Contribution made by the market segments to the consolidated result

• corporate insurance (non-life insurance) – a broad scope of property, TPL and motor insurance products customized to a client’s needs entailing individual underwriting offered by PZU, TUW PZUW and Polski Gaz TUW;
• 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 insurance (life insurance) – group insurance products offered by PZU Życie to groups of employees and other formal groups (e.g. trade unions), under which persons with a legal relationship with the policyholder (e.g. employer, trade union) accede to the insurance product granted and individually continued insurance products under which the policyholder acquires the right to individual continuation during the group phase;
• individual protection insurance (life insurance) – insurance offered by PZU Życie to individual clients under which the insurance contract applies to a specific insured and this insured is subject to individual underwriting;
• life investment insurance – unit-linked insurance with significant insurance risk (investment agreements that are not investment contracts;
• investments – the segment includes investments of free funds, i.e. the surplus of the investment portfolio over the level allocated to pay insurance liabilities of PZU and PZU Życie and the operating result of TFI PZU;
• 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 Countries – 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.

• an increase in insurance contract revenue compared to 2023 by PLN 603 million, i.e.: +14.7% y/y (+PLN 275 million y/y after reinsurance premium allocation). Within revenues, there was an increase in the amortization of LRC as a consequence of a higher sales dynamics of non-motor insurance and MOD while revenues in the motor liability insurance group declined. The effect was achieved by the higher availability of vehicles than a year ago and the consequent recovery in the leasing market, which translated into an increase in the number of contracts. The increase in LRC amortization in nonmotor insurance is a the effect of earning premiums from Q4 2023 including, from a contract with an oil company with a premium of nearly PLN 500 million (yo-y increase in premiums of more than PLN 100 million) and a contract with a power generation customer with a premium of more than PLN 200 million. Further, the Group recorded high sales in 2024, mainly in strategic customer area. The higher level of insurance contract revenue is also triggered by a higher y/y level of premiums allocated to recovery of insurance acquisition cash flows as a consequence of growing sales and a simultaneous change in the product portfolio structure;
• higher net insurance service expenses by PLN 421 million y/y (+19.2 % y/y) which together with an increase in the net insurance contract revenue by 9,8% y/y resulted in the profitability measured by the combined ratio (COR) decreasing by 6.7 percentage point. An increase in the net insurance service expenses is a result of:
  • higher y/y claims and benefits for the current year (+PLN 143 million y/y) resulting from deterioration in non-motor insurance and MOD, and a slight improvement in MTPL – the impact of claims inflation, higher frequency of claims in motor insurance, as well as mass claims (caused by weather events, including floods with a PLN 33 million impact on the result from insurance services) and large claims in non-motor insurance;
  • higher costs, including amortization of acquisition and administrative expenses attributable to insurance operations. The increase in administrative costs is mainly the result of higher personnel costs (the impact of salary increases), IT costs due to the development of the IT area, and the building of competence in the area of systems maintenance and rental services;
  • the release of a lower y/y net excess of prior years’ claims reserves over the current value of payouts – in the same period of 2023, the impact of the release of the reserve without the payment in the contract guarantee in the amount of PLN 60.3 million;
• increase of PLN 34 million (+ 10.2% y/y) in investment income compared to the comparable period last year is a result of better performance of the Polish sovereign bonds measured at fair value through other comprehensive income as a result of the purchase of high-yield instruments to the portfolio, offset by the lower performance of the Polish corporate debt portfolio. At the level of the PZU Group’s overall net result, this currency effect was offset by the changed level of insurance liabilities covered by foreign currency assets;
• insurance finance income or expenses (after reinsurance) slightly decreased (PLN 3 million y/y) and amounted to PLN -76 million. The increase in costs is mainly the result of changes in interest rates. Rising interest rates are pushing the locked-in rates used to discount insurance liabilities at initial recognition higher and higher. Consequently, the effect of “unwinding” the discount as a result of the passage of time is getting stronger.

