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Magdalena Komaracka: Good afternoon. Welcome warmly at the PZU Group results for the third quarter 2025 presentation. It will be led by our CEO -- PZU CEO, Bogdan Benczak; and Tomasz Kulik, CFO of PZU Group and Management Board member of other PZU companies.
Bogdan Benczak: Good afternoon. I'm extremely pleased to welcome you at the presentation of the PZU Group results after 9 months. That's my lifetime and first-time opportunity to -- for me, to manage this presentation. So please understand my unwanted mistakes. Let me start with the key achievements and plans. As you have already seen in our press release, and in our stock exchange communication after 9 months, we've reached PLN 23.1 billion in sales with the consolidated profit of PLN 5.2 billion, capital position 234% of solvability and 246% of stand-alone solvability and the dividend yield for the dividend paid in October is at around 8%. aROE is at the level above 20%. That's a very good position, sort of a head start for me as the acting CEO of the PZU Group. Let me stress that the growth that you've seen in insurance refers mainly to non-life insurance and in particular, non-motor insurance. I'm extremely happy with this result because this is close to my heart. We've had a major growth in foreign markets where we are present in Lithuania, Latvia, Estonia and Ukraine. We've had growth in Life Insurance segment, especially in Individual Life Insurance segment. And we've managed to substantially improve the results after 3 quarters, our capital position is very strong. It's robust and figures are really, really good. The results after 3 quarters and parameters -- profitability and capital adequacy parameters will allow us to pay an attractive dividend in the next year and about the level of the dividend, well, the details of the dividend, if the trajectory is kept could be discussed the next year after the recommendations and the approval of the Management Board and the Supervisory Board. Income and net profit more than PLN 5.2 billion with a share of PLN 3.6 billion from insurance services and PLN 2.2 billion from investment portfolio. We are proud with the results in insurance service increase of 73%. We do know, however, that the last year was truly exceptional. And we had some additional compensation PLN 222 million paid because of the flooding. I believe it's even more last year, we reported PLN 275 million more than PLN 0.5 billion gross of compensations paid. So the third quarter, PLN 1.5 billion and 127% year-to-year growth in insurance service and 85.8% of combined ratio. This shows our diversification. We've got a pillar of insurance services. We've got a pillar of banking activities, and we are working to consolidate further our health pillar, so PLN 3.6 billion result in insurance service, cess PLN 2.2 billion on investment portfolio and combined ratio, as I said, 85.8%. This is a very good result. And we are also happy to -- with our high operating margin in life insurance and with this, we are able to get to an aROE at 22.1%. After 3 quarters, we have a 2-digit dynamics in non-motor insurance. 2-digit is a success and it's a source of pride for us. We've managed to have a growth in this segment. This is a core activity, 77% extremely important for us, especially that the number of initiatives have been launched and actions campaigns for this segment, and now we see a tangible result of our efforts. Individual Insurance segment has also seen improvement in efficiency in our sales network. We've also launched some new products. And here, we also have a 2-digit dynamics in Individual Protection Insurance segment. This shows that when you focus well and define your priorities, clearly, you can be really effective, and this is our case, and we truly deliver. Health pillar. Again, 2-digit dynamics. We are particularly pleased with a number of results. We do see the room for improvement, but quarter-to-quarter and quarter after quarter, we are able to improve in this pillar. Tomasz will give you some more details how referrals to our network of branches -- own branches have improved. He will tell you what kind of tools are used and what tools are actually the best to improve the referral rate. Indeed, as I said, we see the room for improvement, but we've been consistent, and we've been implementing a recovery program. And as you can see, the results are there. We are also happy to see a 2-digit growth in external customers number in our 2 investment fund companies, TFI. This pillar is on the rise and we look into the future with optimistic perspective. This is yet another source of diversification for our revenues within the group. We've managed to increase the value of assets within the group by PLN 20 billion year-to-year. When you have revenue, you have a better solvability ratios. Our credit rating is a A- and positive outlook granted by Standard & Poor's Global Ratings. They've kept the Polish rating as well. So you see that the situation is stable. Group solvability -- solvency ratio is at 234%. We are above the EU average for European insurers. 81% of our investment portfolio is made of bonds, including 65% represented by sovereign bonds. We are aware that our investment portfolio is conservative, but it produces stable and predictable yield on deposits. One more item effective reinsurance protection. Reinsurance program was launched some years ago. It turned out to be effective when we were struck by catastrophic events on the territory of our country, 45% of our reinsurers have AA rating and the remaining 55% half A rating. I presented briefly the financial results. And now let me move to the priorities of the PZU Group for 2026, 2027. This is a sort of an opening statement as a person appointed the CEO of the group. We have a very strong financial position, thanks to our scale to our profitability and our diversification. We have a solid market share. We are leaders in Non-life Insurance and in Life Insurance segments with 30% and 44% of share, respectively, for both of them. We are growing in terms of scale after 9 months, we have PLN 23 billion in insurance services. We have profitability. We are profitable, and we are better than our competitors in terms of technical profitability, for non-life insurance and technical profitability for life insurance according to the data from the 6 months. We are then positioned among the top European insurers. And let me point out that the PZU Group is a financial conglomerate, but we are diversified. We are #1 in Poland for non-life and life insurances and in top 3 for health. We are 30 among banking, #3 in terms of investment funds. And our Baltic-country companies are leaders in their respective local markets and contribute to our consolidated financial results. I hope I'm not committing a blunder by showing you this chart, but this is a moment when we can be proud of our achievements. I don't know what the cost of PZU is right now. But as we announced our results, the price of shares has skyrocketed 61%. So that has gone down a bit. But since 2024, we were growing by 71% versus 46% of the week 20. So this is very good news and if you have a look at our European peers and their valuation, there is room for growth for us. And this is precisely our ambition, the ambition of the Management Board to improve our position respectively versus our peers. So the group is likely to grow, and it will grow. But we are also aware of some negative trends on the market. That's why we're focusing on opportunities. So this means demographic and social