Powszechny Zaklad Ubezpieczen SA
WSE:PZU
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[Interpreted] Good afternoon, everybody. I am extremely pleased to welcome you to the wrap up, the recap of PZU Group's financial results in 3Q '21. As a matter of traditional practice, we always have a problem with the clicker. Let's hope that this is a good omen. As always, I'll try to walk you through the recap. I'll try to give you -- paint the broader picture of the marketplace to say what's happened on the marketplace. And of course, this has an influence, affects our results and our efforts as well as the execution of the strategy we announced this year.
We'll also talk a bit later about the results -- the consolidated results as well as in the individual business lines. And what all of that means for the avenue that we selected when we talked to you about the strategy up until 2024.
Let's kick off then with a recap. So we're wrapping up Q3. We have a pretty high ROE of 17.7 percentage points in Q3. And in the first 3 quarters, it's almost 18%. And so this, of course, is clearly a reason for satisfaction. These are very high results, and this is a profitability, which is close to our strategic objective for 2024.
Now, if we look at our business model and how individual business lines have conducted -- have operated. I'll talk about that a little bit later in the presentation. But I think what we should remember, we should remember 3 things. First, Q3 was a quarter in which transactionality returned, where we basically exited the third wave of the coronavirus. We felt that we were inoculated, vaccinated. We felt somehow resistant to falling ill. And as a result, we started to act in a way, practically speaking, similar to what we had prior to the pandemic. So all of our business processes, our intentions, our strategic objectives were being followed. And that means that certain frequencies returned in terms of motor insurance as well as in nonmotor business.
The third quarter, characteristically speaking, in Poland, is a quarter in which we have higher mass claims, weather related. For example, flooding -- local flooding, water damage, we have had a series of big torrential rains. And so this had an impact on the profitability in Q3 in the nonmotor segment.
At the same time, we can say that we recovered high profitability in the life insurance. And when we talk about Q3, we're at a level -- or at levels that were characteristic for the period prior to the pandemic in terms of mortality in Poland, and this was a causal factor for group and individual continued insurance that the profitability revisited the level of 20% above, was almost 22%. That was the watermark we achieved. And so all of this is being done in a stable, sound business model. Our rating was upheld by S&P.
At the same time, we also paid out the dividend we had announced of PLN 3.5 per share. The total amount paid was in excess of PLN 3 billion, one of the higher amounts of dividends paid on the Warsaw Stock Exchange. So our investors could be elated with a pretty high dividend yield of almost 9%.
The third quarter was also a period in which we launched a new platform for our individual investors who are not always our clients in our core products. But at the same time, they believe this is sensible because they're investing with us. So launching this platform meant that our individual retail investors received proposals of attractive products. The products we offer, products that we're offering in cooperation with the Individual Investors Association. And so it's a pretty attractive offering. And so I'd like to welcome -- or encourage all of you who have joined us to give consideration to that.
So if we look at the first 3 quarters and the third quarter, we can say one thing here. We're at levels that we hadn't yet achieved in terms of the first 3 quarters on a cumulative basis. And the same is true of Q3. It's the highest Q3 in terms of sales. We're growing year-on-year by 5.5 percentage points in Q3 on a stand-alone basis. And we see that nonmotor business is growing the fastest and the strongest outside of motor business. This is happening in the corporate client segment. We see incremental growth of the order of some 26%. In the same period, we can say that motor was -- had slightly softer results and we had growth rate of premium of roughly 10% in Q3, of course, measured on a year-to-year basis. Our international companies saw even higher growth rates, but we see that the life business was a little bit slower, but I would like to calm your fears immediately that this softening was with respect to investment products primarily unit-linked business.
So above all, what pleases us is the fact that we're able to maintain our position in this life segment, which is the most important segment for us. I have in mind here the weak periodic premium business in protection business. So if we look at the other business lines, we can say that we also see growth. We're pleased, in particular, by the growth we've seen in medical services, health services, so PZU Zdrowie, PZU Health, is up in excess -- by in excess of 26%. The top line generated by our health centers is up by more than 30%. We see the asset management pillar, which is managing third-party assets. We see growth in excess of 23%, our TFI PZU company, asset management company, this is the partner amongst the nonbanking entities, which enjoyed the highest amount of incoming assets. So this is the reason for quite a bit of satisfaction.
If we look at the inflows from the employment capital scheme, we had incoming funds in excess of PLN 1 billion, this is PPK. And we had a market share of 36% measured by the number of client companies.