• an increase in insurance contract revenue compared to 2023 by PLN 1,140 million, i.e.: +9.5% y/y (+PLN +1,110 million y/y after reinsurance premium allocation). This resulted from an increase in the amortization of liabilities (LRC) as a consequence of a higher sales, mainly, of MOD and motor third-party insurance products, and to a lesser degree from an increase in non-motor insurance products. In MOD insurance, this is mainly due to the impact of high premium dynamics in H2 2023 and H1 2024 (an increase in average premiums as a consequence of the higher value of vehicles and thus insurance sums). In addition, there was a recovery in the market as measured by the number of new passenger car registrations (+16.1% y/y). Higher LRC depreciation in non-motor insurance is mainly a consequence of the development of PZU Dom insurance portfolio, and the subsequent impact of refreshing the offer and the higher propensity to raise sums insured, as well as PZU Firma insurance offered to small and medium-sized enterprises. The higher level of insurance contract revenue is also triggered by a higher y/y level of premiums allocated to recovery of insurance acquisition cash flows (+9.0% y/y) costs as a consequence of growing sales and a simultaneous increase in commission costs – higher share of the portfolio of sales channels characterized by higher commission rates versus own channels;
• a higher level of net insurance service expenses by PLN 1,914 million y/y (+18.6 % y/y) which, together with an increase in the net insurance contract revenue by 9,4% y/y, resulted in a 7.3 p.p. deterioration in profitability as measured by the combined ratio (COR). An increase in the net insurance service expenses is a product of:
  • higher liabilities y y) for the current year’s claims and expenses, including acquisition expenses (as a result of growing share of multiagency and dealer channel in the portfolio) and administrative expenses attributable to the insurance activities. Year-on-year increase in claims and benefits of the current year (+1,435 million y/y) particularly noticeable in non-motor insurance, as a result of mass damage caused by atmospheric events, including flooding in Q3 2024 in southwestern Poland with a negative impact on the result of more than PLN 225 million). The deterioration in motor insurance is primarily the result of claims inflation and the significantly higher y/y frequency of claims. The increase in administrative expenses is primarily the result of higher personnel costs (the impact of employee salary increases due to changes in the macroeconomic environment), IT costs related to developing the IT area, and own costs. This effect was partially offset by the lower level of advertising spendings;
  • recognition of a loss component (mostly motor third-party liability insurance), including on the inward reinsurance portfolio with PZU Group companies as a consequence of increased claims inflation and frequency of events exceeding the amortization from the opening balance sheet. The total excess of the creation of the loss component over depreciation amounted to PLN 56 million;
  • release of a lower y y net excess of prior years’ claims reserves over the current projected value of payouts;
• increase of PLN 8 million (+ 1.1% y/y) in investment income compared to the comparable period last year is a result of better performance of the Polish sovereign bonds measured at fair value through other comprehensive income as a result of the purchase of high-yield instruments to the portfolio, as well as the positive impact of exchange rate differences, offset by the lower performance of the Polish corporate debt portfolio. At the level of the PZU Group’s overall net result, this currency effect was offset by the changed level of insurance liabilities covered by foreign currency assets;
• insurance finance income and expenses (after reinsurance) were PLN -324 million, an increase in expenses of PLN 66 million y/y mainly as a consequence of a lower y/y positive impact of exchange rate differences as well as a change of interest rates.

• higher by PLN 478 million insurance contract revenues as a result of:
  • a higher premium required to cover expected claims and benefits (+PLN +276 million y/y) following a high utilization of health insurance benefits, mainly outpatient and paramedical services (the effect of continued health debt realization after the two-year pandemic in an environment of high medical services inflation) and higher claims and benefits in other group insurance derived from the increase in portfolio premiums;
  • revenue growth to cover rising insurance acquisition expenses (+8.5% y/y) mostly due to higher fixed expenses (including personnel and IT, and the increasing share of broker compensation;
  • higher contractual margin release in 2024 resulting from an increase in release on the portfolio of individually continued insurance (+PLN 32 million y/y) and group insurance and a decrease on the portfolio of health insurance (PLN -7 million y/y);
• an increase in net insurance service expenses by PLN 139 million y/y (2.3% y/y), which together with an increase in the net insurance contract revenue by 6,5% y/y resulted in the profitability measured by the ratio of insurance service result to insurance contract revenue increasing by 3.3 percentage points. An increase in the insurance service expenses is a product of:
  • higher indemnities and benefits with the development of the loss reserve from previous years as a result of the continued high utilization of benefits from health insurance and the higher cost of claims in other group insurance (inter alia, impact of portfolio development);
  • changes in the value of the loss component with a positive impact on the result of +PLN 34 million (+PLN 21 million y/y) are the result of the deceleration of the component creation in health insurance (the impact of the premium retarification process with a still high level of benefit utilization) and the creation of a new loss component (LC) to the old portfolio of group insurance with low premiums;
  • higher administrative costs as a consequence of higher personnel costs, real estate (rental services) and IT costs (development of the IT area and indexation of costs related to product support);
• an increase of PLN 36 million (+4.2% y/y) in the investment income compared to the comparable period of the previous year was, in particular, due to a higher level of assets to cover liabilities and the purchase of high-yield Polish sovereign bonds with a high level of profitability in the market;
• the insurance finance income and expenses were – PLN 522 million, which translates into an increase in expenses by PLN 13 million y/y among others as a consequence of the increase in locked-in rates.