changes and also the fact that the forecast for the Polish economy are positive. We would like to tap into the growth of the Polish GDP and take advantage of it because I think that the economic growth will have a positive impact on the capabilities of customers who will be able to take out more insurance policies and now the demographic and social changes. So the purchase power of society is growing. Therefore, we think that both investments and life insurance will grow and so will be the value of the property to be insured, and this will also mean some benefits for us through the amount of the premium and now the aging society. Let me address that. We think that this means a higher demand for health and protection products, meaning life insurance. There is also a pressure related to the negative market trends, namely the TPL market is changing. It's moving more towards what we call the soft cycle. We are now nearing the soft cycle. But we can see that there is a huge competitive pressure in segments that continue to be profitable like the MOD and non-motor. So this is a trend we have to face because this is a threat. But at the same time, this is an opportunity, namely the fact that intermediaries are growing, 50% of distribution is now done through brokers and multi-agencies and this is a challenge the group has to face. Also, interest rates will be going down, and this will have an effect on the investment result, and this will also affect the contribution of our banking pillar to our consolidated result. And also higher corporate income tax for banks will have an effect on us as well. Now these are our plans, and I would like to highlight some thanks as CEO, namely over the last 2 months, the group has done the following. We have set priorities for our initiatives and strategies. We have assigned responsibility for specific projects to specific people. And also, we have grouped initiatives. This will help us reverse trends in some market segments, but it will also help us stay the leader of the insurance market in Poland and we will be the leader in terms of profitability and the market share because we already got there but we will be also creating new solutions and products in the market. So from my point of view, the most important thing for us is non-life and mass insurance. We have to improve our pricing here and there are also other initiatives leading to an improvement in the effectiveness of our sales network, and I'm referring to our agents who are our edge -- our advantage, and I believe that they will make a contribution to our results. But at the same time, I think that developing our collaboration with multi-agencies would be an interesting opportunity for the group because traditionally speaking, in this segment, the group was not strong and unlike our peers, our competitors, but I think, and I believe that if we make some moves in terms of pricing and tariff setting, if we modify our distribution and develop the right skills and if we have the right tools at the front end, we will be able to increase sales in this channel as well, keeping our profitability at the same time. Also, now let me address the implementation of the new system of claims handling, and this covers both the non-life and the life insurance company. Obviously, the non-life company is a priority here because I can see that in this company, in particular, there is a huge technical -- technological debt, which is something I realized when I came back to the company. And I think that here, there's a lot of room for improvement of our profitability. And now I personally would like to focus on Health. I would like us to carry out the strategy, which would lead us to the results, the target figures that have been provided for in our strategy, and this could be a strong pillar that has a positive effect on our operations. I can see room here for organic growth, greenfields. But also, we have an opportunistic approach here because we are looking for acquisitions. And we are doing this to improve the take-up, the utilization of our health business in our own clinics, facilities and also to address and eliminate the white spots in Poland. And I'm referring to the coverage of the territory of Poland with our health facilities. So speaking about the investment activity, decreasing interest rates are a negative trend. We would like to manage our own portfolio in an effective way. But at the same time, we want to develop product offer for our external customers and partners so that the investment pillar can increase its role -- its share in the PZU Group's revenue. Now speaking about motor insurance, we are relatively happy with this segment because it has a positive contribution to our P&L account, but we would like to grow outside through inward reinsurance. We have proven partners through the MG model and we believe that this will lead us to positive results. Individual life insurance is what we do, new products, activating the sales network to reach our target customers. So we would like to focus on individual continued products and we would like to reach the silver and middle age generations as well. Now group insurance. So traditionally, it's a strong segment for the company. Currently, the margin is very satisfactory. It goes beyond our strategic expectations. But we would like to be more swift here and respond faster to the changing market, and we'd like to gradually transform here to change the group insurance into an employee's benefit made up of the insurance component, health component and also other elements to be used as a benefit for employees. Bancassurance, we are focusing strongly on the collaboration with Pekao SA and Alior, but we are active on the market. We collaborate also with other companies from outside the group. Now international business, we would like to take advantage of the synergy. We've had some successful projects in our foreign companies. But we are also looking into how to make the most of our companies, let's say, in Ukraine for future projects like the recovery of Ukraine. And obviously, hopefully, the war ends as soon as possible so that we can take advantage of the reconstruction. But for the time being, the contribution of our international companies is at the satisfactory levels of the Baltic countries, combined ratio is at the level of the parent company. So we are very happy with that. Now the group is transformation and the growth of the organization. Let me stress one thing. According to current strategy of PZU, the Solvency -- the new Solvency II regime was to take effect. This was the assumption of the strategy according to our estimates. So new regulations and a new way of appraisal of our assets -- banking assets. This would lead to a drop in our liquidity of 190% to this level and we were expecting this. And even at this level, we have a permanent contribution of the same dividend policy of the group. And this is our starting point. We are also undergoing the reorganization of the PZU Group. We have signed memorandum with Pekao SA and now the group, the PZU Group is getting ready for the baseline scenario and this scenario has been described in the term sheet. There are factors we cannot have impact on. I mean by that legislative changes. Without any amendments to the legal framework, we will be unable to do the reorganization and revamping as described in the documents signed with Pekao SA. We are awaiting further steps, but we do see risks that these regulatory changes will come into effect at a later date than the day defined in the term sheet. And we work together with the Pekao