And so we talked about our ROE, and we can talk about high business profitability. As mentioned, it was 17.7%, was our ROE. We have slightly lower profitability in our nonlife products. And on the life side, we see some rebounding. We have good results in our investment business. And so we're above the risk-free rate by more than 300 basis points. And so by 500 on a year-to-date basis, costs are under strict control under our long-term target, and this means that we have this ROE that we're reporting to you today.
Now if we look at safety, we can say that we continue to dwell at high levels, 225% as opposed to 210% for our peer group with a very high rating -- credit rating. And this basically underscores how safe and how diverse our business model is. And the key thing, of course, is our investment portfolio. So what has been happening on the marketplace? And how should we interpret the market? And what we've benefited from? What we're experiencing as the PZU Group?
The market in Q2 -- let me remind you what we're talking about here in terms of the market. We have a shift of 1 quarter. This is the most recent data published on the market. You can see that we have a pretty high -- pretty strong growth in premium with respect to motor business, up 8%. And outside of that, it's up by some 5%. And so if we look at motor own damage, it's up 15% year-on-year. If we look at motor TPL, we can say that we have quite a bit of growth in terms of our exposure. We can see the number of policies, the number of cars is on the rise, even though we're one of the European markets, which has a greater car saturation, but at the same time, the average price, the tariffs have fallen. And so we can say that those prices have fallen over the last 2 years quite strongly. We'll talk more about that in a moment.
If we look at the nonmotor business, we can say that we have very strong growth in Class 8, Class 9, Class 13. So this is general TPL as well as accident insurance, we can say that the group's share of the nonlife insurance market measured by premium is some 32% and above. And if we look at our percentage of the technical result -- of the overall market's technical results, it's 43%.
And so here is a slide, which describes the situation in motor business. On the upper graph, we depict what's happening with prices for motor TPL. As you can see, over subsequent quarters, it has trended downwards. On the bottom, we look at claims frequency. We can see that claims frequency is on the rise. We can also see that the claims costs are on the rise, and this is a result not only of cost of working hours in spare parts and painting, so, for example, in the motor business, but we can also see growth because of the steady growth in the value of cars in Poland. So the new car prices are rising and that means that used car prices are rising and all of this translates into higher claims costs.
So we have this negative trend -- strongly negative trend with respect to prices. This makes it more difficult to generate positive returns in this business segment. And now if we look at other nonlife insurance, as I mentioned previously, we have recorded robust growth on average of 10% year-on-year. And we can say that it's 20% in nonmotor business. But in the corporate side, the growth is as high as 26%. If we look at the mass segment, it's a little under 20%. So we can say that we have strong growth in sales. And this enables us to balance our portfolio to a greater extent between motor and nonmotor insurance and having in mind the previous slide with the information about the profitability outlook for motor business, this is something that pleases us because this enables us to grow in this part of the business, which, as a matter of principle, is characterized by greater stability and recurring results -- profitable results as opposed to the motor business where we can see we have a very characteristic underwriting cycle.
So if we look at the life insurance market, we can say the following thing. We're pleased that the market share -- we've been able to maintain the market share. And so we have 40.4% of the overall life insurance market. We're also pleased that we're growing. We're growing pretty dynamically growth in Q2. When we talk about the market itself, we're actually have that -- we have that 1 quarter lag, I referred to previously. And so nominally, we have growth of PLN 167 million year-on-year. If we look at the periodic premium, we've been able to maintain our position, our market share. This is that segment, which we consider to be particularly interesting. We have regular customers, long-term relationships and these are protection business contracts. And so we had 55.5% market share.
So if you look at individual protection insurance, we have robust growth, especially with respect to products distributed through the bancassurance channel. But from the point of view of single premium insurance, we can see that we're starting to hear some signals from the marketplace. Well, the market expects that there's going to be product integration by the Polish FSA, which on the 1st of January 2022 will mean that we'll have totally new rules for offering new insurance, so insurance that will be sold as of 1 January 2022. I'm talking about unit-linked business and the rules for selling that, and we can say the rules of the game have been made much more stringent in terms of the split of value between the customer and the insurance undertaking and also in terms of the risk in various asset classes, which can be offered in unit-linked business to customers.