• higher insurance revenues (+ PLN 107 million y/y) resulting from:
  • higher y/y contract margin release,including in bancassurance (+PLN 30 million y/y; among other things, impact of higher y/y sales of mortgage insurance) and term insurance;
  • an increase in premiums allocated to recovery of insurance acquisition cash flows, expected costs, as well as expected claims and benefits, by a total of PLN 49 million y/y;
  • an increase in other revenues by PLN 4 million y/y. There were fewer cancellations of bancassurance contracts in 2024.
• an increase in net insurance service expenses by PLN 33 million y/y (+9.6% y/y), which together with an increase in the net insurance contract revenue by 16,8% y/y resulted in the profitability measured by the ratio of insurance service result to insurance contract revenue increasing by 3.3 percentage points. An increase in the net insurance service expenses is mainly the result of:
  • higher administrative expenses as a result of higher personnel costs and real estate costs (indexation of rental prices, utilities, costs of the new headquarters and IT expenses) and IT expenses;
  • changes in the loss component with a +PLN 5m y/y impact on the result being the cumulative effect of the creation of a new loss component at the level of a year ago and a higher amortization of the loss component for active cohorts from prior periods (mainly in J insurance) than in 2023 with a +PLN 4m y/y impact on the result;
• the level of investment income was slightly higher than in the comparable period last year (+PLN 4 million, or +3.5% y/y) as a result of the increase in the required level of assets to cover liabilities;
• insurance finance income or expenses (net of reinsurance) were PLN -107 million, which means an increase in expenses by PLN 5 million y/y.

• an increase in net fee and commission income by PLN 37 million to PLN 184 million in 2024, with this change resulting, in particular, from a PLN 27 million y/y increase in fund management fees and a PLN 9 million y/y positive impact from the overpayment of funds in the Guarantee Fund of the National Depository for Securities;
• decrease in the PZU Group’s non-insurance operating expenses by PLN 7 million to PLN 38 million in 2024, mainly due to a lower level of the surcharge on the Guarantee Fund of the National Depository for Securities by PLN 10 million y/y.

• higher y/y claims and benefits liabilities due to the increase in the value of the portfolio;
• release of a lower y y net excess of prior years’ claims reserves over the current projected value of payouts;
• change of a loss component with an effect on the insurance service result PLN +3 million y/y as a product of the recognition of a new loss component at the same value as last year and of changes in assumptions for active cohorts from the preceding years having an effect on the profit in the amount of PLN +3 million y/y;
• a 9.8% y/y increase in administrative expenses, mainly due to higher personnel and IT costs. The segment’s ratio of administrative expenses calculated to net insurance revenues increased by 0.2 p.p. to 10.7%;
• PLN 22 million higher amortization of acquisition cash flow. At the same time, the acquisition expanse ratio was 18.3%, recording a 0.5 p.p. y/y decrease

• higher y/y claims and benefits liabilities;
• release of a higher y/y net excess of prior years’ claims reserves over the current projected value of payouts;
• change of a loss component with an effect on the change of the insurance service result PLN -8 million y/y as a product of the recognition of a new loss component in an amount higher by PLN 19 million and of changes in assumptions for active cohorts from the preceding years having an effect on the profit in the amount of PLN +11 million y/y;
• a 18.6% y/y increase in administrative expenses, mainly due to higher personnel and IT costs. The segment’s ratio of administrative expenses calculated to net insurance revenues increased by 1.6 p.p. as compared to the previous year and stood at 21.3%;
• a PLN 12 million, or 20.7%, higher y/y amortization of insurance acquisition cash flows (in functional currency, up UAH 199 million, or 39.3% y/y). The acquisition expense ratio rose by 2.7 p.p. to 29.3%.

The result from investments stood at PLN 51 million, up by PLN 1 million y/y.

Selected Alternative Performance Measures (APM) within the meaning of European Securities and Markets Authority Guidelines (ESMA) no. 2015/1415 are presented below.

The profitability and operational efficiency indicators presented herein, constituting standard measures applied generally in financial analysis, provide, in the opinion of the Management Board, significant additional information about the PZU Group’s financial performance. Their usefulness was analyzed in terms of information, delivered to the investors, regarding the Group’s financial standing and financial performance.

To facilitate the analysis of PZU Group’s profitability, such indicators were selected that best describe this profitability in the opinion of the Management Board.

