Ladies and gentlemen, I'd like to welcome everyone who has joined us today for our meetings. This is an unprecedented event, its goal is to make everyone familiar with PZU again. New, after an event that took place recently, as a result, from the first quarter of this year, PZU is publishing its financial statements in a different way, according to a different standard, its consolidated results. This may be not intuitive, that when it comes to carrying out the strategy to relationships with our customers and the way we approach distribution, the ways, the channels to which we reach our customers, and the way that we provide values through some of the best products. Here, nothing has changed on this level. The only thing that has changed is the measurement of these events and the way they are presented in the financial statements and the balance sheet of the capital group. During today's meeting, we'd like to get to let you know about this new model. We are aware that it's not obvious for everyone. We'd like to let you know how the changes on the regulatory level are impacting the way how we have started to talk to you about our results, this new way. Today's meeting is a workshop. We'd like for this meeting to be as interactive as possible. We invite you to ask questions during the meeting. We also have some people participating remotely, but nonetheless, we invite you to try to participate actively in this workshop. This is because we would like to have an opportunity today to address as many questions and doubts as possible, so that we can make it easier for you to navigate them. So that from this quarter on, you can have a better understanding of what's happening in PZU, and to make it easier for you to discuss it through the lens of how we are reporting this on the outside, through our financial statements. Therefore, we have divided today's meeting into two parts. We'll start with the theoretical part. We'll talk about some basic concepts of IFRS 17. We will compare this standard to the previous standard. We will talk about measurement models. We'll talk about how various business segments will be treated in terms of the new standard. We'll talk about methodological aspects, about choices that we've made that will have an essential impact on the shape of the financial statements and the results of individual segments. We'd also discuss how we'll be presenting the segments in the result statement, how they will be measured. We'll also compare our situation compared to our peer group. We'll tell you to what extent the standard is having an impact on our activities. We will also have an exercise called the strategy recalibration. We're seeing that due to our new strategic challenges, there are a lot of changes happening. That's why we decided to recalibrate certain things, and then we have some key measurements of our ambitions, and we'll try to redefine them. That's another topic covered in today's meeting. We would like to quickly go through certain examples. We're going to discuss how certain insured events are presented and measured in the financial statement. In the new financial statement, but also compared to how they were presented and measured by the end of last year. I think this will be the essence of today's meeting, of today's workshop. If you feel like this is of interest to you, if you feel like you would like to know more, and I feel that many of you may have this feeling, I would like to address these topics. I don't want to compromise due to time limitations or to a need to strictly keep to the agenda. We won't be going back to these certain aspects, quite often, we have the second part. We'd like to remind you about our results for the first quarter. We'd like to tell you how, through the lens of the whole theoretical knowledge that we'd like to present in the first part, and then through the lens of the theoretical examples, and how, in light of them, our Q1 results should be understood. We'll have a Q&A session, and we'll end with a summary. As I said before, because we have a theoretical and then a practical part, we want to talk about insured events through the frame of some specific examples. We want to analyze specific policies which are characteristic to our business. As much as possible, in light of the remote character of this event, we would like you to participate. If anything is unclear or not intuitive, please do not hesitate to ask questions, and then we will stop, and we'll try to answer the questions as they appear, because it's very important for us to address all your doubts and questions. This is the agenda for today. As for the workshop itself, we decided to ask our friends and partners from Ernst & Young. As parts of the joint implementation. This company is our point of reference, and it's been supporting us in the implementation of this new standard, especially when it comes to the main company and to subsidiaries. In my view, these are the best persons and the best partner to discuss these difficult topics in a very clear way. Soon, my colleagues will take the floor, and they will present the first theoretical part. How long will it take? Well, that depends on your curiosity, and here I don't want to rush through it. We'll be going through specific examples, and we'll be going through specific sections in the first part, then we'll take a break. We'll move to the second, more practical part. We'll discuss the results of the PZU Group in the first quarter. That's all from me. I'd like to welcome all of you again. Thank you for your participation. Thank you for joining us remotely, and I'd also like to thank those who are here on site. I believe that participation in person is even more significant, so we are really grateful to you. Without further ado, the floor is yours. Thank you. Can you hear me? Good