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

Good morning, ladies and gentlemen. Welcome to the conference on the financial results of the PZU Group achieved in the first quarter of 2025. This presentation will be hosted by Mr. Andrzej Klesyk, CEO of PZU; and Mr. Tomasz Kulik, Board member; [indiscernible], CFO of the PZU Group. Mr. President, the floor is yours.

Good morning, ladies and gentlemen, good afternoon. Welcome to all those present here on the venue and online, both in Poland and abroad. So thank you for being here. Being an insurer being more or less predictable boring as some say, business or the structure of our [ patient ] does not alter. So we're going to discuss our main achievements and plans. This is what we always discuss, then we will discuss the development of our activities, financial results, possibly group strategy, additional questions in the final point. Let us start with the main achievements and plans. There is no bombshell as at the previous meeting concerning the holding, for example, because it's difficult to bring up something like that every 2 months, so we will be predictable and hopefully helpful in your analysis. Let's move on to the main achievements. A few numbers, which will be discussed in detail. First of all, revenue on insurance, PLN 7.5 billion year-on-year, an increase by PLN 0.5 billion. So we are relatively satisfied with that. I will explain why we are just relatively satisfied. But comparing to the market, this is not something that meets our ambitions. Concerning profitability, we are very satisfied because we've had the best quarter in the history of PZU since we became a public company or probably in the whole history of PZU. It's PLN 1.8 billion in all 4 components. We are actually above our expectations year-on-year. But I'd like to add here that you cannot simply multiply it by 4 to reach the final years at result even though usually, the first quarter is not the strongest quarter in insurance. Our capital position in a relatively boring way remains at the level of 226%. Actually, there are no significant movements here within the group, we are slightly below that due to consolidating various companies. However, PZU SA is at the level of 240%, which is very, very good. As you have heard, ladies and gentlemen, the Management Board and then the Supervisory Council approved recommending to the General Assembly of Shareholders to pay a dividend in the amount of PLN 4.47 per share, which means practically paying out the whole unitary profit of PZU SA with a very small amount allocated to the social fund in line with the Polish law. I cannot stop myself from a historical analysis, namely the return on PZU shares since we entered the market 15 years ago and 2 days ago, PZU had its initial offering at PLN 312 then we split the shares 1 to 10 since that time that shares have been growing very decently except for a few years of the so-called good change where the shares were stable or even declined for some period below the debit the IPO price. But for some time, we've had a very decent good reaction of the market for what we've been doing. A few days ago, for the first time, the shares value exceeded PLN 60, today is PLN 62 for the first time in history, the shares. The total valuation of PZU exceeded PLN 50 billion. At a certain point of time, it reached PLN 54 billion. We are expecting to see PLN 55 billion. As you know, ladies and gentlemen, dividends are merely a technicality, shareholders will receive the payment to their accounts on October 16, 2025. Let me remind you that the General Shareholders Meeting is planned for the 25th June. It will be convened at -- on that date. Dynamic growth result in the first quarter. And here, we can boast for chunks and namely insurance services results have increased by almost PLN 0.5 billion, which is a very strong growth. The result on investment portfolio, almost by PLN 100 million. You know yourselves, ladies and gentlemen, that, to some extent, this is a function of interest rates and what is going on, on the market. So far, we have been lucky. And everything is very nice. Operating margin very high. I admit that it is slightly above the level expected and planned by us and the combined ratio. Ladies and gentlemen, 82.5% combined ratio cannot be maintained. It is impossible to maintain at such a competitive market, but this combined ratio at this level results from 2 things. First, as a country and as a sector, we were lucky. Please look that there was no disastrous winter noticed. There were no disastrous floods and no other adverse weather events, so no catastrophes, which we have been able to avoid. And on the corporate side, in the first quarter, we didn't have any major damage that would be a difficulty or an amount for us to pay. Those numbers demonstrate a result of a certain decision taken some time ago to make our portfolio profitable in particular in communications, transportation. This was successful, but this was at the expense of the dynamics of our revenues of our premiums. This is a significant dilemma for us, ladies and gentlemen. Market share or the dynamics of revenues versus profitability. Now