Contribution made by the market segments to the consolidated result

Corporate insurance (non-life insurance) – wide range of property insurance products, liability and motor insurance customized to a client’s needs entailing individual underwriting offered by PZU, LINK4 and TUW PZUW.

Mass insurance (non-life insurance) – property, accident, TPL and motor insurance products offered to individual clients and entities in the small and medium enterprise sector by PZU and LINK4.

Group and individually continued life insurance – protection, investment (which are not investment contracts) and health insurance; PZU Życie provides it to individual employees and other official groups, e.g. trade unions, and persons under a legal relationship with the policyholder (e.g. employer, trade union) enter into the insurance agreement; individually continued insurance apply to policyholders who acquired the right to individual continuation during the group phase.

Individual life insurance: protection, investment (which are not investment contracts) and health insurance; PZU Życie provides it to individual clients and the insurance agreement applies to a specific insured who is subject to individual underwriting.

Investments – the segment reporting according to the Polish Accounting Standards comprises investments of the PZU Group’s own funds, understood as the surplus of investments over technical provisions in PZU, LINK4 and PZU Życie plus the surplus of income earned over the riskfree rate on investments reflecting the value of technical provisions in insurance products, i.e. surplus of investment income over the income allocated at transfer prices to insurance segments; the segment includes also income from other free funds in the PZU Group, including consolidated mutual funds;

Pension insurance – the segment includes income and expenses of PZU OFE pension funds.

Banking – a broad range of banking products offered to corporate and retail clients by Bank Pekao and Alior Bank.

Baltic States – non-life insurance and life insurance products provided in the territories of Lithuania, Latvia and Estonia.

Ukraine – non-life insurance and life insurance products provided in the territory of Ukraine.

Investment contracts – include PZU Życie products that do not transfer material insurance risk and do not satisfy the definition of insurance contract; these are some of the products with a guaranteed rate of return and in unit-linked form;

Other – consolidated companies that are not classified in any of the enumerated segments.

• increase in net earned premium by PLN 138 million (+5.8% y/y) combined with an increase in gross written premium by PLN 748 million (+22.8%) compared to 2021. The change in the gross written premium of the PZU Group was based on:
  • premium increase in insurance against fire and other damage to property as the result of signing several highvalue individual agreements, including renewal in the Q4 of a contract for a fuel and energy client with the total premium of over PLN 420 million (up by over PLN 180 million y/y) ;
  • increase in premium in ADD and other insurance, including from insurance against various financial risks and guarantee, chiefly due to higher sales of loss-of-profit insurance (also as a result of damage to machinery) and Casco insurance of vessels in marine and inland navigation;
  • increase in the motor insurance premium (+4.8% y/y) from decreased MTPL insurance (resulting from lower sales of vehicles and a slowdown in the highly competitive lease market) and increase in terms of MOD insurance (consequence of higher value of vehicles translated into higher sum insured);
  • improved written premium in the third-party liability insurance portfolio;
• increase in net insurance claims and benefits by PLN 174 million (+11.5% y/y) combined with a 5.8% y/y net earned premium increase translates into worse claims ratio by 3.4 p.p. to 67.3%. The increase in the claims loss ratio in the corporate insurance segment was driven by the following factors:
  • – lower claims ratio in the motor insurance group, including a significant improvement in MOD insurance and deterioration in MTPL insurance as a result of lower than a year before frequency of reporting damage partially offset by an increase in average payments and depreciation of the PLN against the EUR in foreign currency claims,
  • – higher claims ratio in the non-motor insurance portfolio, resulting from deteriorated claims ratio of insurance guarantees (impact of a loss event with high individual value) and the general third party liability insurance (chiefly in the portfolio of insurance of medical entities) and insurance against various financial risks;
• increase by PLN 51 million (+69.9% y/y) of investment income allocated per transfer prices to the segment compared to last year particularly resulted from higher interest rates and stronger euro exchange rate compared to zloty against the weakening last year. At the level of the PZU Group’s overall net result, this currency effect was partly offset by the changed level of insurance liabilities covered by foreign currency assets;
• increase by PLN 11 million (+2.4% y/y) in acquisition expenses (considering reinsurance commission), which considering the increase in the net earned premium of 5.8%, translated into acquisition expenses ratio improving by 0.6 p.p. The decrease in the acquisition expense ratio of both motor and non-motor insurance portfolios is mostly due to changes in the portfolio structure, including lower share of motor insurance offered by lease agencies (which typically have higher commission rates) and renewing a large agreement with a low commission;
• increase in administrative expenses by PLN 19 million (+13.4% y/y), largely caused by an increase in real estate maintenance expenses due to indexation of lease prices and utility prices, move to the new central headquarters and implementing the New Model of Group Work Organization and IT Tools.