So against this background, we can say that PZU Zycie has been able to maintain a stable position in its group and individually continued business. In Q3, it's comparable value as to Q3 2020. So the health portfolio is growing. We have a pretty fast pace of growth in terms of premium and the number of in-force contracts at the end of Q3, we had 2.4 million customers. So from the point of view of what we're doing in the portfolio and adding riders to that portfolio, especially in Q3, we have malignant tumor rider that we've added. So we're trying to offer our customers a broad range, a wide array of options within these riders.
As I mentioned previously, we have a high level of individual protection business sales in conjunction with our cooperation with banks, but we also have lower contributions paid by our customers in unit-linked business. And so there's a bit of a repositioning taking place on the marketplace, not so much in terms of the expected but stated and described guideline by KNF, so the Polish FSA, in terms of their product intervention.
So then if we look at the magnitude of operations in the health business, we continue to grow our size, both in terms of the number of customers and the premium growth we're far -- we're well along the path to achieve our strategic objective in 2024. We want to have PLN 1.7 billion in revenue in 2024. And so we have hit PLN 35 million in the first 3 quarters, so we have a 20% growth rate. This is underpinned by our growing size, and we're also expanding our geographic footprint.
If we look at our portfolio of assets under management, we've already said quite a bit, it's up 23% year-on-year. At the end of the quarter, we're at PLN 37.5 billion in assets under management through the TFI. And then we have another PLN 26 billion managed by our PTE PZU company, which is the pension fund management company, and this shows you the 2 types of entities we have and this magnitude of assets under management for their customers.
As I mentioned, PZU in this quarter, as in previous quarters, is the entity, which amongst the nonbank entities has net -- positive net flows, and we can say that the dominant role is played by assets where people are putting aside money for their retirement. So these are regular savings plans, so PPK and PPE. And this has given us a 23% growth year-on-year.
So if we look at our cooperation with banks, from the point of view of bancassurance, we've doubled premium if we look at cooperating banks, and we've pierced the border of PLN 1 billion in premium. So gross written premium amongst all of the banks we're cooperating with under the bancassurance channel, we have premium of PLN 1.5 billion. So we can say that we're far ahead of the game.
On the other -- in the other direction, we're trying to be an equally attractive distributor for our banking partners, so for Bank Pekao and for Alior Bank. In terms of Bank Pekao, we are the largest external partner. At the end of Q3, the value of loans and deposits secured by PZU for the bank is in excess of PLN 865 million. In terms of Alior, we're cooperating through the cash platform primarily and we're gradually building and enlarging our reach. So more than 60,000 employees and large companies, 200,000 employees in the SME sector have access to this product. And then we have a consolidation loan implementation. This is something that we believe will make our cooperation more attractive from the bank's point of view, but at the same time, it will make it possible to retain our customers in life programs, in the group programs because this is an offering that's a very nice additional element, kind of a whistle and bell, which is pretty attractive from the point of view of the package employers can offer to their employees as an attractive set of benefits.
So to recap the financial results. In terms of premium, we've already talked about that quite extensively. I'll just remind you, year-on-year, it's up by 5.5%. At the same time, this is the highest Q3 in history. So there are very clear reasons to be happy in terms of claims and benefits paid.
We had the following events above all. In life insurance, we completed the third -- or exited the third wave of the pandemic. And this contributed to a return in profitability of our main products of group and individual continued insurance, so above 20% watermark at 22%. So this is a very clear reason to be satisfied. Let me remind you where we were last year -- at the same time at the end of Q3 last year.
We had just completed the first wave. There was quite -- a set of quite extensive restrictions in terms of -- compared to the pre-COVID phase. In terms of pursuing professional activity or being mobile, we had the lockdown and that contributed to 2 things. We weren't talking about the high levels of mortality. Many people were sitting at home, and so, they were, for obvious reasoning -- reasons, limiting their interactions with health entities, and this is something we benefit from, but at the same time, paying for the costs of access.
So even though the utilization in that period was low of our medical packages, which meant that we had the above-average profitability last year this time, at the same time, we incurred costs of being open in our greenfield operations in health business as opposed to our competitors who didn't have to do that. And so the situation today is totally different.
From the point of view of the medical plans, we offer packages, interest has rebounded, traffic footfall is back up. So if you look at the health risk, we can say that the profitabilities are down, and that means this affects the comparability on a year-on-year basis. And so in Q2, we were waging war with the third wave of coronavirus pandemic. So we had paid out PLN 450 million as a result of claims and benefits caused by excess mortality due to coronavirus.