SA on how to react and to see if we are going to sign a new memorandum or not. And I think that we will know that in December, once we've known the exact deadlines. But we do stay in close contact with all stakeholders. So that will be for our Copenhagen project. We do follow up the development on the market. And in the media coverage -- what happens in the media coverage, the Minister of State Assets announced that securing state interest in this project is a key priority for him. Within the group, we are preparing the deployment of a new organizational model, the design works are underway, and we stay in close contact with the supervision authority to know if we will have the endorsement, but we do realize that the challenge is huge. When I joined PZU Group, my first -- one of my first task was to stabilize the situation within the organization. We have 2 collective bargainings and we managed -- we had collective bargainings and we managed to close 2 -- to settle 2 disputes, and we are now in a dialogue with social partners. I do hope that by the end of the year, we will be able to find settlements in other disputes. We focus on a transparent and open communication with social partners in these collective bargainings. And I do hope we will be successful. We are preparing for the cultural transition. We want to transform our governance and culture. We want to be more agile, and we want to shift from silo thinking to a tribal thinking. It's a huge challenge ahead. But within the group, together with the other leadership team members, we believe that we are on the right track. For technology. Well, in our previous meeting, we already said that we had a serious technology that within the group. The Management Board and especially [indiscernible] has been working in that. We've designed a plan to replace the key IT systems and we want to have low-code platforms to -- because we want to act swiftly and in an agile way or respond to any market developments. I've already said that we will have some new claims handling processes. We estimate that by the end of the first semester of 2026, we will already have all the analysis at hand and the provider will be selected and that we will be able to trigger the deployment. We've been implementing our corporate social responsibility policy. We want to build a society resilient to ongoing and current challenges. I'm sure you know our campaign champion slowed down. That's a road safety campaign. I'm sure you know the visualization and look at me moustache only in November because we have another health awareness raising campaign. I wear moustache this month because that's how I see my role as a leader -- as the CEO of the leader of the market leader. Its high profitability and yield, but it's also a major key player and a participant of the social life. Just don't forget we have people to live for talk to your family members about health, about prevention, about screening just go do screening tests. And my colleague does not wear moustache. I encourage him to do the same. That will be the overview of our achievement -- efforts behind these achievements and plans for the future, my personal ambitions as the CEO -- acting CEO for now of the PZU. And now I will move to Tomasz, who will give some more detailed brief of our business in the third quarter 2025.
Tomasz Kulik: Thank you very much. I try to be brief to get some time for the sum up by segment and to have a question-and-answer session. Let me start with some important factors impacting our results. We will start with non-life insurance. It was flat. However, over the same period we had some major rises on revenues from insurance services. There is a stratification among corporate clients, a drop of 9%, but the revenue grew by 7%. Why? Well, it's long-term business. The long-term business is still in our portfolio. We do provide our services, and that's an element of our exposure, and there is a different format used for the reporting to the supervisory authority. Our competitors would report that as a recent premium, especially that there was no change in coverage over the period, and we could not reprice that part of business. This is an element of our exposure, as I've said. And we had some major rises in corporate and mass segments. Under the previous standard, we had the different measurement premium and that value reflects better what happens on the revenue side. Now motor insurance, continued drop, especially Link4 portfolio mass insurances, a multi-agency nonprofitable channel, there has been a reduction. The channel was not among the top profitable entities last year in 2025 for the whole group and for Link4. In 2025, we focus mainly on profitability and yield where such yield is achievable. And we skip any formats that historically are no longer attractive to us. There has been a slight adjustment, therefore, but just have a look the difference between written premium and revenue on insurance, which are -- the difference is the source of this adjustment. Here, in this segment, you have -- we have 3% -- growth of 3%. That's for health, either [indiscernible] of the existing portfolio or new contracts, new protection, insurances. This is a result of consistent work on the portfolio, and we added some new products, which help us improve our insurance margin. We had an 8% increase in individual health insurances. It was quite high, especially that the last year, the starting point was also quite solid. And we had a major share of investment products, including life and endowment insurance products. Quasi investment products sold through different channels, including through banks. And despite that, we still have a rise of 8% for individual health insurances and regular protection insurance products registered a 20% dynamics. For the segment of Non-life Insurance, we've opened stand-alone products in bancassurance, Alior Bank and education. We've already launched what was announced upon the publication of our strategy. We started to go beyond Poland in active reassurance format. We want to be present in foreign markets outside Poland. We are in the stage of studying these markets, together with our reassurance partners and because the balance sheet is good, we have enough space to take on some more risk. And we want to limit anti-selection at the very start of that journey. So we had a fresh start, that is a strong team. And I do hope that in the incoming quarters, we will be able to give you some more details on revenues in this specific channel. We still focus on building and expanding skills in underwriting and bancassurance. We wanted to improve analytical skills of our teams. Let us move to Life Insurance. We have some additional products, serious diseases, treatment abroad. These are elements that are now covered. We are an aging society, and we have ailment typical of much mature and aging societies. So health insurance is a topic of focus for us. We have an attractive offer with very, very hard premiums, and this offer really resonates among customers, attract a lot of customers. In group insurance, we offer a new product based on the insurance sum and the insurance sum is calculated based on the remuneration level. This is a pilot project. We've been testing that solution, and we have also products in bancassurance. Health area, the CEO has already given you the details. We have had growth in both subscriptions and insurances, 15% year-to-year. And the same applies to medical facilities, whether it's occupational medicine or fee-for-service model, we have to digit it's more than 12% always. We are