has an interesting coverage. This is life insurance with health care. Now health care. So, there has been growth in terms of the scale, but also the price. I've mentioned already the inflation rate in medical services. Have a look at the growing number of appointments that have been scheduled via our app. So more and more appointments, but there are some more products are booked or bought via the app. Also remote appointments remain high. I mean, the number of such appointment is growing. And this is important because this reduces the average cost of such an appointment. And most of such appointments are provided in our own health care facilities. We would like to also improve the customer experience to -- so that it's easier to book and buy a visit, to buy drugs or get a prescription. Now, assets under management. I think I've already said a lot about it, but let me add one more thing. The employer's pension scheme has gone up and reached PLN 4.6 billion. And on the market, our drug -- the second with our share, which is over 20%. We are still developing our offer, trying to help people make investments. And we have received some awards and distinction on the market. Let me give you a few figures. You can look at it in the chart. Now, bank assurance and actual banking, you can see that the sales of investment products have been growing gradually. SBE is not that attractive because of the falling interest rates anymore. So here, we can see there has been a drop in Q4 to Q4. But there is also good news. There is a significant growth in the mortgages, and this was related to a governmental scheme. So, let me mention life insurance protection insurance and property insurance here because in these aspects, we have also grown. And speaking about the written premium, we have a slight adjustment here. A small one compared to the situation on the market. We reported a high sale of SBE products in the entire previous year, and we continue to sell a lot of products through our banks. What does it mean in the context of our financial results for Q4. In Q4, we observed an increase in property insurance in both segments. We have sold quite a number of non-motor insurance products. As a result, our sales grew not only in absolute values, but also by 8%, but also our market share grew. The non-motor insurance products were distributed mostly to corporate clients. Those products had higher reinsurance costs, and the higher assigned premium to cover insurance risk. Therefore, we had a slight drop in the dynamics from 8 to 7, to net income after the less reinsurance cost. Let me stress that in the same period, our costs were growing much slower at 3.3% year-to-year. This allowed us to achieve a result of PLN 950 million for insurance products. It's an increase of 30% year-to-year. This quarter, we had PLN 270 million of loss. And last year, it was over 300. This means that last year was much better as far as profitability goes. This together with a lower amount of claims paid on the larger portfolio allowed us to keep the -- to reduce the claims ratio by 5 percentage points. So we arrived at the result of 58%. And the entire combined ratio for Q4 was at 86.6%. That's an improvement by 8.7 percentage points. The banking segment contributed to these results significantly. We also had a surplus of our investment products income. So, the net result attributable to equity holders of the parent company is at PLN 1.6 billion. This allows us to report an adjusted profitability of own equity at 23.4%. There's also an improvement of roughly 1.5 percentage points. Mass insurance segment. In this segment, we report mostly improvements as far as TPL go. We also had an increase in non-motor insurance products. We also had increased income from an increase in sales from external channels, including multichannel. Until now, we been measuring our income by the value of written premiums, and we have actually underestimated its impact on our revenue. Insurance service costs. They were growing slower. What went up were was the value of motor damage claims, and we had higher operating expenses, but we had a lower loss component. As a result, we closed Q4 with a combined ratio at 87.5%, which is a slight improvement as compared to the previous period. There is definitely room for improvement in motor insurance, both TPL and MOD. Corporate Insurance segment now. We had an increase of 16% in MOD insurance. And like in mass insurance segment, we had a rising cost of distribution and rising cost of reinsurance. This increased our revenue from insurance products by 17%. The expenses were going down in that period. They were going down because in the same period of the previous year, we had to handle 2 large claims. You may remember that one of those procedures ended well for us, we had runoffs at PLN 60 million in the second quarter. And the second claim was handled in Q4 of 2023. So for this reason, the comparative data between those 2 periods is a bit distorted. Now, the basic ratios. There is an improvement of the combined ratio on the totality of products, and then motor insurance and non-motor insurance products. So, there was an overall improvement in 3 segments in our group and individually continued insurance. We report a slight increase in those -- in this segment. In this portfolio, we have a stable growth as far as insurance goes. Together with a stable increase in the