to paraphrase it somehow, we assumed that now we are collecting the ammunition for continued struggle. And now we are gaining both profitability and capital for the potential further struggle. Those who merely struggle for the market share rather than profitability. We'll have a much more difficult life, and we'll find it more difficult to fight against us. Please look at 3 things that we can boast. But we'd also like to tell you a bit more about it, namely revenues premiums outside transportation insurance. The largest chunk of our portfolio is, of course, communications, so ensuring cars. However, the business around cars, so not of course is increasing very decently with very good profitability. I'd like to emphasize again that to some extent, we were lucky because in this quarter, there were no catastrophic events, which is fortunate for us, and we're glad about it. The second is the health pillar revenues. Less than 10% of growth, in my opinion, this is very unambitious and we need to accelerate revenue, boost revenues here, sales. However, we will not accelerate until we work out a profitable business model. Tomasz will discuss it further, but let me just say that if we divide our health insurance business into two parts: one, insurance and monthly fees for service of various kinds and the revenues of our own clinics and by PZU, for example, Gamma here in Warsaw. I hope you don't have any issues with your limps. If you do, you're welcome to visit. It's our company. And should we deduct profits from these 5 companies we own, we would be in the negative. So acquiring additional revenue, generating loss, the shareholders should kill us for that. We do not want that. So let me introduce a man here sitting in the first row, who took up a very interesting challenge, namely, for 2 weeks, he has been the CEO of [indiscernible] Jan Zimowicz, who concurrently as a Board member of PZU USA. I want to emphasize this because -- so he is the member of the group, which is in charge, PZU, which demonstrates that [indiscernible] who is and will remain an integral part of the group and is not a company managed separately. So let's wish [ Jan ] all best because surely, he will get the support of all of us, me included. And the last point, assets managed by us within the investment funds business, so we are positive concerning the net inflow to the funds from nonbanking funds. Ladies and gentlemen, due to the [ rise ] regulations, there is a huge advantage of those, who have access to the banking distribution network. We do have such access but not on preferential terms. So we are relatively happy about this PLN 1 billion. However, we have appetite for more. Let's move on. This is the last slide in my part. It is important for us to maintain the rating because it is still too early to discuss that. However, soon, both due to the holding structure and our obligations, our capital position, together with Tomasz, we will start thinking about various types of capital optimization. So this is super, super important to maintain this rating. We are happy that, that rating remains at the same level. I suppose that should we carry out a rating of our emission than probably in euros, we could try to get an even higher rating. So let's leave it on this quite high level. And let me give the floor to Tomasz, who will guide you through individual business lines, as usually is the case in the same manner as last time. Tomasz, the floor is yours.

Thank you very much. In this subsequent section summarizing the development of our activity. I will click through those slides quickly to discuss it in the context of results the asset business on a stable growth trajectory concerning revenue, interest, premiums. Those increases the growth is slightly lower. The significant difference in these 2 worlds that is associated with the specificity on the side of the corporate clients, as you can see comparison of 2 amounts dynamics as in SS 17 and the dynamics in premium which, in the situation of the corporate strategic client growing with coverage of over 12 months, we get to quarters where this business even though is in our portfolio is not the basis of the allocated premium because it doesn't go out to the market, it's not quoted and sold as such. So it's -- but it still generates value within the group. Now in terms of life insurance, stable increase on the group business, individual as well. On the one hand, and a boost of scale due to health insurance. On the other hand, growth in selling up an increase of scale of the site of group insurance, primarily protection, individual insurance to velocities on the one hand, very dynamic, 79% of dynamics concerning insurance in the banking channel, investment insurance or our deposit products with guaranteed interest rates at our branches within our distribution network. We succeed with protection products, both the hybrid and flexible product, which we have discussed some time ago, the dynamics of which year-on-year in the first quarter is on the level of slightly below 25%. So we have a very dynamic boost here on the health pillar. We have already set a few sentences. Let me drive your attention to a very