growing, thanks to our partners. We have partnered medical facilities. We want to be present everywhere and to attract more and more customers. We act as an adviser. We can suggest our own facilities or partner facilities simply to streamline the cost -- the average cost of medical procedures. We also increased the number of online visits, and there is a channeling of patients inflows to our medical facilities, 40% of all patients in the third quarter. Assets under management, whether it's the TFI PZU or our group banks, we have TFI PZU as a leader PLN 3.5 billion, a large share in banks and growing scales of assets in ECS. And now for product. A new fund, private debt fund which is done together with the Bank Pekao SA with joint allocation, both for us, for the bank. It's over PLN 100 million. It's a fund to finance companies as a long corporate debt with the offer is directed at the clients of private banking of Pekao SA and it looks like a good top-up of our offer in terms of the attractiveness of the investment, especially with this type of assets in mind. Now Innovate Poland, which recently was inaugurated by the CEO. So over to the CEO.
Bogdan Benczak: Innovate Poland, this is the Poland version of the program and PZU is one of the originators of the project. We are the private company, the joint projects together for the Polish Development Bank and the Polish expansion fund, which are public entities. We have done this to diversify our portfolio and to get extraordinary rates of return. This is also aligned with our strategy, because we've been diversifying our revenue on deposits. Thirdly, we see it as a project where there is a room for synergy with other projects that we have now in the pipeline. We collaborate with the highest number of start-ups in Poland. We have the PZU Ready project, which is for start-ups. So we can see some synergies here and the possibility to fund some of our partners with money from this Innovate Poland fund. Also additionally, thanks to the ideas of the project and some accreditation procedures and certification procedures, we think that this will let us to achieve synergy and speed up the certification and speed up the selection of funds we would like to invest in the future. Thank you.
Tomasz Kulik: Now our collaboration with banks -- bancassurance. Here, the sale measured through written premium quarterly reached PLN 600 million. So it's a very important distribution channel. It's growing, thanks to the same groups of products and the growing offer. And this time, stand-alone products have been added to our offer. So we hope that this channel will only continue to grow. And now I would like to walk you through the financial results in Q3 with a breakdown into segments. So first, general results. The highest top line ever in Q3 and the highest result ever for the group. So top line now the growth year-to-year is around 5% with an important contribution of the non-life mass insurance, especially non-motor because here, the growth rate is almost 10%, 8.1% growth, corporate and non-life insurance. Group individually continued insurance are a bit lower, but the baseline was very high, and we will tell you what has happened here in this segment, double digit, 18% of growth in individual protection insurance and life insurance, a very high contribution from our foreign companies. So this actually generated our insurance revenue in this quarter. Now net insurance revenue is the same as the gross amount that the year-to-year, a lot has been happening on the side of the costs, especially if you think about the claims and benefits. Here, you can break it down into 3 areas. So first, no comparability because let me remind you that last year, we were speaking from the point of view of the operations, and we were facing the flood and its consequences on the very next day after the flood and we were already there. So Q3 last year and the reported results was affected by this -- by this mass incident and actually brought the result down by PLN 265 million -- rather PLN 275 million. At the same time, the frequency of claims was lower in motor insurance, which also had an effect on the rate of return and MOD and MTPL in both segments, which is good news. At the same time, the reserves from previous years were overrated mainly because of the reversal of the trends of indexation. And I'm speaking here about PLN 56 million, the overestimate. There was also a drop in the reserve of the [indiscernible] provision. Cost effectiveness is very important for us. This concerns how to reach customers in an effective way, also how much we want to spend on customer service. In both terms, we have increased our effectiveness. So we have increased the effectiveness of our administrative costs, personnel costs and technological cost is offset by other cost categories. So this means an improvement which translates into index which is lower by 30 basis points. The same goes for the cost of acquisition. And also now let me mention something that actually proves the quality of our business, the net contribution and the improvement of the loss component. As you can see, the new loss component and the amortization. Overall, has a positive effect on the result. In all the segments, it's worth over PLN 90 million. So it's very good news especially if you think about what's happening in the Non-life and the Motor Insurance segment. Q3 ends at the level of [ 505 ], a huge change, 170% here year-to-year with strong growth and financial income, PLN 360 million with a growth of 45% year-to-year. This is the final result. And this mostly generated by the increase in the corporate debt and the improvement of the profitability of corporate capital instruments. So the final results for nonbanking amounts to PLN 1.419 billion. The banker segment is flat, 2.2% is a slight adjustment. This is -- this means that the result is PLN 1.9 billion and with very high profitability of equity over 25%. And this is much higher than expected when we published our strategy at the end of last year. Now we have improved cost effectiveness both on the side of life and non-life. And again, this is good news because this has had an effect on the result. And now let's have a look at the segments. So first, let's start with the mass segment. The dynamic in non-motor insurance was a bit different because the growth rate was almost 10% and mostly household insurance, but also PZU [indiscernible] PZU company and offer for SMEs. This is a new approach to the insurance sum with a aggressive pricing. So this led to an important increase compared to Q3 last year. Motor insurance is quite flat, especially if you think about all the things happened with Link4. As we have already mentioned, Link4 needs to focus on bringing back profitability this year, but a slight increase in the acquisition costs. Now quality has improved. Speaking about the expenses and the cost structure in this segment has changed totally. The share of cost in revenue has gone down, but there is also a lower liability for current claims. So there are some massive claims payouts, but also -- that were the last year, not this year, but also there has been an improvement in motor insurance. As I've told you in Q3, we had an improvement in the loss ratio -- loss frequency concerning this product. So a smaller loss component and the amortization of the loss component from last year gave us overall PLN 40 million, which contributed to the result of the SKU and with a positive effect of the overvaluation, overstatement of the reserves from last year. So PLN 715 million. This is the overall