morning, everyone. I'm Radosław Bogucki. I'm a partner in EY, in the EY company, in risk consulting. We've been partnering with the PZU Group for many years now in terms of the implementation of the new accounting standard, both for large subsidiaries of PZU SA, PZU Życie, as well as for all the subsidiaries of the PZU Group. Before I'll discuss the implementation, Hanna, can you please introduce yourself? Good morning, ladies and gentlemen. My name is Hanna Ulańska. I'm also a partner in the same sector, risk consulting, as Radosław. Along with Radek, we've had the pleasure of supporting the PZU Group in the implementation of IFRS 17. I'd like to start by thanking representative of PZU Group for inviting our company to cooperate in this difficult project. It's been several years of really hard work. Just to briefly sum up the years, we must say that we are very proud of this project, that we've been able to be successful. We faced a lot of challenges. As you know, the portfolio of the PZU Group is very large, is very complicated. We have a lot of life insurances that reach back to policies from the 1990s. As a result, we face many challenges with data availability and methodological challenges, and I believe that we've dealt with all of that quite well. It was also not easy to organize the implementation project in the PZU Group. As you will see in the examples that we'll show you, IFRS 17 is a standard that requires from accountants to understand actuarial concepts, and actuaries, they need to understand accounting elements. Controlling also plays a significant role, as well as teams handling financial analysis. This was a multi-leveled approach, and both on the side of PZU and on our side as the consultant, we've had to engage people of many different skills and competences, and we've had to coordinate that to create a well-working team, and I believe we've been successful. There was an additional complication. We were cooperating not only with PZU SA and PZU Życie, but also with the subsidiaries. Another great challenge was the technological sphere of the implementation. IFRS 17 requires processing of an enormous amount of data, and these are also new data and new concepts that we've not used before, for example, cash flows. This was also a great difficulty to find a calculating reporting tool instrument that would be able to process this enormous amount of data and to conduct all the calculations. This was also a great challenge, but we've been able to do it. To sum up, we are really proud of this project. You've already seen the first results, but today we'll focus on explaining the numbers and their meaning. If you were to describe briefly the changes of IFRS 17 compared to the previous standard that we've used to report until December 31st of the past year of insurance contracts, namely IFRS 4. IFRS 17, first of all, introduces a much greater comparability, cohesion, consistency, and a clearly defined valuation methodology. IFRS 4 was a very general standard. As part of IFRS 4 reporting, you had a lot of variety of accounting practices. You're talking about the measurements of liabilities most often. Quite often, the different liabilities measurement between different companies were not comparable. IFRS 17 still leaves a lot of leeway for companies, but nonetheless, the valuation methodology is the same for everyone, and where there is some wiggle room to shape the parameters and methods and so on, there is an obligation to reveal the choice of methods. Here the comparability is much greater. As for some more technical elements of measurements methodology, something that was not present in IFRS 4, but does appear in IFRS 17, is, first of all, a well-defined and regularly updated assumptions used to measure liabilities and assets related to insurance business. The widespread use of discounting, so the assessment of time value of money and revealing the portfolios of insurances which are onerous. In IFRS 4, there was no such requirement, so quite often, sometimes, onerous portfolios were connected with profitable portfolios so that the loss would not be shown in the presentations. Also an open valuation of options and guarantees. This is also present in IFRS 17, and it's a new element compared to IFRS 4. Another new element is that it requires, in the moment of the first recognition of the policy, the expected loss or profit of this policy, and then to qualify this policy either to the profitable portfolio or to the loss portfolio. For the profitable portfolios, then we have clearly shown the expected profit from a given policy, which is presented in the balance sheet as a liability. This obligation to recognize at the very beginning, loss policies, onerous policies and profitable policies, gives us the possibility to track the results over time and then to present onerous policies in a different portfolio, in a different report. On the next slide, you see a comparison of the results according to IFRS 4 and IFRS 17. Here, none of the positions are repeated in both cases. To simplify it a little bit, IFRS 4 first revealed all the sources of revenue, especially premiums, then it presented all the sources of expenses. First of all, claims and benefits, administrative and acquisition costs. The result was the difference between these two positions, whereas according to IFRS 17, the presentation is completely different. We are calculating, first of all, revenues from insurance, from the insurance business, the expenses of the insurance business, then we show the result. Separately, we show the result of financial activities, and here it's important to show the discounting effect. Only then do we have a comprehensive result of the insurance business. Hanna, would you like to add something? Yes, I believe that an important change is life insurance with the