dynamic shift and the possibility to serve the traffic within our branches, which is significant concerning the average cost of a medical procedure, which has a very significant influence on the profitability, which we can demonstrate with similar utilization levels and our own chain means also that we can control the patients path and have influence on utilization. So I'd like to point out this significant increase at the end of Q1 concerning managed assets, which it is important to emphasize that TFI PZU is #1 among nonbanking tier investment funds with new sales net growth at the level of PLN 1 billion with a share of 1 -- of 9% -- over 9% and very significant sales growth in the banking channel, which on overall generate very high two-digit dynamics contribute to the increase of allocated premium year-on-year of over PLN 135 million. This is the main information. Now let's move on to how Q1 allowed us to generate value, both in new business and in shaping the portfolio in that time. To wrap it up. The CEO already said that we've been growing in terms of the top line insurance revenue. PLN 0.5 billion year-on-year. However, as the President said, this is not expressing our ambitions here, we have appetite and hope for more here. And in the context of what we've been saying about the strategy, PLN 36 billion is a very ambitious target. Should those increases be at the level of 7%, 7.5%. So here, definitely, we need to boost the results. Now not to only drove down even these increases were checked by areas, which were characterized by double-digit dynamics, primarily asset insurance, noncommunication insurance in both segments. We've already discussed life insurance, individual and investment insurance, individual protection insurance within owner chain. So all that allowed us to drive the dynamics up on the side of foreign companies lower values. However, to a large extent, these were lowered by the appreciation of the Polish zloty. Let me remind you that these are markets where sales are denominated in euros, so despite significantly higher dynamics in the functional local currency after the exchange to zloty parameters are slightly lower. Now concerning the cost of insurance services, both year-on-year and quarter-on-quarter, the absolute values, we have achieved lower costs, which is due to 4 effects: first, cost efficiency, lower fixed costs, which correspond to lower overheads through direct acquisition and distribution costs or lower cost of damages and paid out amounts. This is one of the elements. The second element is a definite improvement of the insurance business quality as perceived by 2 items. One is a very significant component of amortization, the component of losses recognized in previous periods, which offsets the payouts served in the covenants period. And on the other hand, very insignificant element of the new loss component or overestimation of the opening balance. Hence, this all shows us the quality of the portfolio for Q1, so very positive information indeed. This all is coupled by a one-off event recognized on the side of the corporate portfolio. This is a release of higher net provision as compared to the previous years. This has resulted to loss adjustment payouts and the total amount is around PLN 100 million. This gives us an overall result for insurance services on a very high level of PLN 1.25 billion, 59% over last year's results. And that's more than even Q4 last year, which was a very strong quarter indeed. Looking at financial -- net financial revenue from insurance activity as well as cost of money in time and the recognition of the fact that we are talking about standards, wherein cash flows are discounted on a portfolio basis in order to cover the technical and insurance provisions. The total of these 2 components that continued to grow year-on-year by 16% allows us to finish Q1 at the PLN 1.267 billion result without banks. That's a very high result, 67%. Adding the banking segment result to that, and that result is flat year-on-year. We're ending at PLN 1.76 billion. A few more interesting pieces of information on our own capitals and adjusted values for equity bypasses total revenues, including the provision differences between the lock in and current interest rates. So indeed, we are achieving a very high RO capital and the improvement of cost efficiency as well as lower combined ratio, meaning an improvement in asset insurance by 6.7 percentage points as well as margin on group and individual continued insurance policies was reflected here. The very brief summary of how individual segments contributed to those overall results follows now. For nonlife insurance, the mass insurance segment, an improvement of 8.3%, mainly due to a relatively high depreciation dynamics on the side of nonmotor insurance products, 13.6% here at flat cost of net -- net cost of insurance services. These reflected an improvement in motor issues as well as the effect related to lower loss component volume as that was established this quarter as compared to the previous quarters. This contributed positively to this quarter's costs at an amount of almost PLN 100 million. At improved cost