And so if we look at the nonlife side, if we look at our combined ratio, it's at a similar level as in Q3 2020. We have -- it is up slightly by 80 basis points. So it's up on a quarter-on-quarter basis primarily because of what's happened in motor business and also in nonmotor business with mass insurance. So water-related claims, flooding, hail, weather-related. So this is something that's characteristic of every third quarter of every year. All these things happened again this year.
So if you look at the admin expenses, as I articulated previously, they are below our long-term strategic targets. And so our acquisition expense ratio is on the rise because of shifting sales channel distribution mix. So to grow, we have to be represented well in all distribution channels, including the multiagency channel. And up until now, we were well below our market share in the multiagency channel. So we want to continue working on this channel. We want to grow in this channel. We want to grow above the market pace of growth. We have roughly a 20% market share in that channel. So there is room -- there's headroom for us to grow. But at the same time, we're well aware that compared to tied agents, we have higher distribution costs. And so some of these higher costs are related to the multiagency channel. And so the distribution in the banking channels through bank insurance where we have high growth in the premium -- gross premium written, as I mentioned.
And so if we look at the investment result, let me remind you that we have 3 drivers of our bottom line. So we have the main portfolio. We'll talk about that in just a moment. And so this is highly recurring. Then we have the results of our customers. And then we have big changes year-on-year. And this affects the aggregate. And then we have other, where we have primarily the revenue from subsidiaries investment result. And so we have, of course, impairment losses for bad debt. We also have something we have in every first and third quarter, which are the FX differences because of the asynchronous property valuations for real estate.
We do those appraisals -- real estate values -- real estate appraisal values with -- by hiring property surveyors at the end of Q2 and Q4. And so that means if there are -- if there's a depreciation of the Polish zloty, which is what happened in Q3 of this year, that means that there's a technical asynchronous factor, which is then shored up at the end of the year.
In this quarter, the deviation affected the result and the difference was more than PLN 60 million. So these are the 3 parameters, which affected that one single line and makes it sometimes a little bit more difficult to understand what's happening inside that line item. So if we look at the banking results, we can say that we wrap up the quarter at a very high level in terms of our return on equity at 17.7%, as I've stated previously.
So if we look at profitability by our operating segments, here, one could say what I've said previously. We have a slight deterioration measured by combined ratio, down by 80 basis points in nonlife insurance and our Polish insurance undertakings. And we see deterioration in the mass insurance. Here, the combined ratio has moved up to 93.5%. This is something that we discussed, and we discussed what that mosaic consists of.
And then if we look at the corporate business, we can say the situation is totally the opposite. It's diametrically different. So we have motor business at the same level of profitability. But we have growth in the profitability of other products and that meant that this segment's profitability has moved up quite strongly year-on-year.
If we look then at life insurance, we've already talked about the group and individual continued business. And so then in terms of individual business, we see a growth of 17.5 percentage points. And so this is something that is very pleasing. And so we can say the same is true in the international insurance businesses. And so we have very robust returns in the life business and so we have a 13% in year-on-year return.
And so if we look at the individual classes of insurance, I think we've discussed this quite extensively. So I don't want to dwell on this any longer, so I'll click through the discussion of this part and this part because we've already summed those up.
Here's a slide where I'd like to share some information with you what we see in terms of the pandemic, the loss ratio, how this is affecting us quarter-on-quarter, year-on-year. The first information I'd like to share is the number of deaths. Up until now, we had showed you that on a weekly basis. I think it is better, conceptually, to show this on a weekly basis as a quarterly basis. As you can see, we have 2 characteristic peaks. One of them is drawn by the navy blue curve. That's a solid curve, which shows you what happened in 2020 -- over the 52 weeks of the year 2020.
If we look at 2021, that's the dotted line -- the dotted curve, with a major peak around the 13th, 16th week. And this is something that we experienced in 2020 and we had 3 quarters of flat results. And then we had 1 quarter that was below the long-term trend, and that converted into high profitability and low loss ratio in this segment. If we look at 2021, the situation is totally different -- diametrically different. So in terms of the wave that took place at the turn of Q1 and Q2, which meant that if you looked at the quarterly profitability of this business segment, made it very difficult to compare those quarters. This is why I really wanted you to understand this what was taking place in the previous year and what's taking place in the current year.