number of insurance, the margin has been growing at a higher pace. Q4, according to our estimates -- in Q4, we allocated a smaller part of the premium against LRC. So after the pandemic, the policyholders were needing -- needed less health care -- needed more health care services. All in all, those factors contributed to a drop of profitability in that segment by 4% to the level of 22%. Life insurance, individual protection insurance products. Our revenue went up by 1.2% compared to Q4 in 2022. Please note an increase in other sources of revenue less and less people resign from policies. And at the same time, a smaller part of the premium is allocated for LRC. We also liquidate less damages. And in all other segments, and in this one as well, we have higher administrative costs. The contribution of the segment in our consolidated revenue went up by 6% in Q4. This slide and information contained therein is very important. This slide shows that the group and individually continued insurance. CSM is above 100%. This is very good news, especially given the challenges that we'll have to face in 2024. We have observed a higher increase in the individual continued protection insurance. Now, profitability by operating activities, we noted a significant increase in profitability, both in mass and motor Insurance. In life insurance, we have observed a slight drop. The reason for this is that the insured started to make a more extensive use of their health care packages, and this led to a slight profitability drop. In health insurance on the Polish market. I think that this slide is pretty much self-explanatory. So just to summarize, the number of deaths is going down to pre-pandemic levels. Already now, we can -- we see that the number of deaths is similar to the number of deaths that we had in 2019, which is about 7,800 deaths per week. So this was good news. Especially for health care insurance products. Now, our investment results, we had a stable interest rate income. Private equity yielded slightly worse results compared to the previous year. We had to adjust their valuation, but they still positively contribute to our results and our real estate portfolio. We had to make slight adjustments as far as the office premises go, swap point income. Our logistics parks and their value devaluation of our logistics parks grew compared to 2022, and this affected the comparability of data between the two periods. Also, between Q3 and Q4, we noted significant changes resulting from foreign exchange rate differences. They, together with our real property portfolio were reversed in Q4 following a valuation of our portfolio. You may remember that this has happened before. Namely, if we have -- when the Euro to Swati ratio changes in Q3 and Q1, this affects the value of our real property. We have a high level of solvency, thanks to an increase in our own funds. This is thanks to good investment performance and some growth in other sectors. For the time being, it's a technical adjustment. The profit attributable to the shareholders of the parent company has been adjusted, and there has been a decrease of own funds. We're in outlook for the dividend for the upcoming 12 months. Now, here we have had the effect on the scale, a risk growth in non-life. So, a few million others here, and the ratio has improved by 3 percentage points reaching higher levels for the comparability in the group. Now, let me speak about the strategy where we are. Our insurance performance. We have been quite ambitious here, and we would like to do even better, and I hope we will manage to do that. But there is a good sign, which is what we saw in Q3 and Q4 last year where we grew faster than the market. It's an unprecedented situation in this group, which has such a huge market share. Hopefully, this trend continues this year as well. Because if it does, we can meet the goal, but even go beyond it. Now, the health care pillar. Here, we are on the right track. We are growing. And again, here, we are also thinking about exceeding our strategic goals. Hopefully, it happens this year. Now, the bank's contribution. Here, we are all aware of the fact that the rates are going down. So we realized that it might be difficult to achieve this result again. Therefore, it's important to focus on your own portfolio and develop the scale in insurance. So we have to focus on higher operational flows. And a good profitability based on good risk selection. We know that there is a huge pressure because of the growing costs and the inflation of the cost, especially, I mean, employment HR costs. These costs are growing. And for banks, for insurance company, this is a huge item on the cost list. So we will try to carb these costs in order to achieve even a higher growth on the insurance market by keeping under control the cost price relation. So this is the most important information that sums up 2023, and also especially Q4 of 2023. From the point of view of financial reporting, it has been a very difficult year because we had to implement the new standard. So we had to take into consideration 2 standards at the same time in our communication. So we wanted to build a bridge in way before the old world and the new world. So now we will stop using the old standard because the market is shifting to the new one, especially on the stock exchange among publicly listed companies. And now, I'm happy to take questions.