efficiency, this boosts the operating result by 100% up to a level of PLN 584 million and also improves the combined ratio in each dimension possible for both classes of motor and nonmotor insurance policies. We are often asked about the motor insurance market, but right now, we're in the world where we're able to get information from local markets in line with local standards. That is the Polish accounting standards. I'm pointing to that because you cannot really equate the standards. The differences are present growth in cost attribution and their recognition over time. But at the end of the day, when talking about monetary values, the totals are just the same. Still the situations vary quite a lot over time. So what's the market behavior when you look at it through the lens of the Polish standards. On the side of third-party liability, the dynamics continue, but the impetus is going down for Q1, we've got shares data for some market segments and a slowdown to 7.6%. That's around 1 percentage point below Q4. Now for voluntary policies, we are still moving between 3% and 4% in both from MTPL and MOD products, given the dynamics of cost increase, this does not allow us to generate value. So insofar as the MOD product continues to be profitable as we can see in the result -- technical results or technical profitability diagram, according to Polish standards again, it is visible that in Q4, the loss reached up to 7 percentage point already. What we were doing our best to achieve over that period? And what is also visible in this period, it was to improve profitability following last year's losses that were particularly painful to us in quarter 2 and 3. We did our best to tap into the upward market trend, but it seems quite obvious, not everybody shares this appetite. Some other players continue to stick to growing their market shares, meaning this market continues to suffer from pricing pressures. This is not visible yet today, and we're not reporting that yet under MSSF 17, but given the situation related to nonprofitability of MTPL insurance policies, this situation of margin depreciation may also, at some point, leach over to MOD insurance. A positive aspect is that the number of accidents or damages remain stable, not growing anymore. Here, the inflation a stimulus shaped the cost side first and foremost of all. And I'm also obliged to remind you of the differences between the 2 standards because following the last conference, there have been some reports that equated these to reporting standard results, but these are not equal during the cohort of portfolio lifetime. But at the end of the life cycle, the results must and will be the same. Differently from the Polish accounting standards, the IFRS standard is a bit more conservative, which means we are forced to recognize the so-called loss component, that is the part of the portfolio where the pricing does not cover current costs. This component is to be recognized as loss bearing at the point of its recognition in the portfolio. This is not visible in the Polish standards. The profits and losses added up together, meaning there are some situations wherein in spite of certain losses recognized internationally, the profitability is there. Later in the game wherever price reductions or price increases step in, in the following years, losses that have once been recognized cannot be recognized or be recognized again. So then we kind of benefit from this high degree of conservative approach applied in year 1, while to the contrary, in the Polish accounting standards where the profit bearing and loss bearing portfolio parts offset one another. We have quite a lot of discrepancy in profitabilities between those 2 parts. But as you can see here, these curves start converging with each and every consecutive step to meet at the very same point at the maturation. So just to remind you of that difference and to sensitize you to the discrepancies. Now moving on to the -- next segment, we've been growing at 2-digit rates for nonmotor insurance and at 9.4% for motor insurance, which keeps us our revenue increases at 2-digit levels. The costs continue to go down. But just like I mentioned earlier, this is mainly due to release of higher provisions that have been set up for losses, which impacted the -- that budget line at a level of around PLN 100 million for that period as a one-off event. As a result, the profitability on a nonmodel insurance is extremely high at 50%, and we are only aware that it's untenable over longer term. With rising cost efficiency, the operating result continues to grow by 1/3 each year, improving the profitability in each dimension, including the MTPL and MOD according to international standards. On the side of group and individual continued insurance, an increase of slightly below 5%, but we continue to grow, nonetheless. In the top line, given 2 aspects, first and foremost of all, the most important one is higher contribution and the release of contract margins, an increase of that component was pretty significant. And the second parameter was expected benefits exceeding expectations by PLN 60 million. This is both due to indexations and the aging of the