What we can anticipate this year is the fourth wave. And so if you look at the daily growth of deaths, we can say that it's starting to move up in terms of how that -- the shape of the curve is taking. If we look at the number of people who have been vaccinated and the people who've fallen ill with COVID and so had some sort of natural resistance. And we also see that there are people who struggled with coronavirus but had some additional illnesses. And some of those people, unfortunately, are part of the statistics you see here. And so we believe, for that reason, that the fourth wave should not be so pregnant in consequences. And so we anticipate that Q4 will be slightly better. And that means that the overall year, with respect to profitability, we may be comparable, but it's also possible that we might produce better results.
If we look at Q3 alone and you can see that on the graph below, you see a decline in the loss ratio, but it had a totally different mix of risks in group and individual continued business. And so the growth in health insurance products, we saw a rebound in the interest. In terms of normal visits to health clinics, medical clinics, utilization is back at the previous level in terms of our subscription plans. And that meant that we had a higher loss ratio by -- was up by nearly 2 percentage points, a lower loss ratio in terms of deaths in Q3 as opposed to the loss ratio we saw in other risks. And so this is a mosaic of how the various parameters affected the comparability of -- in this segment on a quarter-on-quarter basis, year-on-year basis.
And so if we look at the investment result, the deep dive of what you've seen on the previous slides. Well, from the point of view of the composition of this portfolio, not much has changed. Well, the composition is determined in a safe and conservative fashion, which means that we have a comparable outcome and a foreseeable outcome. And so if we look at the interest income, pretty stable. And if you look at valuation, measurement and realization, you can say that we saw totally different conduct in this quarter as opposed to the previous in terms of higher yields and prices falling as opposed to previous quarters. Well, we can say the situation in this quarter is totally different.
If we look at the equity instruments, we can say they have a much smaller impact, especially one exposure to an entity in the logistics business. At the same time, we see growth in other equity portfolios. So private equity exposure is up, and this is something that has allowed, to a large extent, us to offset that single impact from the previous quarter, mentioning that one particular exposure in that asset class.
If we look at the real estate portfolio, we have a cost disconnect in terms of the costs of property development projects. As you know, we try to participate in some projects a little earlier to benefit from the margin of the developer when the warehouse is being commissioned for use. And so we anticipate this will take place in Q4. And that's why we have a slightly -- a slight disconnect between the costs we're incurring and the revenues we anticipate to report, but Q4 should basically balance that out. And basically, the gap that I mentioned in terms of the negative impact of FX differences should be filled out -- filled in. So it's the -- what we see in the real estate portfolio cost versus revenue and then the technical FX difference line item because of when we do property appraisals and the loss that we incurred in Q3.
And the third element that is probably easier to speak about in the context of this slide, as I mentioned previously, are our clients' investment products, which in this quarter had a negative result as opposed to large growth in Q2 and Q3 of last year. Well, this means that there's a total lack of comparability if you have one amalgamation, when you look at the investment return in the nonbanking segment.
Now we have cost effectiveness. This is something we've discussed. We have an increase of 0.4 percentage points. We are happy that it's 0.4 percentage points because we have inflation that's raging and the wage pressures and pricing costs linked to salaries. And then you have increases in rent costs and utilities costs because of CPI. And so we were pleased that we were able to offset this growth in our portfolio. And that meant that our quarter was closed below the strategic objective.
In terms of the cost to revenue ratio, we maintain a high level of solvency. It comes in at 225%. So this is a level, which clearly shows that while pursuing the strategy, we can simultaneously deliver on what we said we would do with respect to return on equity and paying dividends. This creates space that next year, based on the results we're generating this year, we're going to be able to distribute earnings in the way in which we discussed that subject in our strategy, in our dividend policy. So it's a little early to recap our strategy.
These graphs -- well, I think I could sum up with these graphs that we're on a good path that the strategy, when we think about it and how we view it today, we believe that the strategy is not at risk. We don't see any major signals that there could be risk here for the strategy could be in jeopardy. As I said, we're pleased by the high level of solvency, coupled with a high return on equity. And I think that's more or less the spot where I would pause. And now, I would maybe not ask you to post questions from the room, having in mind the environment in which we function. So there are no people here. I'll have questions on the iPad and people from the Internet will be able to post questions at this time.
[Interpreted] What is the sensitivity of your solvency to rising yields on bonds and the results at the end at the end of the Q3?
I can't say how much it is. If I can tell you how much it is, then there would be no sense not to publish it in the presentation. So please be calm. We'll publish this information in the future. We consistently report our -- divulge this information with 1 quarter lag. I can tell you that the solvency ratio will be at a similar level. And I think it would be difficult for me to say much more than that.