unit-linked products. Before, the whole premium collected for such products was presented in the written premium, so in the revenues. Now in the revenues, we have a premium that the policyholder is paying to the fund. This mechanism is much more complicated, but this is a simplified version. We have the premium paid by the policyholder to the fund, and then they can collect it, and this is not presented in the revenues. It's quite an important change, because the assumption of the standard is such that this premium does not impact the company's results. It's an important change in terms of comparison with IFRS 4. Because the measurement methods are completely different, the presentation of the value of liabilities in the balance sheet is also different. I don't want to go into details of IFRS 4, 'cause you're quite familiar with it. We have separately presented in the liabilities, the technical operational provisions, as well as other liabilities related to insurance services. On the asset side, we have the share of the reinsurer in the provisions, as well as insurance liabilities and activated costs of acquisition, which are shown separately and in a clear way. The balance sheet of IFRS 17 may seem less clear at first sight, because you have only four positions related to insurance services. I will use English terms. You can also take a look at the glossary we've included at the end of the presentation. You'll also find the Polish names of the concepts there. After many years, we are quite used to using English terms. It's even easier for us. We have insurance contract liability and reinsurance contract liability. This is the obligation from insurance or reinsurance contracts. On the other side, you have the specific assets. These are the positions we see in the balance sheet, whereas you will also see the analytics of the positions where they are revealed. There you'll see the components of each of these elements, especially that insurance contract liability. We see this on the next slide. This is the value where we see the value calculated with the actuarial methods in accordance with IFRS 17 standard. This is the value of liabilities in terms of future coverage period, so liability for remaining coverage and the value of already incurred claims. This is the current claims provision or reserve, LIC in short. The next component of insurance contract liability is the loss component, which arises when we have a portfolio of onerous contracts. Contractual service margin, CSM. This is the profit which I mentioned, and which is shown in the balance sheet as a liability and is being amortized over time. We have the so-called risk adjustment. To put it in simple terms, this is related to security, a security margin, which appeared in IFRS 4 as well, but it was not revealed in a clear way. Each insurance company was setting up provisions and reserves, according to the law in a conservative manner. The safety margins, of course, were shown, but the IFRS 17 standard requires us to designate this surcharge on the risk, this risk adjustment in a clear, open way, separately for the liabilities due to incurred claims, LIC, and separately on LRC, liabilities for remaining coverage. Let me briefly come back to the previous slide. What is important here, as Radek mentioned, that this transparency regarding the balance sheet itself, maybe it's not greater according to the new standard, because two important or three important items disappear, in my opinion. First of all, receivables, or pre-premium receivables, as well as the liabilities, such as commission-related liabilities. Everything is shown as part of Insurance Liabilities, this is what you need to remember that a look at the insurance liability is a look from the point of view of all the expected future revenue under the insurance contract. These items are included directly into the measurement of the liabilities. One more maybe comment regarding this topic an additional component that we see in the equity, so are the Comprehensive Income, here we are presenting the change in the measurement, the valuation of the liabilities due to the changes of interest rates. We'll be talking about it more elaborately later, but this is also a new component, new part of the balance sheet that we need to remember. The IFRS 17 standard allows three valuation models for the insurance portfolios. The first method, the default one for the, insurance contracts is the second method presented here on the slide number 2, the General Measurement Model, GMM in short. In a moment, we'll elaborate on more details, being aware of the fact that unfortunately, but time is running fast, so I'll not be getting into details. Generally, we are measuring the value of the amount of liabilities based on the best estimate of liability, similar to, what now we are calculating and reporting as part of Solvency II. We add to that the risk adjustment, this, what I mentioned already, and the other part, what's left as expected profit, CSM margin, is the third component of this valuation method of the contractual service margin, CSM. A similar model could be applied with respect to the valuation of portfolios where we have insurance policies with an unit-linked component. This is the Variable Fee Approach. The difference, the philosophy of measurement is the same, but the difference a bit in the details, technical details for those policies. However, a completely different model, the so-called PAA, Premium Allocation Approach, that's a simplified model that we apply for measurements of the portfolios, simply speaking, of one-year policies, so for the normal, regular insurance, property insurance and non-life insurance business policies. The method is different, measurement is different under IFRS 4, but the results come out quite similar. One more comment from