PZU Group, 3Q2022: Premium growth dynamics highest in a year supported by the non-life segment

24 November 2022 — Daniela GHETU
The value of insurance premiums collected by the PZU Group throughout the first three quarters of 2022 exceeded PLN 19 billion (~EUR 4.05 billion), 4.3% up y-o-y. In Q3 alone, GWP growth rate was the highest in a year (12.1% y-o-y), thanks to the rapidly growing sales of non-life insurance, motor insurance in particular.

Net profit attributable to shareholders of the parent company after three quarters amounted to PLN 2.1 billion (-9.8% y-o-y), and in III. PLN 660 million (-10.7% y-o-y). "The result on insurance and other activities in Q3 was higher by 39.4% compared to the same period last year, but the total result of the PZU Group was affected by charges resulting from regulations on banking activities. Their negative impact in Q3 amounted to PLN 547 million, and PLN 750 million cumulatively. In the case of Pekao and Alior banks, belonging to the PZU Group, the additional costs of support for PLN mortgage loan holders (so-called credit holidays) amount to PLN 2.43 billion and PLN 502 million, respectively. After removing the negative impact of regulations concerning the banking sector, the PZU Group's profit in cumulative terms after the third quarter of this year would amount to nearly PLN 2.9 billion. The return on equity ratio after three quarters of this year amounted to 17.5%, and 17.3% in Q3 alone. This is a value higher than the strategic goal," says Tomasz KULIK, member of the management board and CFO of the PZU Group.

Beata Kozlowska-Chyla, President of the PZU Group, commented: "The macroeconomic situation in the world, resulting from the war in Ukraine, creates a very demanding environment for business, including ours. In these circumstances, the results generated by the PZU Group should be considered solid and based on strong, sound foundations. They prove that the path of safe, stable growth, supported by a strong capital position and consistent diversification, while maintaining development and high profitability of the core business, is the right one. This allows us to achieve the ambitious goals outlined in the strategy, despite difficult economic conditions."

Good prospects for investment activity

The result on the main portfolio after three quarters of 2022 amounted to PLN 1.57 billion. A year earlier, it was PLN 1.72 billion, but then it was strongly influenced by a one-off profit of PLN 518 million due to the company from the logistics industry going public on the stock exchange. In Q3 of this year alone return on the portfolio exceeded 5.2%, and the investment result amounted to PLN 607 million, growing by 54.9% year on year.

The asset allocation adopted for the investment portfolio allows the PZU Group to operate effectively in an environment of rising interest rates. In the structure of the main portfolio, debt instruments account for 75%, including treasury debt for 57%. Since the beginning of the year, better and better results from floating-coupon bonds have been recorded. In the long term, this will also allow fixed-coupon bonds to be rolled over at higher rates. After three quarters of net interest income from the main portfolio increased by 36.6% to PLN 1.3 billion. In Q3 alone, it amounted to PLN 541 million, i.e. it was 78% higher than in the corresponding period of the previous year.

Solid results achieved in a repeatable manner and a strong capital position of the PZU Group, confirmed i.a. Solvency II ratio exceeding 200% and S&P agency rating at the level of A- with a stable outlook, allowed for the payment of dividends. On October 20, 2022, PZU paid PLN 1.94 in dividends per share, allocating a total of nearly PLN 1.7 billion for this purpose.

Core business development

In Q3 this year, the total written premium of the PZU Group amounted to PLN 6.4 billion (EUR 1.37 billion), +8.2% y-o-y, and net claims and benefits paid amounted to nearly PLN 3.93 billion (EUR 0.384 billion) (+0.9%). The growth rate of insurance sales was the highest in a year. It was driven primarily by the sale of non-life insurance (in Q3 it increased by 12.1% y-o-y, to PLN 3.5 billion), especially in the corporate segment.

In motor insurance, written premium increased by 8.6% in 3Q, the most in five years, despite the continuing downward trend in the average prices of compulsory MTPL insurance for motor vehicle owners. This increase was possible mainly due to the rapidly growing - in Q3 by 18.7% y-o-y - sales of MoD insurance , both due to the high renewal rate, the growing number of new contracts, and the higher value of the insured vehicles.

In non-motor insurance, the increase in written premium in Q3 amounted to 18.1%, including as much as 56.3% in the corporate segment. Sales increased incl. home insurance, small and medium-sized enterprises, subsidized agricultural insurance, loss of profit insurance (including damage to machinery), ship and rail vehicle insurance in the corporate segment.