Can you share with us about your current exposure to InPost? I would prefer not to do that because with respect to that exposure -- I'm not talking about our relationship to the InPost itself because we don't have any relations with the company, but we have some ideas about that exposure, about what that exposure should look like in the future. And if we start to share that information with you, then I would have the impression that we would publish our strategy on how we're going to treat this exposure. So just as with respect to the previous question, I'm going to try to escape from giving a precise response.
Because of the rising mortality, would we see higher claims paid and because of the lack of restrictions, we'll have a higher claims frequency? Well, certainly, one should anticipate this, and this is not some sort of secret knowledge. But this is more a matter of intuition that if we look at the daily growth in the number of infections, the growth in the number of deaths, it would be very difficult for us to report in Q4 of this year a profitability in the life segment or generally in PZU life.
At a similar level as in Q3, what will actually happen? Again, it would be very difficult to give a very precise estimate. I've seen a variety of estimates of highly reputable agencies like the health agency, which -- well, those estimates are very different from one another. So I think this question -- I'm not going to say I'm not going to respond to the question. But basically, I don't want to speculate because what the excess mortality will be, to a large extent, depends on how we conduct ourselves today. Our behavior, our responsibility, our feeling of accountability, whether or not we're going to continuing -- continue to get vaccinated, how we'll conduct ourselves when we have mass assemblies even in stores. So as a result, I can only implore people to get vaccinated to care for one another, disregarding the fact that this will help us, but this will also help all of us enjoy health and enjoy upcoming quarters.
If we look at the normalization of claims frequency, well, this is what it is. The results quarter-on-quarter are more burdened. And so it's my hope that the overall market will be capable at the proper time to appreciate the depreciation of margin, which is taking place in the motor business, and react in such a way to make sure that we don't have the same situations that we had in 2015 and 2016, where prices were growing wildly from quarter-to-quarter and year-to-year by tens of percentage points. And so it's again my hope that at the right time, we'll see the reaction about the marketplace in terms of pricing these products.
20% premium growth in nonmotor and what is your outlook for 2022?
[Interpreted] So if we look at the nonlife business, we believe that non-life insurance next year should be characterized by pretty strong growth. They will be a function of what's happening in the economy. If you look at the GDP forecast, it's quite buoyant, quite positive. We should end up the year above 5%. We should anticipate further significant growth. This will be driven by individual consumption as well as by capital expenditures, especially by businesses. And this will have a direct translation or direct impact, knock-on effect on the new assets to be insured. And this should mean that we'll have pretty robust growth, especially in nonmotor insurance.
If we think about motor business, I would wish myself that we would have gradual adjustments or corrections to avoid a cliff effect, which would be inevitable if the market fails to react at the proper time. I have already observed amongst smaller insurers certain compelled adjustments or corrections. Well, a bigger player can do more, a smaller player can do less. So smaller players can accommodate negative information to a lesser extent. So some of the smaller insurance have started to employ selections -- sorry, solutions to correct prices. And I hope this will generate sufficiently strong growth signals for the rest of the marketplace. And we will not allow a situation to occur like the one we had in the past. And this is my wish for myself for the marketplace. But as I said, with respect to the nonmotor business, we believe that the growth in the development should be quite different.
In your strategy, you talked about a turn in the underwriting cycle and core deteriorating in 2022 before improving [Foreign Language]
[Interpreted] These questions are jumping. So I'm sorry if I'm reading them incorrectly.
90 levels in later years. Do you maintain this view?
[Interpreted] I remember well how we estimated the market -- assessed the market, especially the motor business market. We were fairly convinced and confident that in the latter half of the year, there should be a price rebound. And as a result, the margin erosion would cease to transpire. And after the inevitable peak that over the next 12 months from that point, we would have a portfolio that would be at low prices. And then later, there would be a rebound. Today, I can say that I continue to uphold that view. But what I can say or add is that everything suggests that this outlook will shift by a vector of, say, 2 to 3 quarters. That's what the picture is starting to look like with a parallel and slightly larger, perhaps, at the scale of the overall marketplace, decline in profitability in nonlife business, especially motor business.
Remains at normalized levels, is margin of 2020 sustainable in the near medium term?