result in this segment with the effectiveness ratios improved practically in every area. Now the motor market and how the trends are going to translate into the results in the upcoming quarters. So first of all, the price dynamics in MOD and MTPL. MOD now, it achieved the highest values in December, January and Q1 this year. The growth rate was at the level of 7.6%, with a drop to the level of 1.5 percent point. But still, it's a positive unlike MOD, which is minus 3%, the previous was MTPL. So for MOD, maybe the only positive thing is that maybe we have already hit the bottom and then we'll pick up. But in MOD, well, it still continues to be quite a profitable product at the end of Q2, which is the last publicly available data, it has a 7% of -- almost 7% of profitability. And MTPL now. In Q1, this profitability was quite high and quite surprising. Now we are at the level of 0 given that the price is not growing anymore at the same rate. For MOD, there is no effect of the increase of the value of the cars. This was a phenomenon that was there after the pandemic for some time, but this was the main driver of growth that now has disappeared. This slide is based on the PAS data. So cannot be directly referred to our reporting. Corporate Insurance segment, high dynamics, more than 8%, both for non-motor insurance, it's almost 7% and motor insurance Link4. Well, it's similar to mass segment, the acquisition costs are lower. The costs of acquisition are similar to mass segment structure of expenses has changed more or less 4% drop due to better cost efficiency, and that's an important parameter for the results of this third quarter, much more than the improvement in quality. We just look at net loss. The net loss also had a positive impact on corporate clients. Current liabilities have gone down. We had lower payments and lower liabilities in non-motor insurances. As you see a bunch of factors that help us to get a double growth up to PLN 309 million. It's similar to mass segments. We've seen the improvement in all major product group. Group individual continued insurance. We started with a high base and then we had increases. However, what I would like to stress is a lower allocated premium for future expected claims and benefits. We had a drop of 64% in this loss component. We've had a better alignment and a more conservative approach. We just thought that the loss ratio and mortality could be higher, but not -- it did not happen. We had very positive variations on these components last year. Because we had better alignment for 2025, we've managed to get a better share of CSM. And with that, we got 26% increase year-to-year. It's not only a standard scale up. We've also changed cost and actuarial assumptions regarding insurance liabilities. That is why we have a 1.5% increase in insurance revenues. We had lower payments under individual continued health insurance, and there was a slight increase -- general slight increase in health insurances with positive cost components. And we end Q3 in operating result of PLN 550 million and a profitability of 27%. Mortality. In the 3Q -- well, 3Q is usually a period of seasonally moderate number of deaths and that was the case this year with a slight improvement year-to-year compared to 3Q 2024, we had an improvement of 3.3%. So the number of compensation benefits to death ratio, it remains positive for us compared to the similar period. So it's better by 10%, around 10%. Individual protection insurance. In this segment, you see very high increases 18.1%. We've already mentioned that. It's basically due to 2 products, individual insurance, which profits and individual protection insurance, PLN 17 million and PLN 14 million increases, respectively, for both of them over that period and CSM has grown considerably 21% year-to-year. And this was a result of better cost effectiveness. Because of that, we decided to change the assumptions regarding costs and the share of costs in contracted insurances. These increases come mainly as a result of scale-up of our businesses, and this translates into better operating results, 10% compared to the previous year. So this quarter is closed with PLN 120 million contribution of that segment to the consolidated results. Let me now move to the CSM balance sheet value. It will be recognized in consolidated results. As you can see, we've had some major increases for CSM from existing businesses and new businesses. For existing businesses, we've had some positive impact of rate indexation, rate tarification and there was also a change in assumptions, and that influenced our way of thinking our approach to costs of that service in the future. Let me mention 2 points regarding that change. The change is usually introduced in quarter 4. This year, we've introduced the change in quarter 3 because there has been some earlier dates set for reporting. So we want to be ready for February because we want to change, be more proactive in communication with the market, and we want to report faster. But sometimes, we were unable to get involved in some communication because we had a delayed reporting. That is why some procedures were implemented earlier and among them were the procedure on the update of technical assumptions and for CSM, we got a very positive effect because we got better cost efficiency in the end. As you can see in both segments, there has been a major improvement. Investment results 5.7% in interest. We also see an increase and the same can be said about debt instruments, the same parameter was different a year before. Last year, we wanted to seize the opportunity on the market, and we wanted to extend the portfolio. There was some negative valuation of these instruments. Also last year, we had depreciation write-off on 1 corporate exposure item. And that's why you've seen a major increase year-to-year, there has been an increase for capital instruments, indexing, private equity and health sector, all of them contributed to this class of deposits. We note a positive contribution to investment real estate assets with a level of 5.7% at the end. And I will end with solvency. It's extremely secure. Results are very high, and we can adopt an extremely optimistic outlook for the year to come. As you see and as you hear, third quarter is the time of growth of our own funds with a slight increase in Solvency II requirement. The increase was observed for both insurance business and for banking -- Bancassurance segment. What's our trajectory and what's the state of play. Gross insurance revenue. Here, we need to look for and prospect new sources inward reassurance. And definitely, as the CEO has said, we need to step up our efforts to get our ambitious goal and to deliver what we've defined by the end of 2027. Value-based thinking pays off. And just have a look at our ROE. We are within the range of our strategic goals for both life and non-life insurance, profitability. We have high Solvency II ratio, and we didn't have reorganization. We just have changes as part of the Solvency II regulation. We've known the details for some time. And now we can say that depending on different scenarios, we are quite well prepared. We are a value-based company and that is why we are selected by investors who believe that we will be able to provide high value and high return on dividends so the dividend per share will be really high. So as I've said, we are really prepared for that. That would be the sum up of the results for quarter 3 and our trajectory in the state of play. And now I give the floor to our CEO, and please feel free to ask any questions.