my side here. The level at which we are conducting this measurement, we are conducting the measurement on a relatively granular level, the so-called insurance contract groups, the so-called groups of insurance contracts. There's also a different approach versus what is done under IFRS 4, where we are looking at the much lower level of granularity at this measurement. However, here we are looking at these groups of insurance contracts, where, first of all, are grouped according to the moment of commencing the contract, and one group cannot, is not, cannot contain the contracts that began within a period of longer than one year. We're talking at least about the so-called one-year cohorts of contracts. To that, we add the profitability, the yield element that Radek mentioned before, that we have to separate the onerous from non-onerous contracts, and they are also grouped separately. We also have to make sure that those contracts have a similar risk characteristic. They are jointly managed. Only at this level of a group of contracts we are carrying out the appropriate valuation, appropriate measurement, and this also has an implication, the fact that the risks and the losses and profits from the individual groups cannot offset each one another. Those groups at the level of which we are conducting the calculations, we arrive at several hundred groups, as a matter of fact, in as a result, and this is this order of granularity and results. In the PZU Group, as you can see, is due to the size of the PZU SA joint stock company, the largest part of the business is measured according to the simplified method. Definitely the standard allows for that, but, one third, roughly, is the, measured according to the General method. The unit-linked, insurance contracts mainly link, are not, do not make up an important and significant portion of this portfolio. Okay, a few words, a few more words about just repeating myself a bit, what we already said, but if we were to select one of the most important slides of our presentation, so let's maybe stop, for a moment looking at that, the definition of a General model. Which as I was just mentioned, is very important from PZU's point, standpoint. Let me repeat, our measurement of insurance portfolio starts with setting, with determining the best estimate value. Best estimate of liabilities due under this portfolio as of the day of beginning of the coverage under this portfolio. We set the best, we establish the best estimate of liability, similar to the value of the provision of the reserve that we are displaying in the Solvency II report. We add risk adjustment to that, and what's left is the contractual service margin. These three components make up the amount, the value of insurance liability, LRC, which is a counterpart of today's margin premium reserve. We are at the beginning of a coverage period, there is no damage has happened, no claims have been paid out. The time is running. Out of this portfolio, the losses, the claims are being paid out and the subsequent reporting date, once the claims have arisen, we will be showing the LIC evaluation. The liability for incurred loss claims. This is the counterpart of claims reserve, according to the IFRS 4 and the Polish accounting standards. Of course, there is a component for the reported claims, and we have a measurement evaluation based on the expected cash flow revenue under these claims and the appropriate risk adjustments. The protection against the fact, if the payouts actually made in the future, were to be higher or lower, but that would be a variance versus the expectations were to be adopted under the actuarial methods. What Radek has briefly already described, the General Measurement Model. We also have a simplified model, the simplified model, I think, can be summed up as a valuation, as a measurement of a liability that is closest to what we've been observing under the old standard, the IFRS 4. On one hand, the valuation, the measurement of this liability for the incurred claims is practically similar, the same as in case of a General Measurement Model. We are looking at the future expected payments under the incurred losses, incurred claims. We add the safety margin, such as the risk adjustment. However, regarding the part related to the claims that have not incurred, so the future coverage, future protection, the LRC component Liability for Remaining Coverage is measured, is valued at a very similar level as we see today under IFRS 4. I think, in the most simple terms, you can think about this component as a reserve, UPR reserve, reduced by the premium liabilities, premium receivables. This is definitely a simplified model which is closest to what we observed using the old standard. Now, a few words about the risk adjustment. A standard actuarial joke, it says that the probability of the actual payments will be equal to what we determined to be the best estimate is equal 0. We the only thing we know is definitely it's gonna be come true. There's the need to determine, to value the risk adjustment. The amount, the value that will provide a protection, hedging versus the situation where the future payouts will in particular, will exceed the assumed cash flows. Due to the fact that we have available historic data, historical data, on the payouts, in relation to our assumptions regarding the expected value of a distribution of payouts, we are able to calibrate the probability distribution graphs and determine those risk adjustments accordingly. Generally, in practice, two methods are used. This is either the confidence level method or the cost of capital method. Due to the availability of data and certain technical details related to the calculations, the assumption has been made. It is assumed that the confidence level approach is used more in case of a non-life