Kamil Stolarski, Santander Bank. Congratulations on your results. I have a question about the dividend. We know the KNF recommendations, the financial supervision authorities recommendations. And the question is, are there any limitations that might lead to a situation where you don't pay the dividends as high as the KNF recommends? This is not the maximum recommendation of the KNF, the supervision authority. This is just a recommendation, which means what you may do, but you're not required to do it. Just to be precise. Okay. So this is my first question. And Solvency II, what about the 200%. You've given us the figures without the profits for the next year. And the same is included in the strategy. So now, the equity policy and 200%. You've been speaking about this 200% level without the current profit.

I try to answer your questions. So speaking about 200%, this situation, this is what happens at the end of every year, if I get your question right. Well, the situation is that when a new year starts, we are trying to foresee what's going to happen in the upcoming 12 months. So we do this to consider the dividend. And this will not be confirmed until the general meeting in June in the middle of the year. So intellectually, it's quite a demanding exercise. But I try to answer your question and be specific in it. We would like to remain northbound when it comes to this 200% rate. What I mean is that what we can't rule out is that there might be periods, and this depends on many different factors. But there might be periods when we understand that we will be under this ratio. But our risk appetite suggests that we will not go below 170. So this is where we aim, but we know where the red flags appear. And now, the dividend. Speaking about it now today, as you said, there is a lot of room here. The financial supervision authority has launched this 50-50 mechanism of a rolling result. So technically, there is room for that. But I would like to say one important thing. When it comes to profit sharing, the new management, the new board will be deciding about it. And I understand that you would like to know as soon as possible what guidelines for that are. And I think that because of that, it's difficult to answer this question about dividends now because PZU should know what the strategy should look like. If there are significant capital expenses to avoid a situation where the strategy is not achieved. And this is due to a decision which has been taken prematurely. What we want to avoid is a situation where the company becomes hosted decision -- the best decision. I hope that soon we will know who sits on the management board, and hopefully, the management board communicates soon what their stands is about creating value added. We all know that there are issues that need to be addressed. You've certainly followed the news in the press. And I think that the decision about profit sharing cannot be taken on lasers, at least a general debate about the future plans.

I have a question about MTPL. And I'm surprised by this result, and it's so good despite the trends. I mean, I'm positively surprised that it's still profitable for you. But the question is what's next? Can you share your outlook for this segment for the upcoming quarters?

I don't know what our competitors will communicate about Q4 and Q1 this year. But getting back to this story, there is a mix adjustment between the cost and the price. So I think that the market can only report losses from Q4 in such a situation. And I think that during the first 6 months of this year, the market will be under a growing pressure because of losses in MTPL. So unfortunately, we haven't seen any significant moves in terms of the prices. This market is still growing. But the trend is not as strong anymore to speak about a permanent improvement. Therefore, as I've told you, Q1 will be certainly under pressure. This is because claims costs are growing. The number of claims is growing, but also other costs are growing. Technology, HR costs. That's why it's difficult to break even. And I think that soon, the prices will start growing. And as soon as this happens, we will keep you informed. We will see you soon, probably. And we will give you an update. And one more thing, we have closed the year with this specific performance because the share of MTPL in the whole portfolio has gone down, because speaking about our product range, we have gone down by 1.5 percent points in terms of MTPL of our portfolio. But on the other hand, we have restructured our portfolio in such a way that we focus now on cars that are less -- but are not as valuable. Maybe you can't see that in profitability, but this is a safer approach for the portfolio, for the group. So that it doesn't affect the whole results that much. I see there are no further questions in the room, but we do have quite a few questions, quite a number of questions sent by people following us online.

Subordinated bonds in 2024, taking into consideration rating update and capital needs.

I'm not sure if I can agree with what is suggested in the second part of the question. I don't agree that we have high capital needs, especially in the context of the presentation that I have just given and the conversation we've just had. Let me answer this question in the following manner. As of now, we are not planning to issue any bonds. We do have one financial instrument issued on the Polish market denominated in Polish, we issued in 2017. We carried out a buyback, and we're keeping it until 2027. So let me answer this question in the following manner. Given our dividend and capital policy, and given S&P recommendations, we mustn't overleverage because it's quite easy to do that. So we cannot disturb the ratio of own capital to external capital of 75 to 25. We want to keep this ratio. So given that, and given the short discussion that we've just had in the room, the answer is I do not see any need to issue such bonds. I do not exclude it in the future because PZU might decide to develop in various directions in the future. A lot depends on where the new management board identifies areas for growth within the group. So we might come back to thinking about such a scenario. But as of today, I cannot answer yes to your question.