individually continued portfolios. On the cost side, we've seen an virtually flat trend, just some 1.3% of growth and improved portfolio quality. As you can see, these 2 components that serve as a kind of an indicator or litmus paper in terms of profitability trends, that is development of the loss component and this depreciation platform so much better Q-to-Q than year-on-year, meaning these costs are virtually stable and at improved cost efficiency, we're in a situation where we're reporting very high profitability figures and an improvement of the operating result by almost 25%, which is an outcome of improved technical efficiency through the lens of the loss component and higher contribution of the contractual margin by PLN 20 million. For mortality of that period, the trend has unfortunately been an adverse one to us. The number of deaths is going up by some 6% year-on-year. Let me also point you to the fact that in terms of the mix, the combined results, number of debts per number of benefits paid, the positive change to that mix means we're paying fewer and fewer benefits per each death recorded, which helps us benefit from that modified structure, and that's the most important message we wanted to communicate. On the side of individual protection insurance, we've said quite a lot already. The costs continue to go up linearly. And the revenue improvement contributes to some 10% uptick in the operating result. What we're happy with is that we're able to generate value. You can see a confirmation in the slide here. The contractual margin continues to go up both in individual and group insurance as well as individual protective insurance. The improvement over this quarter shows that we are selling -- these insurance policies on one hand. And on the other one, we're able to do added sales saturating or indexating the portfolio. In terms of our investment result, each asset class has contributed to this growth, a very high interest result and an improvement in terms of capital instruments as well as real property strategies. This is all supported by positive result of FX differences on real property orders in Q1 and Q3, we're recording these temporary differences resulting from the fact that we only evaluate our real property portfolios twice a year. And in this annual, the yield is on a level of 6.6% while the payouts as of the end of 2024 is on a level of PLN 226 million, which is a very good position to be in given the very high dividends just announced. So that's on the level of our strategy from -- for 2027, and we are more than happy that we are able to show these figures will help us generate value in the future. At the same time, generating high yields for higher returns for our shareholders. No strategic objectives and strategic summary. Just like I said, the top line situation is very good in terms of profitability from our core business, be it life insurance and non-life insurance. We'd love to have seen certain segments to have operated better, in particular, given their scale, but that's a good opening. Still, one, where like the CEO said, we'd love to see a bit more. And now I'm giving the floor over to our CEO.

Yes, ladies and gentlemen. As we can see in the strategic goals, that's the official strategy that has not been adjusted yet by the Board. So we must comment on these very results. And just a few points that may be important to you in the long-term view. First, the insurance revenue, if you look in the top left corner, and if we extrapolate that, PLN 36 billion would have been very hard to achieve indeed. We must do our best to increase our sales dynamics. And over the past few months, the company in particular has focused on making the previously unprofitable business profitable. We've collected capital. We've collected our weapons and now we're ready to fight for profitability and fight profitably. We don't want to just throw money away. Now for the Solvency II ratio, it's a proxy. I wouldn't pay too much attention here because the holding and 2027 regulations will put it on its head anyway, but we'll do our best to maintain decent solvency ratios anyway. But now for core, the combined ratio, just like Tomasz said, the first quarter has been very kind to us, indeed, but maintaining COR at such a low level, at a market that this competitive is close to impossible. However, compensating a potential COR increase must be done by increasing our revenue. And that's a dilemma we will continue to face over the coming period. This must be a long-term decision, though, just not purely reactive one. And the last thing I wanted to mention health. I asked [ Jan ] to attend this session. For this for purpose, PLN 3 billion. Well, given what President [ Ustrov ] used to be, I mentioned reaching that PLN 3 billion over 3 years, not 12. And now we're 12 years in and PLN 2 billion, mostly unprofitable is what Tomasz glided over a bit because if we split our health business into 2 parts, on health care facilities, the ones we invested in or the ones we acquired or the insurance business and regular subscription payments, the top business brings us gigantic revenue, but it's not profitable. It's close to 0.