insurance, whereas a property insurance, whereas the cost of capital method is used in the case of life insurance business. An important thing is that the standard requires disclosure, which quantile of distribution of future payouts claim, under claims, is corresponding to the risk adjustment. In brief, in simple terms, whatever assumptions we make regarding the risk adjustment, the standard doesn't define, doesn't impose that, but you need to disclose it. You need to show it, what level of risk adjustment you include in your provisions, in your results. Once the payouts are made, of course, the risk adjustment is released and it enters the appropriate item of the income statement. What is important here is also the fact that This risk adjustment, we have to disclose this method, but under the old standard, of course, the reserves also included a certain part of safety margin or risk adjustment. First of all, it was not openly disclosed. On the other hand, it didn't have to be released over time, whereas the new standard requires that. Once our payouts and the claims are carried out in accordance with our projections, then this risk adjustment is released in the income statement as our revenue. I think this is our significant change. Additionally, what is important is we could, of course, think about this risk adjustment that we can freely apply or assume any safety margin, and so risk adjustment, so as to control the results on our reserves. Due to the disclosure obligation, it's not possible. That's one thing. Second aspect is such where the risk adjustment also involves in the assessment of the profitability of our contract. The higher risk adjustment we take into account, also we will show more onerous contracts in our portfolio. There is this thin line that we are balancing when we are determining the risk adjustment. A new component of the liabilities, the so-called CSM, contractual service margin. This is the component that's a part of the measurement for the overall measurement model at PZU Group. These are traditional life insurance products. This component of the balance sheet is measured as a difference between the expected premiums and the expected expenses and benefits. Of course, adjusted by the discount rate and the safety margin, so this risk adjustment. This is the counterpart of the future expected profit. This measurement must be made, we must make as of starting the contract, commencing the contract. This is also a new obligation. So far, the valuation, the measurement of liabilities was performed only and solely as of the reporting date. Here, for each contract, we have to make this measurement as of initial recognition moment. What is important, if there's no profit, so our contract is onerous, so then we recognize the so-called loss component. This is not a part of our balance sheet. It's a loss that is immediately recognized in the income statement. There is no symmetry between recognizing the profits and losses under the new standard. The profits are recognized throughout the period of providing the insurance service, the coverage period, whereas the losses are recognized as of the zero date, and only later, technically amortized without having any impact on the results on the earnings in the subsequent periods. The CSM for the subsequent valuation dates, measurement dates, what's important, the sequence of actions taken. It is adjusted, first of all, by unwinding the discount effect, because it's also part of the balance sheet that's also subject to discounting. Up to the contractual service margin for the previous reporting period, contractual service margin is added due to the new contract in the given insurance group. Subsequently, this item is adjusted by the changes in the actuarial assumptions. This is what's important is the sequence of taking these actions. When, if our estimates for the future regarding the future cash flows change as of the reporting date, when we adjust our contractual service margin, only in the subsequent step, we release a part of the contractual service margin and place it into the result, into the profit. This element, the CSM release, this is a component, the part that's finally shown as revenue in the income statement, whereas the entire CSM amount, before recognizing this revenue, takes into account the changes of actuarial assumptions. We will be seeing this effect on the detailed examples which we'll be discussing. What's important is the changes of actuarial assumptions are not recognized right away, immediately. They are recognized step by step, gradually, by releasing the contractual service margin over time. A few words about discounting. We'll not be wasting too much time on that because time is running out. The standard allows two methods for determining the discount rate. One has to remember that, in contrast to the requirements of the service to the insurance company, determines the discount rate for its portfolio on its own for reporting under IFRS 17. The standard allows two methods, the top-down and the bottom-up methods. In the top-down method, basically, we start by replicating the cash flows from the liabilities, with the cash flow, cash inflows due to the portfolio of assets replicating these cash flows, and we include the risk of default, the risk of bankruptcy, which is potentially included in the measurement of this portfolio of assets. It's not applicable to the portfolio of liabilities, the PZU Group decided to implement the second method, the bottom-up method, where the discount rate is determined or is set as a sum of risk-free curves, risk-free rate curves, and the illiquidity premium. The main reason was the need to be consistent with the valuation of the portfolios applied for the Solvency II reporting needs. As you can see, the standard, IFRS 17 allows for increasing