So given the possibility of exceeding the PLN 28 billion insurance revenue target, do you expect a potential breakthrough on the net profit line this year?

Breakthrough, do you mean exceeding 5,800? This might be quite difficult, but I have a good slide illustrating my answer. The answer that I'm about to give. So, are we able to exceed 3,800 in our nonbanking activity, that I would say yes. Obviously, this depends on the situation on the market. Let us take motor insurance, products market, for instance. So it depends on what happens there. The same goes for the health insurance products market. So these are the 2 factors that will strongly influence our net profit. And I do not exclude the possibility of reporting even higher net profit next year.

The second question. Assuming that the scenario of falling interest rates materializes and assuming that you will have worse results from the banking segment, what net results do you expect this year? Is the PLN 4.3 billion target at risk?

I'll answer with one sentence. The PLN 4.3 billion target is our commitment, basically. And we'll do everything possible to make it happen.

What has been the impact of the…

Excuse me. Because I keep receiving your questions and the strikes me.

What has been the impact of the change in the methodology for reporting in Q4, which segments and income statement items of the balance sheet and equity have been materially changed?

Well, this is a -- to answer this, I would have to give you a long list of pieces of information. In short, we were dealing with a material change that was for the first time audited in this manner by our auditor. Last year, we only had -- we shared with you only an estimate of the impact of the new reporting standard on our net assets. This year, we carried out a midyear review, and we had the first audit using this method in the second half of last year. Therefore, we had a lot of debates on the methodology of carrying out this audit with our auditor. And this affected the way individual segments were analyzed, in particular, the life insurance segment. So before they were recognized using the previous standard, then they were reviewed again and already adjusted. So the main impact affects the life insurance and the operational result. And the operational results is affected by other estimates regarding the structure of our income. Now, in the balance sheet, we used to have a position of technical provisions, and now these sums are aggregated under a different line.

The next question. When estimating the possible dividend, should we take into account the strategic goal of 50% to 80% of the consolidated net income?

We have already answered that, I believe. To give you a precise answer, we need to analyze the new strategic challenges. And you see the possibility for generating additional value from possibly other market segments. And then we need to will make a declaration based on that.

Increases in 2024. Do you think if market can deliver double-digit rate increase in MTPL line?

The answer would be yes, with an exclamation mark. I would like to share one piece of information with you. We haven't disclosed this information in this manner yet. Last year, we changed our average risk exposure in MTPL. Today, we have a larger share of customers who constitute a smaller risk for us compared to 2023. As a result, we could increase the price. And we increased it much higher than we showed you. And for this reason, we achieved that level of profitability, the one that you can see on the screen. This also answers the question why in Q3 and Q4 when the market was in a difficult situation. We, under both reporting standards could report the very good ratio of profitability. So the answer to this question is yes.

Retained earnings from 2022 PZU result that was not paid due to regulatory dividend restrictions.

I think I have already answered this question. I understand that dividend is always an exciting topic. However, we're making any statements regarding dividends right now is not a good idea because PZU is now undergoing a process of change, and we want to communicate responsibly.

What changes in the operational costs we should expect in 2024, can the acquisition costs be -- and the dynamics of acquisition costs be visibly lower in 2024 compared to 2023.

I'll start by answering the second question. And the answer is yes, especially if the tariffs will go up on the motor insurance market. Because this market segment is characterized by lower acquisition costs. And in general, regarding our expenses, let me put it this way. In the banking sector, the expenses are in double digits, in particular, HR costs. In the Insurance segment, and I'm not talking about the costs of our banking services. The dynamics of HR costs as of March this year is also at double digits, I believe, 12.5% compared to 15% last year. We want to be an attractive employer. And in order to be an attractive employer, we need to give our employees a good working atmosphere, adequacy challenges, but also a decent pay. So this is how the market looks like. We need to stay competitive as far as an employer. Therefore, the cost level compared to written insurance. Written premiums did not go up. And I think that this is the most important target for us this year, and we are absolutely able to achieve it. So I think that this is an indirect answer to the question regarding operating costs. Please note that the costs are not spread over the year equally.