Bogdan Benczak: It was very solid, good positive 10 months. That would be my final word.
Bogdan Benczak: Yes, I have to speak to the mic. We had very good 10 months. And now I open the question-answer session. I look at the chat, but let us start with people who are physically in the room. Any questions from the audience in the room. So let us start with questions on non-life insurance.
Magdalena Komaracka: Autonomous Research. I will translate that into Polish. To what extent was the combined ratio in Poland in 3Q by favorable weather conditions and/or reserve releases in the third quarter.
Unknown Executive: Let me phrase it that way. I would like to stress firmly the following thing. Our DNA includes a conservative approach to liabilities, including insurance liabilities. So we will not act unpredictably here. We have reserves. The level of reserves is absolutely adequate to the market situation -- persisting market situation. These reserves are also adequate because they will allow us to cover all insurance liabilities whatever the scenario. So our insurance portfolio is like this. And the economy has an effect on it as well, and this is what has happened in Q3. So the first thing that happened was the following. And this was purely economical. The inflation got down. And this is about modeling results for the capitalized value. And together with the drop in the inflation rate. So there is also a huge correlation between the indexation level decided by the courts and also the trends of the inflation, the CPI or the salaries inflation. So we see some room for a drop in the level of reserves. And at the same time, we will remain as conservative as before because in the upcoming years, probably we won't have double-digit figures as in the previous years. And this is because the inflation rate is on a very good trajectory to reach the inflation rate goals, as mentioned by the Polish National Bank. So PLN 50 million for MTPL. This was 1 of the reserves I'm referring to. The second parameter is the following. Let me remind you -- but years ago, given the case law, whenever there were injured people in a car accident that actually survived but they were in persistent vegetative state, the family had to look after a person -- bedridden people or seriously ill. So we are speaking here about their mental psychological consequences, which led to claims and in 2017, 2018, we created a reserve for that purpose. But we can see that there are fewer and fewer claims, where courts decides the money to be paid. And this was for years, 1998, 2017, so 20 years of liability. And now we are gradually decreasing that reserve, and this also has had an effect to the overestimate of PLN 21 million on the results. So this is what it looks like in the non-life insurance segment and I hope this addresses your question.
Magdalena Komaracka: The second question is from HSBC. How does business mix shift from motor to non-motor impact your combined ratio over the next few years? Can this shift to higher-margin non-motor offset pressure from softer market conditions?
Unknown Executive: So we made it very clear in our strategy. What we really are focused on is the growth of profitability that's in our DNA. That's why it was our conscious decision to limit situations, which are not very attractive in terms of value generation. We have told you about the Link4 portfolio situation. We also repositioned PZU SA and the effect of which has been and probably will be the increase in the share of the non-motor segment line of business. What we think is still relevant is that the mass and corporate segment with the mixed portfolio, which brings together motor and non-motor insurance. Here, we want to have profitability managed by combined ratio, but at the levels of no more than 90%. This is our target. Hence, the new activities whose purpose is also to make more room for more revenues in a situation of a soft market.
Magdalena Komaracka: And now speaking about motor insurance, given the pricing pressures in motor insurance, what levels do you have to sustain your core in the upcoming period?