• increase in net earned premium by PLN 802 million (+7.9% y/y) combined with an increase in gross written premium by PLN 673 million (+6.2% y/y). The PZU Group posted the following under sales:
  • higher written premium in motor insurance, chiefly MOD insurance (highly dynamic number of insurance with simultaneous increase of the average contribution due to higher value of vehicles translating into an increased sum insured) and slightly in MTPL insurance (the impact of the increase in average premiums with the deceleration of number of insurance policies). This effect was partially limited by decline in new passenger car registrations (recorded especially in the dealer channel),
  • higher premium in natural catastrophe insurance and other property damage insurance, chiefly as a result of higher sales of subsidized crop insurance (as a result of the subsidy pool from the state budget greater than the year before) and insurance of buildings. This effect was partly offset by lower premiums from mandatory insurance of farm buildings resulting from the high competitiveness of the market and the natural erosion of the portfolio (declining number of farms),
  • increased written premium in third party liability insurance (including TPL offered for PZU Firma and PZU DOM and Professional TPL insurance),
  • lower ADD and other insurance premium, chiefly by slower sale of insurance offered in cooperation with the Group banks cash loan and mortgage loan, resulting from a decline in demand for mortgages in the face of high interest rates and greater restrictions on calculating creditworthiness. The effect was partially offset by an increase in the written premium in travel insurance and provision of PZU Auto Pomoc assistance services;
• increase by PLN 398 million (+6.4% y/y) in claims value and benefits net, which combined with net earned premium up by 7.9% translates into an improvement of the claims ratio by 0.9 p.p. compared to 2021. This change was driven mainly by:
  • decreased claims ratio in motor insurance reflects lower MOD and higher MTPL insurance claims ratio due to, among others, positive handling of claims in previous years partially offset by deterioration in the claims ratio in the current year (impact of the higher average payment, including depreciation of the PLN against the EUR),
  • higher claims ratio in non-motor insurance, including insurance against fire and other damage to property, mainly as a result of higher than the year before level of losses caused by atmospheric events (ground frosts and hail);
• increase by PLN 208 million (+54.0% y/y) in investment income allocated to the segment on the basis of transfer prices, compared to the previous year, caused in particular by higher interest rates and stronger euro exchange rate compared to zloty against the weakening last year. At the level of the PZU Group’s overall net result, this currency effect was partly offset by the changed level of insurance liabilities covered by foreign currency assets;
• rise in acquisition expenses (including reinsurance commissions) by PLN 296 million (+13.9%), to PLN 2,429 million, which, when coupled with the higher net earned premium up by 7.9%, caused growth in the acquisition expense ratio by 1.2 p.p. The increase in acquisition expenses was mainly attributable to the modification in the product and sales channel mix, including a higher share of the multiagency channel;
• increase in administrative expenses by PLN 28 million (+4.1% y/y), largely caused by an increase in real estate maintenance expenses due to indexation of lease prices and utility prices, move to the new central headquarters and implementing the New Model of Group Work Organization and IT Tools. This effect was stronger due to intensified marketing efforts and wage pressure.