Estimate of Solvency II ratio as at year-end 2023.

I can't answer this question. We'll give you an answer in 2 weeks on the 4th of April. This is when the SFCR report by PZU SA will be published. And 2 weeks later, the report for the whole group will follow. These are quite sensitive data. And given where we are now, I can't share this information today with you. I'm sorry for that. The next question is about the dividend. I think we can skip it.

2023 was much lower than 2022.

You mean the consolidated level here? And this is due to the situation in the banking sector and also all the negative events that we have discussed. These are not taxable costs. That's why the effective tax rate was higher.

Is the pressure on prices, not as strong anymore in MOD. I mean, the second quarter and the third quarter of 2023?

I don't know if there was any price pressure in Q2 and Q3. You probably are referring to this slide. The growth was slower here. This was because we were back to normal, meaning that the growth of value was not as high anymore in terms of the insured property. Over the last 24 months, the value of cars went up by over 50%. But we think that it's not going to happen. We are not expecting any events, which would be so influential as in the last -- in the few last years of geopolitical nature. And then we have the average price per risk. The risk was growing significantly. But now, the trends are negative. So even with the same rate, the average price should be lower.

So do you mean in your presentation that in the life segment, the COVID debt, post COVID debt has been already paid?

I've only told you that last year, on average, the debt rate was $7,800 per week, which is pretty much similar to 2018 and 2019. Maybe this means yes. There are many question marks still about the loan COVID. But from what I know, I can tell you that higher death rates are not as big a challenge as they used to be. Speaking about different age groups, that the rates are back to the pre-pandemic levels. What has changed is the share of each group in the structure of the portfolio. So this is an aspect that might be distorting the general picture.

Tariff increases that you're able to put through for your health product to offset rising costs of health claims.

Well, what I can tell you, I would like to speak about it in the same terms as I use when I speak about the motor insurance market. There is a well-established practice in the motor insurance market. So it's easier for us to communicate in a standardized way. But health care products are insurance policies, but also there is another form, which is quite predominant today on the market, which is the subscription. And this market is not regulated at all. So it's not possible to analyze the general market at all because there is no general data about the market available. As of today, we have over 3 million contracts in the health care segment. We have a specific number of agents who contact our customers and who can talk to our clients about changing the prices and changing the tariffs. But it's not only talking about health care with our customers because our customers also have other products, such as life insurance, et cetera. So what the customers are interested in is the price per coverage. And half is only an item. And I'm telling you this, to tell you that the pricing aspect is much more nuanced. In the past, PZU didn't know was not good at resetting tariffs. Now it's different. And in the past, we offered a larger coverage at the same price, or the same coverage at a lower price. And it didn't make sense. But we got better, that is totally different today. So if we want to contact all our customers, and we have so many of them, we have to behave in a specific manner. There are a few factors to take into account here. Simply because we can't contact every customer each year. And until now, we haven't had automatic repricing clauses in our agreement. So we have a 3-year period here. So we need to realize the following, we can contact some customers in year 1. We can suggest a repricing clause or price update clause. But another group of customers, we contact them after 2 years. So at the beginning, they had a low price. They were very happy with it. And now we have to increase the price and add to this pricing clause. This clause is about automatic price update because of the inflation rate. in year 1, if it's 5%, it's easy. In the year 2, if it's 12%. It's not that easy to talk with the customer. And the year 3, as I've said, given how many branches we have and how many customers we have, it's very complicated. And still speaking about the maintenance of the portfolio, the costs are very high. I can't give you the details because it's our secret. It's about whether we can or can't keep, or find new customers. I can't give you this information because this is our competitive edge, which is priceless, given the situation in the market. There are no more questions. Thank you. And see you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]