Bogdan Benczak: Well, I think it depends on how the market behaves. Because the claim inflation rate has been going down. So when you think about the average price of compensation and motor insurance, we can't be too optimistic about the levels of this and the fact that they will start at the same level. So frequency might have an effect, and this is precisely what happened in Q3, but the inflation trends will also have an effect. What we see is the following situation. The MOD market remains to be profitable -- remains profitable, and we are a bit more profitable here. But please bear in mind that we are using a different standard and the one that allows us to gather market data. So if the situation continues, probably this will lead to a compression of margins and whether it's 5% because this is very, very stable and the profitability is going down very slowly but steadily. Anyway, it's very difficult to predict. Now we have negative data from 2 quarters. Q2 and Q3, the negative adjustment is minus 2.8%, and we'll see how it continues at the end of the year, because the end of the year is a very interesting time because some are already positioning themselves for the next year, some are still trying to deliver targets from the current year. So it's interesting things to happen. So if we are able to grab this opportunity and position ourselves the right way, we might even benefit from this situation in Q4. And now MTPL. We don't want to grow at any cost in channels where there is no value for us. So maybe as discussed in our strategy, we will continue to grow but slower, but we will be able to generate value for our shareholders or for our customers because we have a very big portfolio and also, I think that we have mentioned pricing and other issues and we're getting better at the offering to our customers. So if nothing happens, we think there will be a slight depreciation of the margin on MTPL, but we still think it's going to be a profitable product but also depends on the market and the situation. Today, the market is not profitable. And there are companies that generate value and there are some that loss value. And we want to be among the former, but it means that it's very hard work, and it's very nuanced in terms of accepting risking and portfolio and tariff settings in the mass insurance are part of PZU's activity and the part of our priorities. Of course, there is the market situation, but also we have a list of activities that help us improve like pricing, claim handling, frauds. So we have to analyze thoroughly what's going on in the market, but there are also things happening inside PZU.
Magdalena Komaracka: And there is also 1 more question from [ Trigun ] about the Motor Insurance segment. So what's behind this very significant improvement in the profitability quarter-to-quarter.
Unknown Executive: And we have answered this question already. Well, there is 1 more element that also happened in Q2, the amortization versus the new creation of loss component, the amortization is higher and has a positive contribution to the result.
Magdalena Komaracka: There is 1 more question, a new one from HSBC. Historically, so -- is this the moment in the market where the pressure allows it to reverse? I mean, become more profitable? So historically speaking, where are we. So is it subsidizing 1 product with another?
Unknown Executive: I think that the Polish market changed significantly when the pandemic started. Let me remind you. In 2019, we told you that a new underwriting cycle was beginning, but the pandemic was a game changer. And first, we had gigantic profits. This was largely because there was no traffic and no insurance incidents. But then people started to work half remotely and half in the office in a hybrid way the traffic came back to the street. And you could see that this cycle was very much disrupted by the pandemic, and the cycle took overall 6 -- almost 7 years. So it's difficult to find a similar period in the past. So historically speaking, in a totally different legislative environment, there was a point where both MOD and MTPL products were not profitable, and this was when the regulator, the financial authority started its interventions. And that was 2017 as far as I remember when the new regulations on the price adequacy took effect. The purpose was to curb the situation that had been happening back then. So now it's difficult to imagine a situation or a huge technical losses offset. And everyone is happy. Why? Usually such a model has a very negative effect on the capital position and insurance companies need to guarantee the right capital to cover and to pay insurance liabilities. So the rules have changed a bit here. So after such a long cycle, it's difficult to compare this time to a similar moment in 2015 or '17. And this approach could be also seen in our strategy, but it looks like we are going to move in a much narrower corridor historically speaking, maybe with a pricing cycle or an underwriting cycle. But it's time span is going to be totally different unprecedented. Let me stress one thing. We are far from a negative technical result, far from it. That's not our philosophy.
Magdalena Komaracka: We have 2 more questions regarding results and communication, 1 from HSBC and [ Trigun ]. Regarding non-motor insurances, do you see any one-offs. That will be from [ Trigun ]. And from HSBC, weather losses were having in 2024, but would you describe 2025 as a normal year? If not, how much should we normalize for weather?
Unknown Executive: Well, let me phrase it this way. Depends what you understand by normal. The flood, we experienced last year. It's not a regular event. And it's recurring event that should be included in the forecast for every year. I believe that technically speaking in non-motor insurance, it's quite okay. We had some frost in the second quarter for PLN 10 million. Apart from that, there were now other massive events, the ones we had last year, like flooding. So again, what is normal? What does it mean normal? We had more violent weather incidents that's for sure and we have some unseen events. For instance, a heavy rainfall during winter. And we believe that these events may have impact on the claims side. But this is a quotation element. The parameters, which influenced the level of risks are also taken into account when the quotation is being produced. Right now, we've changed our way of thinking. We know that we may have clients on -- in the flooding areas. We have flood protection, not far from the Vistula River in Warsaw, and we have big villas. And when we produce quotation for insurance for such large villas, we will do a totally different valuation than the valuation for a small 3-room flat, somewhere in the tenement building. So these elements unprecedented weather events are already piece and parcel of our quotation methodology. So again, normal for us here means positive. This year is positive.
Magdalena Komaracka: I still have 1 question about investment -- about holding. So about investments. It's from Autonomous Research. You've mentioned pressure on investment income in insurance and the contribution from banks, given the duration and maturity profile of your fixed income portfolio, what pace of compression should we expect on the fixed income yield in banking? Can lending growth potentially offset pressure on net interest margins?
