PZU’s standalone results

• increase in gross written premium to PLN 14,692 million, or 9.7% more than in the previous year. This was due to the higher premium in insurance against fire and other damage to property (impact of the renewal of several large contracts and improved sales of crop insurance) as well as motor own damage insurance and insurance against various financial risks. After the reinsurers’ share and change in the provision for unearned premiums, net earned premium was PLN 12,750 million and was by 7.0% higher than in 2021;
• higher level of claims and benefits – amounting to PLN 7,895 million, which means an increase by PLN 539 million, i.e., 7.3% compared to 2021. The most significant change, that is the growth in the group of insurance against fire and other damage to property, general third-party liability insurance and insurance guarantees, was partially offset by the lower value of claims in accident and illness insurance an on the group of transport, marine and aviation insurance;
• net investment result down4 at PLN 1,303 million (by 16.4% year-on-year), as a result of deteriorated performance reported by subsidiaries; • acquisition expenses higher by PLN 279 million, or 11.0%, compared to 2021, including reinsurance commissions, as a consequence of the growing insurance portfolio and the high share of the multiagency channel, characterized by higher commission rates;
• a 5.0% increase in administrative expenses, from PLN 723 million in 2021 to PLN 759 million in 2022. The increase is primary caused by the impact of rising maintenance costs of properties due to the indexation of lease prices and utility prices, the relocation to the new headquarters, and the implementation of the New IT Work Organization and Tools Model. The effect was amplified by intensified sponsorship activities, salary pressure and costs of aid support associated with the situation in Ukraine.

• TPL motor insurance premiums, accounting for 32.6% of PZU’s insurance portfolio (35.5% in the prior year). The slight increase in premium, with the simultaneous decline in portfolio share by 2.9 p.p. were caused by strong price pressures, intensified competition in the market, and the persisting limited availability of new vehicles (experienced especially in the dealership network and in lease agencies);
• the MOD insurance premium with a 24.9% share of PZU’s total gross written premium (+1,2 p.p. in comparison to 2021). Contrary to the portfolio of motor third party liability insurance, the value of written premium largely increased in comparison to 2021 (by 15.3% year-on-year), which is due to the high growth in the number of insurance contracts, with the simultaneous increase in average premiums (rising vehicle values translating into an increase in sums insured);
• premiums on insurance against fire and property damage accounting for 24.7% of PZU’s premium portfolio. Compared to 2021, their share in the insurance portfolio edged up 2.3 p.p., while their value was up 20.7%. The improved written premium was a consequence of the resumption of a contract with a client operating in the fuel and energy industry in Q4 2022, with a simultaneous increase in written premium to a total of over PLN 420 million (an increase of more than PLN 180 compared to 2021), and an increase in written premium in crop insurance (impact of a subsidy pool from the state budget greater than the year before). This effect was partly offset by lower premiums from unsubsidized, voluntary crop insurance and mandatory farm building insurance, resulting from the high competitiveness of the market and the natural erosion of the portfolio (declining number of farms);
• third party liability insurance premiums accounting for 6.3% of the PZU’s insurance portfolio. The premiums were 10% higher compared to 2021 and their share in the portfolio did not change. This resulted from the growth of the TPL portfolio offered with PZU Firma and PZU DOM, as well as professional TPL insurance;
• other insurance premiums, whose share in the portfolio was 11.5%, 0.5 p.p. lower than in 2021. The premium value increased despite a significant decline in accident and illness insurance (-26.4% compared to 2021), including cash loan and mortgage loan insurance (offered in cooperation with the PZU Group’s banks). Lower premiums offered through the bancasurance channel are a consequence of falling demand for mortgage loans in the face of rising interest rates and greater restrictions on creditworthiness calculation. This decline was offset by higher premiums in assistance insurance (included in the PZU Auto and PZU Wojażer offerings) as well in aviation, marine and transport insurance.

In 2022, acquisition expenses (including reinsurance commissions) amounted to PLN 2,815 million, and increased by 11.0% in comparison to 2021, which along with a 7.0% increase in net earned premium y/y translated into a deterioration of the acquisition expense ratio by 0.8 p.p. The change in the acquisition expense ratio was driven largely by the modification in the product and sales channel mix, including a higher share of the multiagency channel as well as changes in the remuneration model for crop insurance.