Good results in the property area were achieved while maintaining high profitability of key business lines. The combined ratio (COR) in Q3 this year amounted to 89.9% vs. 92.6% a year earlier.

In life insurance, the premium in the group and individually continued (IK) insurance segment grew steadily - in Q3 2022 it increased by 2%, despite the pandemic. This was mainly the result of continued development of the group outpatient health insurance portfolio, higher sales of additional insurance to group protection products, as well as from additional contracts to continued insurance. "The situation related to the frequency of deaths and claims ratio has stabilized. In the third quarter of this year the loss ratio of protection products was only slightly higher compared to the same period last year, which is in line with normal seasonality. After three quarters of this year, the result on the most important for us group and personal insurance amounted to PLN 857 million, growing by 16% y-o-y. We are gradually returning to the high returns recorded in the pre-pandemic period. The operating margin in this segment increased in Q3 2022 to 22.5%," indicates Aleksandra Agatowska, president of PZU Zycie.

In the case of individual life insurance, the margin in Q3 increased to 20.2%. The newest single premium endowment insurance with a very attractive rate of return - Pewny Profit at Bank Pekao and Safe Tomorrow at Alior Bank - sold best. They guarantee clients the payment of funds regardless of the situation on the financial markets - the profit is known in advance at the conclusion of the contract. These insurances are very popular and it is planned to sell them also through other distributors.

Growth in strategic markets

The PZU Group continues its rapid development in the areas identified as key in its strategy for 2021-2024. Revenues in the health pillar after three quarters of this year increased by 17% year on year - to PLN 937 million (EUR 199.4 million). Both the revenues generated by the constantly expanding branch network (by 17.5% y-o-y) and the sale of health insurance and subscriptions (by 16.6% y-o-y) increased. The number of health contracts in the entire PZU Group increased to 3.17 million, i.e. 8.9% y-o-y, mainly due to the sale of health insurance and supplements to protection products.

Main achievements of the PZU Group after three quarters of 2022

Financial results

  • Return on equity at 17.5% (17.3% in Q3 2022) - at the level of strategic goals. PZU again among the most profitable insurers in Europe.
  • High profitability of non-life insurance with a combined ratio of 89.2% (89.9% in Q3 this year) - no significant changes year-on-year, despite the relaxation of restrictions related to COVID-19 and a much higher frequency of claims and cost inflation.
  • An increase in the operating margin in group and individually continued insurance to 16% compared to 14% after three quarters of 2021 (22.5% in Q3 this year).
  • Improvement of the margin in individual life insurance - an increase to 19.7% after three quarters of 2022 compared to 13.3% after the same period in 2021 (20.2% in Q3 this year).
  • Very good investment result - the return on the portfolio reached 5.2% in Q3 2022 . Increase in net interest income, favorable interest rates when refinancing maturing treasury bond tranches.
  • Costs under strict control despite unfavorable conditions. The cost ratio in Q3 this year amounted to 7.4%).
Business development

  • Gross written premium after three quarters of 2022 reached PLN 19 billion (PLN 6.4 billion in Q3 alone). Stable growth in strategic business lines.
  • Continuation of strong growth in sales of non-motor insurance - by 12.3% y-o-y (in Q3 2015 by 18.1% y-o-y), especially in the area of corporate insurance - by 28.2% y-o-y (in Q3 this year by 56.3% y-o-y).
  • An increase in the motor own damage insurance premium by 14.9% y-o-y (in Q3 this year by 18.7% y-o-y). As a result, the premium in the entire motor insurance segment, despite falling prices on the TPL market, increased by 6.1% y-o-y (in Q3 this year by 8.6%).
  • Accelerating the dynamics of individual life protection products - premium growth by 66% y-o-y . The new " Pewny Profit" and "Safe Tomorrow" life and endowment insurances enable safe investment of capital without risk, with a guaranteed sum insured throughout the insurance period.
  • Further dynamic growth in demand for private medical services , translating into PZU Group's revenues in the area of health higher by 17% y-o-y. Large increases both in revenues generated by outlets (17.5% y-o-y) and in insurance and subscriptions (16.6% y-o-y).
  • PZU TFI is the market leader in net sales after Q3 2022 - sales of PLN 641 million (with net outflows on the entire market of PLN 23 billion).
  • The value of accumulated PPK net assets reached PLN 1.93 billion , which means an increase of 75% within 12 months. TFI PZU ranks first on the market in terms of the number of acquired companies and second in terms of asset value.
The full press release, also referring to the Group's asset management segment, ESG initiatives, new products and technical advancement is available on the PZU Group's website.