[Interpreted] Well, medium term, yes. Long term, it would be -- probably be difficult. And what I expect, unfortunately, is the situation we'll have, starting with next year, in terms of unit-linked business and the product intervention I referred to previously. And we should anticipate that the sales of these products would fall and the decrease in revenue or premium. And that means there should -- could be more price pressure in this segment. So in group business and protection business. And so if that does transpire, this could mean that we'll have an inevitable decline in margins somehow triggered by price competition.
So in the medium term, I would say, yes. In the long term, we believe that this could be difficult, having in mind the structural changes through which we will proceed.
You plan to pay an interim dividend. Is it possible to maintain that dividend of PLN 3.5 per share? Well, the PLN 3.5 per share was a dividend for 1.5 years. If I can use this comparison, well, this would be very difficult to maintain compared to a normalized annual result.
So probably not next year?
Certainly, we don't plan an interim dividend from PZU.
[Foreign Language]
[Interpreted] Well, I see there are quite a few questions. What is the extraordinary costs of hail damage? We do not share that information directly. I can say that this did have a knock-on impact of approximately 2 percentage points plus additional claims in mass business.
What are your plans with respect to unit-linked business? Will PZU continue selling unit-linked business in January?
Well, I don't want to respond unambiguously to that question. Now certainly, there will be a change in our relationships with entities distributing our unit-linked products. We'll try to develop these products in the bank channel, especially in the banks that belong to the group. So we would like for our customers to have, at their disposal, products that will meet the highly stringent regulatory criteria. To what extent our other non-group distributors will be interested in following that same path? It would be difficult for me to prophesize.
The signals I've heard is that these products would be very difficult to distribute. And as a result, perhaps some players will consider discontinuing distribution because the costs to educate people responsible for sales will be out of whack with the benefits from selling those products.
As I said, it's not possible to give an ambiguous response to that question. There's a variety of information at a later stage. Next quarter, I'll try to respond to that question.
Is PZU Zdrowie profitable in terms of net profit? Well, that's an interesting question. PZU Zdrowie as a company, PZU Zdrowie S.A., that's the name of the health insurance company, is a company that's not a secret of any -- in any way, shape or form is not capable to complete the year with a positive result. But in terms of its role, that's not a goal in and of itself. The goal in and of itself is not to -- at all costs to filling that gap. The goal we have is to bring about a situation in which using health products offered to our customers by the segment PZU Zdrowie, PZU Health, where we sell products -- insurance products -- health insurance products by the insurance company. And we're here talking not only about PZU Zycie, but also PZU S.A. as well as TUW as well as Link4.
Those 4 companies are distributing health products. And these sales are visible in their top line. And the results are also visible in their technical results. So the technical result generated on the products delivered in the form of insurance plus the result on the subscription plans sold by PZU Zdrowie, plus the result that we generate on occupational medicine, which PZU Zdrowie offers, plus the fee for service, the result in that, which PZU Zdrowie and health clinics offer where we want the sum of all of these components to generate a profitability, which is at the best possible level amongst the best in that product segment.
So when we talk about the best, we're saying -- we're speaking of providers like LUX MED or Medicover. So today, we can confirm that the sum of the parts is at least as profitable as the best players in the peer group.
So with persisting pressure in motor business, do you anticipate that the regulator would intervene as has taken place in the past?
I spoke to you of intervention, which took place when the technical results were negative in Q4 but this has been decelerated. But there was a follow-up of that intervention. Today, based on the data we have published at the end of Q2, we can say that the motor TPL -- total market of motor TPL is a market that has a positive technical result despite what's happening, where the motor own damage has a similar situation. So we should also say that PZU has a disproportionately large share of the profit as opposed to its share measured by premium. So I would assume that the second step announced by the regulator during the annual meeting in Sopot. We're talking about the Polish insurance chambers meeting in Sopot. This will take place, and this will make it possible to avoid the problems we grappled with in the past.
So if the regulator allows for the distribution of the other 50% of the profits from 2020, would you consider a distribution of profits?
Well, we would have to think about and measure up with such a recommendation and regulation what that recommendation would look like. We would clearly take a -- we would clearly scrutinize it, but I couldn't right now take on a covenant or an obligation due to that to understand what that additional 50% would be. I'd have to look at that first. But certainly, having in mind the company we are, we are a dividend-paying company. So this is a part that -- an element that we would clearly review.
[Foreign Language]
[Interpreted] So I'll go ahead and display Slide 10.