In 2022, administrative expenses reached PLN 759 million, i.e. 5.0% higher than in the previous year, which alongside the increase in net earned premium by 7.0% y/y translates into an improved administrative expense ratio, by 0.2 p.p. The increase of administrative expenses is primary caused by the impact of rising maintenance costs of properties due to the indexation of lease prices and utility prices, the relocation to the new headquarters, and the implementation of the New IT Work Organization and Tools Model. The effect was amplified by intensified sponsorship activities and salary pressure.

The balance of other technical income and expenses in 2022 was negative and stood at PLN 224 million. The 14.7% deterioration in comparison to 2021 was an outcome of a higher impairment charge on receivables and a lower allowance to the prevention fund.

The balance of other operating income and expenses was also negative. It reached PLN -364 million, while the year before – when it was also negative – it stood at PLN 278 million. The y/y change is mainly the result of higher financial expenses (PLN +105 million y/y), including interest on the issue of debt securities.

At the end of 2022, PZU’s balance sheet total was PLN 45,935 million, and was 3.3% higher compared to the previous year.

The main component of PZU’s assets were investments which stood at PLN 40,165 million (up 2.3 % compared to the end of 2021), which accounted for 87.4 % of PZU’s total balance sheet value, compared to 88.3% as at the end of the previous year. The level of investments, excluding investments in subordinated entities, increased in connection with the achieved investment performance and net operating income, which was offset by the disbursement of dividends from the 2021 profit, increased by the amount transferred from supplementary capital, originally augmented by the 2020 profit.

As at the end of 2022, PZU’s receivables stood at PLN 2,527 million, and accounted for 5.5% of assets, whereas the year before they amounted to PLN 2,404 million (5.4% of assets). This increase is an outcome of higher direct insurance receivables (PLN +294 million y/y, net of impairment charges) and a decline in other receivables, including those from other entities (PLN -150 million y/y; the impact of lower receivables from outstanding investment transactions and collateral margins).

Fixed assets, in the form of intangible assets goodwill and property, plant and equipment were disclosed in the balance sheet at PLN 432 million (PLN +9 million y/y). They accounted for 0.9% of assets.

As at the end of 2022, PZU held cash of PLN 131 million (0.3% of assets). The year before, the corresponding value was PLN 146 million.

At the end of 2022, technical provisions were the main component of PZU’s equity and liabilities. They reached the value of PLN 23,913 million (net), which accounted for 52.1% of equity and liabilities. Their share in the balance sheet increased by 1.1 p.p. compared to 2021, while in terms of value they rose by PLN 1,238 million, in particular due to a higher provision for outstanding claims and benefits, mainly in the group of insurance against various financial risks and general third party liability insurance, as well as a higher provision for unearned premiums, mainly in natural catastrophe insurance, insurance against other damage to property and MOD insurance.

At the end of 2022, equity was PLN 15,824 million and accounted for 34.4 % of equity and liabilities, down 1.0 p.p. compared to the end of 2021.

Contingent receivables amounted to PLN 3,045 million, i.e. were lower by 17.8% in comparison to the previous year. They comprised among others: guarantees and sureties received, bills of exchange issued on account of granted insurance guarantees and other contingent receivables comprising mainly securities obtained in the form of mortgage on the debtor’s assets, other contingent receivables, etc.

The balance of contingent liabilities was PLN 1,145 million, which represents a decline by PLN 59 million (-4.9% y/y) in comparison to 2021. This is the result of an increase in disputed claims, not recognized by the insurer and with regard to which creditors have taken legal actions before the courts (+ PLN 151 million y/y), as well as lower other contingent liabilities, including lower Sureties from subsidiaries (- PLN 83 million y/y) and liabilities due to unpaid loan tranches (- PLN 95 million y/y).

In 2022, PZU generated a return on equity (ROE) of 10.4%, down 1.8 p.p. compared to 2021. In 2018-2022, the average return on equity (ROE) was 14.5%.