The return on equity (ROE), adjusted return on equity (aROE), and the return on assets (ROA) indicate the degree to which the Company is capable of generating profit when using its resources, i.e. equity or assets.

They belong to the most frequently applied indicators in the analysis of profitability of companies and groups regardless of the sector in which they operate.

Return on equity (ROE) is a measure of profitability. It permits an assessment of the degree to which the company multiplies the funds entrusted to it by the owners (investors). This is a ratio of the generated profit to the held equity, i.e. financial resources at the Group’s disposal for an indefinite term which were contributed to the enterprise by its owners. In the case of the PZU Group, the value of net profit and equity differ considerably depending on whether they are provided excluding or including the profit/equity of minority shareholders. In this respect, both return on equity (ROE) – attributable to equity holders of the parent, and return on equity (ROE) – consolidated, without excluding profit and equity attributable to non-controlling shareholders, are presented. In addition, the PZU Group presents an adjusted return on equity (aROE), calculated on an equity basis excluding accumulated other comprehensive income relating to insurance and reinsurance financial income and expenses (being a cumulative effect of changes in discount rates for valuation of insurance liabilities on the PZU Group’s capital), which provides greater stability to the indicator.

Return on assets (ROA) reflects their capability of generating profit. This indicator specifies the amount of net profit attributable to a unit of financing sources engaged in company’s assets.

Return on equity attributable to equity holders of the parent (PZU) for 2024 was 17.2% and the aROE ratio was 18.0%. The ratios were 3.4 p.p. and 4.0 p.p. lower than those obtained in the same period of the previous year, respectively, as a consequence of a decline in the insurance service result, including, in particular, in the mass non-life insurance segment due to higher claims liabilities of the current year, both in motor and nonmotor insurance. Lower result in insurance business segments was partially offset by better results in the banking segment, including despite higher (than a year ago) charges related to the legal risk costs of foreign currency mortgage loans and “credit holidays” costs. Return on assets (ROA) of the PZU Group for 2024 was 2.5%, i.e. 0.3 p.p. lower than in 2023. This was to due to lower performance in insurance services, in particular, in the mass non-life insurance segment, partially offset by higher performance in the group and individually continued insurance segment and in the banking segment (an increase in interest income partially offset by higher legal risk costs of foreign currency mortgage loans and higher operating expenses).

To facilitate the analysis of PZU Group’s performance, such indicators were selected that best describe performance in the case of insurance companies and those pursuing banking activity in the opinion of the Management Board. Some indicators refer the costs of pursuit of insurance activity to revenue, hence reflect which portion of the revenue was allocated to costs and which portion – to margin. For the banking activity, the Cost/Income (C/I) ratio was selected as the relation which best reflects the performance of this area of the activity in the opinion of the Management Board. All indicators are widely applied by other companies from the corresponding sectors and by investors and serve an analysis of efficiency and profitability of these companies.

One of the fundamental measures of operational efficiency and performance of an insurance company is COR (Combined Ratio) calculated, due to its specific nature, for the non-life insurance sector (Section II). This is the ratio of insurance service expenses, including amounts recoverable from reinsurers to the net income on insurance activities; a decrease in the value of this indicator signifies an improvement in efficiency.

The combined ratio (for non-life insurance) of the PZU Group’s has been maintained at a level ensuring high profitability of business.

It stood at 91.9% in 2024, up 5.9 p.p. compared to 2023, mainly as a result of a decline in profitability in the mass non-life insurance segment due to an increase in the loss ratio.

Another important indicator is the life insurance profit margin – the profitability of life insurance segments calculated as the ratio of operating profit/loss to net insurance revenues. In 2024, the ratio reached 27.1%, and its increase by 2.7 p.p. in comparison to 2023 was, in particular, due to higher insurance revenues significantly outpacing the increase in insurance service expenses in the group and individually continued insurance segment.

As regards banking activities, efficiency is measured by the cost to income ratio, i.e. the quotient of the PZU Group’s non-insurance operating expenses, excluding the levy on other financial institutions, and the sum of operating income, which includes: interest income calculated using the effective interest rate and equalized to it, other net investment income, result on derecognition of financial instruments and investments not measured at fair value through profit or loss, net change in fair value of assets and liabilities measured at fair value, interest expenses, fee and commission result, and other operating income and expenses. In 2024, the cost to income ratio in the PZU Group’s banking business reached 34.3%, and was higher than in 2023 by 1.7 p.p. This was due to the rate of growth in costs surpassing that in income. The increase in costs was mainly caused by rising personnel costs at both banks.