Tomasz Kulik: Let me answer the following way -- give you the following answer. I will take the perspective of the last 12 months because we started efforts in this area in the third quarter of 2024. What happened there then was that we simply wanted to use what happened around us. So in order to extend and in some way freeze our debt portfolio, mainly sovereign bonds portfolio. We simply seized the opportunity of very positive environment and positive external parameters. And there were some positive results last year. We managed that. And we believe that we can benefit from this on -- in the long term. If interest rates go down by 100 -- 100 basis points, we will be between PLN 80 million and PLN 110 million, PLN 120 million corridor. That would be our position right now. We will do our best to offset that corridor, and we can afford that today, considering our capital position right now. So we can increase that level -- slightly increase that level of acceptable risk. And the share of debt -- corporate debt instruments in our investment portfolio. This share is not excessively big. And the CEO said today that the sovereign debt treasury -- debt share in our portfolio corresponds to 65%. So it's 65% of the whole debt portfolio, and we are not representative Europe-wise when compared to other European peers. So we still have some room, but it needs to be meaningful if you have no reasons to rely on out-of-the-box solutions, you won't use out-of-the-box solutions. However, the number of possibilities is limited. This is not a very deep market. The Polish market is not very deep. And we do have some strategies which try to go beyond the Polish market as sort of a change of cap, and we will think about it if there are new drops of interest rates. And this will be aligned with the new organization and with the new -- with our strategy.
Magdalena Komaracka: And we have the last question about holding. Could you remind us of the time line to complete the merger with Bank Pekao or reorganization? And could you provide an update on the legislative process that will enable the merger -- the reorganization?
Unknown Executive: Well, you should have been closed by the end of the second quarter, it should be closed by the end of the second quarter 2026 according to the time sheet. Legislative process. The draft will be sent to the parliament. We are just ahead of the parliamentary work. And it's too early to answer the question on the shares and the price of shares.
Magdalena Komaracka: And brokerage house of Citi Handlowy Bank. I have a very specific question, but I know that the CEO has such a background. I have a question about the presence -- your presence in the Baltic states. There have been some details in the presentation, but what is the cycle? What's the stage of the cycle? And what are the risks? What are the threats?
Bogdan Benczak: Well, the market is similar to the Polish market. There are less insurance companies, but the competition is similar. There is a different mix, slightly different mix split by industries. Traditionally, transportation, logistics, furniture and wood industries. These are the traditional industries within the mix. As you probably know, we are facing a major challenge in Lithuania, there has been a 10% tax on revenues from insurance that has been just introduced, 10% of the written premium tax. And we -- just want to know how this tax on the 10% of the written premium will be calculated. We know that the proceeds from the tax will be used to finance the defense spending. And I believe that this may have an impact on the insurance market in Lithuania. There are no implementing acts and some business lines will be exempted. This is the situation in the Lithuanian market. As you probably know, a long time ago, as part of the transaction with RSA acquired Lithuanian Latvian PZU and the branch of [indiscernible] in Estonia. Right now, [indiscernible] is faring extremely well. They are agile. They are the market leader and they represent the sales mix as we do. They have their own network of insurance agents and they also have cooperation with external channels, a strong position of brokers within the network, similar to multi-agencies in Poland, similar price leverages. The mass segment is most developed for medics. For us, it's health insurance, and it's in Lithuania, the same sector is now on the rise in Lithuania and Latvia, the most developed and Lithuania developing. In both cases, we have good profitability. And the reasons for that are similar to the causes in Poland, the difficulties in accessing public health care. In Estonia, the situation is slightly different, public health care services are of high quality, and that's why health insurance is not a widespread product. And there is a high level of digitization, plus need for quick response. So when you get the request for quotation need to react immediately. We are market leader in non-life in Lithuania. We are market leader as a stand-alone company without consolidation, so as a stand-alone company. And we are also a leader in Latvia. And in Estonia, we are #3. As far as I know, for non-life. Our life insurance company in Lithuania has started to show a positive dynamic. So there has been some growth. But undoubtedly, we need to speed up and we are right now thinking how to reposition the company on the market. The Lithuanian company has a branch in Estonia [indiscernible] has a branch in Estonia. Many years ago, we bought a branch actually and Volta is a standalone company headquartered in Riga, combined ratio and written premiums. I don't know if we have data on that. Let me show you the exact slide. And if you add to Ukrainian companies, PLN 2.3 billion of written premium for third quarter alone. So the Baltic countries plus Ukraine. It's integrated, consolidated in 2025. 86.5% of combined ratio, Baltic States and Ukraine and then the conversion of local currencies. I have to check for written premiums. We actually, you got me, you got me with your question. I have to check and get back to you with the details. However, the combined ratio is at 86.5%, and it's similar to PZU's combined ratio, and the product mix is also close to what we have here. Distribution channels. When we bought Estonian branch Bancassurance and City Bank had a major share. Now this share has shrinken and there is a bigger share of broker and agent sales -- broker and agent-mediated sales. So bancassurance still counts, but its share is not that important. Many years ago, I was involved in the acquisition of this business and I can tell you and Tomasz will agree with me probably that all the basic assumptions were delivered with a surplus. So all the companies are agile, and they have a very successful contribution. And now Ukraine. We are now undergoing a very, very deep restructuring of the companies and this year, Q3 has witnessed a strong pickup in terms of sales and the combined ratio is at the level of 94. So there is no reason to be ashamed given the extreme conditions over the circumstances. So we can be actually proud of it.
Magdalena Komaracka: Any more questions? No more questions online.
Bogdan Benczak: So thank you very much for your attention, and we hope we see you -- we'll see you again in -- after Q4 and we will be informed about the date of the conference in the current report.
Magdalena Komaracka: Thank you very much. It has been very stressful, but also a very interesting experience. And please have a look at our website and our awareness campaigns. Thank you.