So now increasing revenues would simply make no sense economically, we would be just be -- we would just be revolving the money. We're here to earn money rather to do that. And of course, Mr. CEO has some ideas here at the next meeting, we will share these because at that meeting, he will, to some extent, be already responsible for the health results. So that's it about the strategy. Surely, we will come back to you with a certain revised version of the strategy, especially that the holding will allow us for making certain selections different than the previous one. This probably is it. We have a few questions from our online visitors. But first, let's try to answer any questions from the audience here in the room. So the first 2 questions are about the holding. And the first one asked by Trigon is whether after further analysis, you believe that you will have enough time, you will make it to transform the company to a holding by the end of 2026. We have no choice. We will make it. The second question from Autonomous, whether you can share information concerning the plans for exchange? And the second, does the group has any preferences concerningly maintaining of a 20% share in the PKO bank? I'd like to emphasize that so far, we have reached an agreement with PFR which stipulates a 30%-plus division, which will allow us to consolidate PKO SA. I believe that at the time when we will be making a decision on the structure of the holding, then we will concern -- consider our level of our engagement in both banks. Question about Solvency II and the holding as well from Trigon. Would you maintain the estimated influence of new regulations as of 2027 presented during the last presentation? Yes, but I'd like to give the floor here to Tomasz because there are some nuances associated with the time and the way this ratio is calculated. Tomasz, if you might?

Yes, of course. Assuming nothing changes. So the situation is as it is now, we are -- in 2027 with the same scale, the same business and so on, we will recognize the following effects. On the one hand, a significant increase of the capital requirement associated with the fact that we hold banks for which today's requirements do not take into account proportionally safety buffers. So we're speaking of the significant increase in this banking part. On the other hand, we have changes, which may have a negative impact on the solvency ratio at the level of 5% to 6%. These are adjustments of capital levels and the like, which again will be incorporated by this change. The third issue and -- we've already discussed this as well. We keep working on an internal model concerning the method of calculating the capital requirement for this insurance part. Why is it important for us? Well, it is significant for us for 2 reasons. One, because calculating this capital requirement in a way that is corresponding to the specificity of the business. We are capable of reaching -- achieving certain elements of better adjustment because what is the standard formula? It is a classical approach, one size fits all. So it has to be good for everyone. And disregarding a certain specificity or a certain markets yield the capital requirement level which has to be maintained by everyone and through being maintained guarantee safety both on the level of the company and the market. So we assume that introducing this internal model will allow us to free a certain part of our capital. However, even more importantly, this implementation of the internal model will improve the adjustment of insurance risk to the price. Today, the price assumes a certain level of capital inefficiency resulting from what I mentioned. So here, we should benefit from it in a triple way, better reflects the price, better understand the profile of our own risk and the third element is that we will benefit from it from the point of view of the capital requirement level decreasing, especially for catastrophic risks.

One more question to specify it more concerning the bank from Trigon. Are you considering any changes in the bank shares before the transformation into a holding? Well, what I think is that if we assume very roughly that the holding is a matter of next year, sometime next year. Well, we as the Management Board need to have very clear recommendations concerning the future of shares held in both banks. Otherwise, it makes no sense. So the sequence will be as follows. Most probably as promised to you at the very beginning of Q3 or around Q3, we will come back to you with the details, both of the holding and our engagement in the banks. Two questions concerning communication also from Trigon. What was the reason for the decrease in motor dynamic -- insurance dynamics decrease, especially in the mass market sector. I'll start but probably Tomasz can add some detail. Ladies and gentlemen, in a few segments, we had a hugely unprofitable business, especially in the distribution channel. It's not about the distribution in the product itself, but the distribution channel called multi agencies. The amount of money burned by PZU without any positive influence on the result was enormous, and this has been stopped. And a vast majority comprised of price rather than the volume of policies. Tomasz?