• rise in gross written premium by PLN 136 million (+1.9% y/y) driven by:
  • attracting further contracts in health insurance. At the end of 2022, PZU Życie had more than 2.7 million in-force contracts of this type, simultaneously adjusting the average price to market and macroeconomic conditions (considering price inflation of medical services) while maintaining portfolio profitability,
  • increased revenues on riders in group protection products, with the pressure of increased departures of insureds from groups (work establishments),
  • for active up-selling of other insurance riders in individually continued products;
• increase in the net earned premium by PLN 135 million (+1.9%) in connection with the development of the insurance portfolio and release of the provision for unexpired risk of PLN 25 million. The provisions is created to cover potential deficit of future premiums (due to the heightened mortality caused by the COVID-19 pandemic), and its release is associated with the lower than forecasted claims;
• increase in investment income by PLN 97 million (+18.7% y/y), which is comprised of income allocated according to transfer prices and income from investment products, related to higher income allocated in protection products due to higher interest rates and deteriorated investment product results, especially EPS. At the same time income from investment products does not affect the result of the group and individually continued insurance segment because it is offset by changes in insurance liabilities;
• lower insurance claims and benefits along with the movement in other technical provisions by PLN 264 million (-4.7% y/y), to PLN 5,333 million resulting from:
  • decrease in insureds’ and co-insureds’ death benefits during the year, corresponding, as follows from Statistics Poland’s data, with a lower mortality in the whole population in the period,
  • decrease in technical provisions in EPS (a third pillar retirement security product), which was affected by weaker investment performance than in 2021;
  • declining value of benefits for childbirth,
  • an increase in technical provisions for older versions of individually continued products, recognizing the expected effect of higher indexations in the years to come – this expectation is based on the high level of the observed and expected inflation rate,
  • rising costs of benefits in outpatient health insurance caused by higher utilization and inflation of medical costs,
  • an increase in benefits in riders related to critical illness, surgical operations and hospital treatment, as well as permanent disability and dismemberment which was due to a lower incidence of benefits last year as a result of lower activity due to the COVID-19 pandemic;
• higher by PLN 35 million (+8,9% r/r) acquisition expenses caused by the higher fees for insurance intermediaries in group protection insurance related to the stronger sales, especially in the segment of insurance products dedicated to small and medium-sized enterprises, and higher group health product premiums with a simultaneous growing portfolio of these products;
• an increase in administrative expenses by PLN 83 million (+12.4% y/y), largely caused by an increase in personnel costs as a result of wage pressures, intensified sponsorship activities and higher costs of maintenance of properties due to purchase of new equipment and furniture related to the move to the new headquarters, implementation of the New Model of Group Work Organization and Tools and higher level and sales bonuses. Factors contributing to the cost reduction include lower demand for consulting services for the ongoing projects and the lower dimension of advertising efforts.

• gross written premium lower by PLN 299 million (-17.1% y/y), to PLN 1,451 million as a result of:
  • decrease in premium generated in investment insurance in the bancassurance channel as a result of restrained cooperation with one of the external distributors and a downward trend in products offered in cooperation with the PZU Group banks, –
  • decrease in premium generated in investment insurance, mainly life insurance with unit-linked insurance in the own network and Individual Retirement Accounts,
  • decrease in the portfolio of protection products in the bancassurance channel, including those sold in cooperation with the PZU Group’s banks, chiefly in the area of insurance offered for mortgage loans,
  • new sales of Single Premium Endowment products offered in own network and in the bancassurance channel,
  • increase in the premium for protection products offered in own network;
• decrease in investment income by PLN 334 million (from PLN 153 million in 2021 to PLN -181 million in 2022), composed of income allocated by transfer price and income from investment products, due to deteriorated results of investment products, especially the Multi-currency Investment Program and lower income allocated to protection products. Income from investment products does not affect the result of the individual insurance segment because it is offset by changes in insurance liabilities;
• decrease by PLN 634 million (from PLN -1,329 million in 2021 to PLN -695 million in 2022) of insurance claims and benefits along with the movement in other technical provisions. This was largely caused by a decrease in provisions related to unit-linked products, which resulted both from lower investment income and a slump in contributions to unitlinked funds. From the point of view of the operating result, the latter factor was of small significance – it was offset by a lower level of gross written premium and lower investment income;
• drop of PLN 8 million (4% y/y), to PLN 216 million, of acquisition expenses resulting from lower sales in unitlinked products in the bancassurance channel with simultaneous increase in fees paid to intermediaries for sales of protection products both proprietary and banking channels;
• increase by PLN 23 million (26.7% y/y), to PLN 109 million, of administrative expenses, chiefly resulting from higher personnel costs resulting from the wage pressure, increase in property maintenance costs and the purchase of equipment and furniture in connection with the move to the new headquarters implementation of the New Model of Group Work Organization and Tools, modernization of IT systems and higher level of variable payroll associated with above-average execution of plans. This effect was partially offset by the lower dimension of advertising activities.