You say it will be impossible to continue running a profitable business. Wow, [Foreign Language]
[Interpreted] This is a strong -- I'm not sure if I actually said that. What I said is that it becomes more and more difficult and not so much that it's impossible to pursue this business in a way that would generate returns. So I think the confirmation of this word is the result that we're showing you. I see the slide that you're referring to. And so then I'll show the profitability of the individual product lines. We're showing the profitability in the motor business. In the mass segment, it has deteriorated year-on-year.
But at the same time, it makes it possible to generate pretty satisfactory returns considering where the other -- I think we can say one thing. PZU is in a totally different situation from the one in which smaller or small players are in. PZU partially benefits from the conservative provisioning policy it follows. That enables us to show positive runoffs from previous claims years. And this means that we can fill in that gap -- the shortfall. And I hope that we have enough fuel and we'll be able to navigate the situation, keeping our feet dry. It depends when the price rebound will take place. But I think -- let me say...
[Foreign Language].
[Interpreted] That would be too harsh of a statement. Sorry.
Does the insurance sector experience wage pressure at the same extent -- to the same extent like the rest of the economy? Well, yes, and no. Why? We're not an island -- an uninhabited island.
Well, so what's happening in the insurance sector, the financial services sector having in mind what's happening on the Polish market with respect to consolidation and combining various entities?
Well, this provide slightly different maneuvering room. But there are positions, which are outside of that discussion. I won't surprise anybody or astonish anyone if I mention here technical functions, IT functions. Today, this is a group -- an occupational group following coronavirus. But I would say that having in mind the experience we've gained from coronavirus, well, we can say with people working at home, so the supply of labor. So employers vying for these rare resources, we can say that this is something that's quite strong. And we're not only talking about the supply of work offered by employees in Poland for the Polish market, we're talking about employers offering jobs outside of Poland, and that work can be done anywhere where you have a good internet connection. Those are things that we see after the experience we've drawn from coronavirus. It turns out that all this work can be done remotely. Yes, we do feel that pressure. It's not equivalent to the average pressure experienced by the economy.
The COVID-19 death wave. Would it be reasonable to expect group and individual to operate with at circa 20% margin going forward? [Foreign Language]
[Interpreted] I partially responded to that question. Yes, in the medium term. In the longer term, it will depend on the structural changes taking place in other business lines. So let's limit ourselves to a response in the affirmative in the shorter term.
Strategy to navigate the motor market challenge. How long do you think the market will be able to sustain the price competition with high frequency and claims costs remaining high?
[Interpreted] Perhaps I'll respond by saying what I'm concerned by. I'm concerned by the thinking possibly following the following path. Even though smaller insurance undertakings have to utilize pricing solutions because smaller players can do less. Well, I don't want all of us thinking about how we're going to close the year 2021. Well, this is a year, which in principle where we have pretty good reasonable profitability. As a result, perhaps some of us might arrive at the conclusion that rising prices -- raising prices could have an adverse impact on sales objectives, and we might close our eyes and somehow pushing this topic back into 2022. And we'll end the calendar year, and that's how we'll end up financially in Q1. Then we'll think about summing up the 4 quarters of the previous year, and everybody will be happy that we have had pretty good, decent profit.
But that profit will be generally profit from first and second quarter in motor business with a lot of pressure in Q3 and even more pressure in Q4. If this scenario does in fact materialize, and especially in Q1 because we're not going to do anything because we're going to be busy by closing our books and accounts and celebrating the successes achieved in 2021. And then we'll have Q2 of next year, which would then show a major correction in terms of profitability. And then we'll have some bigger problems in the second quarter of next year. This is a scenario, which I'm slightly concerned by. And this is a scenario -- I'm speaking, frankly, because this is a scenario we've seen materialize in the path, and it didn't produce anything good. I don't want to say anything about to what extent we're able to afford walking that path and keeping our feet dry. We're prepared for something like that better than our competitors. As you know, we attempt to optimize -- perhaps this isn't the best word, but we work quite hard on our costs in the claim side. And basically, there was quite a bit said about that in the mass media.
We have some reserves on this side. We'll endeavor to utilize that so as not have to recognize the cost inflation in our own portfolio of claims. We're a little bit better prepared for this adverse scenario.
I can conclude. This is the final question from the Internet. I can say that I would wish for this adverse scenario not to materialize. And since as I mentioned, this is the last question, I'd like to thank you very cordially. I'd like to thank you for this nearly 15-hour session. And I'll say [Foreign Language] until I meet with some of you in the near future, and with all of you, certainly in 1 quarter from today. So thank you very much.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]