Yes, I can confirm it. Absolutely. We are in a situation -- you might remember the slide, let me click back to it quickly, which is not that simple. So I'll just keep on speaking while clicking. The market in Q1 declined in terms of price dynamics to the level of around 7.6%. Yes, let's say it 7.6% concerning TPO for the last -- at least half a year, we try to generate a significant inputs for the market, which would contribute to an attempt of repeating this cycle, which we witnessed back in 2015, 2016, probably it's not necessary with such strong dynamics, but what is happening today is that the dynamics of prices replicate the burning costs, the costs of carrying out this business the underwriting risks. Hence, taking into account our position in individual distribution channels in a situation in which, as you can see, the market was decreasing profitability quarter-by-quarter last year, we were forced not wanting to behave irresponsibly to produce this growth. Hence, we are in a situation in which being the leader in this last period in terms of price increases, we generate dynamics measured with the premium of around 2%, 3%. So the balancing figure is the portfolio and exposition, which taking into account the hugely unprofitable influence on the whole TPL portfolio disappeared from our portfolio. Is it a desired situation? No. We will try to balance this situation to a larger extent with of the balance between growth and profitability in a manner which will allow us to generate value all the time. Second question from Autonomous. Whether price increases in TPO insurance? Of course, in motor segment, are enough to cover the damages inflation to cover the damages inflation, yes, but not to lead us away from a space below 0, while still making up for the damages inflation. And as you may see, we are not speaking any more of a delta of 2.5% or 3%, but rather an issue reaching 6% or 7%. This is a snapshot as of the end of last year. So on the one hand, yes, the dynamics allow for replicating what is happening on the cost side. And no, these are not the dynamics which allow us to bring the situation to the positive. Now my question about life also from Autonomous. A question about Slide 24. As I suppose, excluding a change of assumptions in variances, the contract -- contractual margin increased by less than 1% in Q1 2025. Is it worrying to you, what are you planning to do to increase this margin? Well, the first part of the margin is that if I understand, I may understand this way of thinking. But from the point of view of considering the portfolio, we're speaking in PZU, it is not justified because a majority of this variation, which we're discussing here accounts for upselling to the portfolio up sales primarily to individual continuation. This is the business model which are not an element of recognizing this CSM upon new sales. This has been this idea for business for many years trying to create a new relationship, we do not want to be too aggressive in sales terms. So this package, this offer from the point of view of covering is thinner. And later on, over the lifetime of this product, it is simply saturated with additional products, additional drivers. So we always need to look at these 2 positions jointly in our case because they jointly demonstrate how we generate new value from the point of view of reaching the customer upsales and new sales. So should it be as in the question, the answer would have to be negative if we realize that this is not 100% of our sales. The situation changes were not speaking of 1%, but rather 2% in the scale of a quarter. So this is a situation in which perhaps we might not be overly optimistic, however, due to the portfolio structure because, again, ladies and gentlemen, we cannot discuss it in isolation. We have a portfolio of 10 million clients with a vast majority of the portfolio in a very advanced age. So if we wanted to maintain this value in a manner in which this portfolio on the other end of the lifetime of the policy will behave. We're speaking of huge increases of new sales, which would be difficult to replicate. You might say that we are here, to some extent, a limitation to ourselves. So it is important for us to have new formulas, hence, the flexible product, the hybrid, which is a completely new way of thinking, new value for the customer. But it's again, grinding the whole, changing the whole portfolio like this will take years. It's not just 1 year. Coming back to solvency. We have a question from PKO BP Securities. In your opinion, will the financial supervision authority agreed to the less conservative requirement in the internal model? I can answer that. It is not a question of a less conservative requirement. It is a question of a requirement that replicates the profile of our portfolio's risk. It is as though we asked whether the financial supervision authority, maybe not the authority. But whether a sports club coach will allow the runner to where tailor-made shoes or rather than running in size 44 shoes, all of them. If you adjust the size of your shoes, you run faster and you run better. Now question about the holding. When should we expect the passing of a law, which will allow PZU to create a holding structure? Or is there something called which we could refer to as [ Lex PZU ]. I'd like to emphasize that surely no [ Lex PZU ] will be created. This would make no sense. However, the law, which is needed to create a holding as an issue as a matter of adding to the law on insurance activity an identical provision as in the banking law concerning the division of an enterprise. This is all it takes. These are not paragraphs. It's probably just adding a few words so that the insurance law becomes analogous to the banking law, which is a standard within the EU and practically around the world. No more questions from the online audience. So Mr. President the floor is yours.

Since there are no more questions, ladies and gentlemen, thank you again for following us for your analysis. But we are also very, very grateful for your comments, which we read. We very strongly agree with some of them. We agree as well with some other of them. For us, how should I say it? They are a stimulus for us to keep thinking to develop further. Thank you again. I encourage you to get in touch with our colleagues from the ARR. Thank you very much, and have a nice afternoon and weekend. Thank you.