• net earned premium higher by PLN 322 million (18.5% y/y) combined with an increase in gross written premium. Gross written premium totaled PLN 2,359 million and was higher than the year before by PLN 492 million i.e. +26.4% y/y (+23.3% y/y in the functional currency). Sales were up by PLN 484 million (+27.2%), generated in non-life insurance chiefly as a result of a considerable growth in sales of motor TPL insurance (+27.8% in the functional currency), MOD insurance (+25.1% in the functional currency), property insurance (+20.6% in the functional currency) and health insurance (+41.0% in the functional currency). In life insurance, sales climbed by PLN 8 million (+8.9% y/y);
• a decline of PLN 55 million, to PLN -13 million in investment income. This was mainly a result of decreases in stock markets;
• net claims and benefits higher by PLN 156 million (14.4% y/y), achieving the level of PLN 1,238 million. Claims ratio in the non-life insurance rose 0.6 p.p. to 60.8% compared to the previous year, due to, among other things, the increase in the frequency and in the average claim value in motor insurance, in the mass area, in non-motor insurance, including insurance against fire and other damage to property, as a result of higher than the year before level of losses caused by atmospheric events. In life insurance, the value of benefits stood at PLN 43 million and was PLN 44 million lower than in 2021, which resulted from the lower growth in life insurance provisions;
• increase in acquisition expenses by 24.0% to PLN 454 million. The rate of growth in expenses was correlated with the rate of growth in sales; the acquisition expense ratio calculated on the basis of net earned premium increased by 1.0 p.p. to 22.0%;
• administrative expenses slightly higher (+14.8% y/y) at PLN 163 million. The administrative expense ratio stood at 7.9%, down 0.3 p.p. compared to the previous year.

• decrease in net earned premium by PLN 20 million (-8.8% y/y) combined with a decrease in gross written premium. Gross written premium amounted to PLN 231 million and fell by PLN 108 million compared to the year before (-31.9% y/y, -29.2% in the functional currency). The negative rate in most types of insurance is related to the outbreak of hostilities within the Ukrainian territory, and suspending the sales of several products concerning property insurance or financial risk. The largest declines were recorded in agricultural insurance (-66.8% in the functional currency), property insurance (-63.9% in the functional currency), accident insurance (-50.4% in the functional currency), and motor TPL and MOD insurance (total of -17.4% y/y in the functional currency). The increase in gross written premium was noted only in Green Card insurance, due to the taking out of policies en masse by people traveling abroad. Premium in life insurance dropped by PLN 35 million (-38.9% y/y, -37.3% in the functional currency);
• a decline of PLN 58 million in investment income. The value of investment income was charged with an impairment loss;
• net claims and benefits higher at PLN 106 million (+3.9% y/y). The insurance value in the field of
• non-life insurance dropped by PLN 3 million compared to the previous year. The nationwide declaration of martial law on 24 February excluded insurers’ liability for damages resulting from hostilities. PZU Ukraine made payments under motor TPL and MOD insurance in accordance with the terms of the insurance contracts and applicable legislation. In life insurance the value of benefits paid increased by PLN 7 million (+19.4% y/y) compared to the previous year. The claims ratio calculated on the basis of the net earned premium in non-life insurance was 41.4%, down 6.0 p.p. compared to 2021;
• drop of acquisition expenses to PLN 48 million from PLN 112 million in the previous year (-57.1% y/y). The acquisition expense ratio decreased by 26.1 p.p. to 23.2%;
• decline in administrative expenses by PLN 6 million (-15.4% y/y), to the level of PLN 33 million. The administrative expense ratio calculated on the basis of the net earned premium decreased 1.3 p.p. and stood at 15.9%.