the discount rate by the illiquidity premium. The point is that to take into account the value of money, the fact it should be taken into account, but there are portfolios that are very liquid, such as the unit-linked portfolios, where the cash flow can take place anytime at any amount, and also where are portfolios where the cash flows are much more predictable, well-planned, and this is where the discount rate can be increased by the illiquidity premium. Let me add that the discount rates are an important part of impacting the value of our liability. If discount rates change significantly, I think we were witnessing such material changes over the time. At that time, the amount of liability may change also materially. Under the new standard, the insurance companies have a choice between recognizing this change either directly in the profit, in the result, or by recognizing this change in the amount of the liabilities in the capital. Here, PZU Group chose the second option in order to stabilize the result, which is presented in the profit and loss statement. The next element is the opening balance sheet valuations of the transition. The standard requires determining the opening balance in a way, as if the standard would have always been in place, has always been in effect. We are applying IAS 8. What it means in practice, it means that we have to go back in time, to the time when the policy that we now have in our portfolio was issued and began took effect. We need to measure the value of the best estimate of the liabilities, the risk adjustment, and the contractual service margin for this policy as of the date that this policy was concluded, was signed, and then moving over time, amortize according to the requirements of the standard, these elements, so as to arrive at the CSM value, CSM amount, as of the reporting date. It's a difficult task, especially as we mentioned in the case of the PZU Group, where the major significant portion of the portfolio has several more than a dozen or more than 20 years old. As I mentioned, one of the successes of this project is the fact that we managed to prepare such data and to carry out such measurements, such evaluation, according to the requirements of the standard. In a situation where such an approach is not possible, the standard allows for the so-called modified approach, modified retrospective approach. This approach, briefly speaking, consists in the fact that the precise actual projection as of the date of concluding the policy and the subsequent periods, we can replace with the database on the actual implementation of those cash flows. In a situation where such data is not available, the third option would be to use the fair value approach, which measure the CSM as of today, without the need for retrospectively backtracking to the day the policy was concluded. We can estimate the CSM as of today, as a difference between the fair value of the portfolio of the so-called fulfillment cash flows. The amount of the best estimate and the risk adjustment for this portfolio of insurance contracts. In practice, fair value is very close to this value, amount of cash flows and certain technical differences. CSM estimated this way is frequently close to zero. I can say that the standard punishes in a way, quote unquote, the insurance companies that do not have a historical, good historical data, so as to use it to value the transition according to the historical retrospective approaches. Summing up, the most important changes regarding the accounting policy of PZU Group, we can focus on five aspects. First of all, the selection of interest rates, we mentioned already that. The PZU Group decided to use the top bottom-up approach, to apply the risk-free rates, plus illiquidity premium for regarding the liabilities. This approach also was chosen because in order to maintain consistency with the Solvency II regime and the measurement of the liabilities for the needs of the new standard, because the so-called risk-free rate is basically the same rate that is applied for discounting the liabilities under the Solvency II regime framework. The other important element is the recognition of value of changes in liabilities due to the changes in the discount rate and the way these changes are recognized. As I mentioned before, the PZU Group decided to recognize those changes in capital, cost of capital, then not taking into account the changes directly in the income statement. I think all this is also the most frequently chosen option by the insurance groups, due to the wish to maintain the stability of the results presented in the profit and loss statement. The next aspect, the risk adjustment. The risk adjustment is due to risk. Two methods: cost of capital for the life business and the confidence level approach in case of a non-life business operations. This approach is consistent to what we've been observing on the market. This is a market practice, most often, most frequently chosen by insurance groups. The next element is the split into the insurance groups based on the level of which the measurement of liabilities takes place. I mentioned it briefly before, the split has to be very granular in the case of PZU Group. In case of a life operations, life business, the Group decided to apply the annual cohorts. We combine, we group all the contracts with the initial recognition date falls within a single year, whereas for the non-life business, this is the split into quarterly cohorts. This split is more granular due to the fact that the Group wants to keep observing the profitability of the individual groups of contracts quarterly, and monitoring this profitability on an ongoing basis. The final element, so the transition approach, Radek mentioned already three methods. The PZU Group most frequently applied method is the full retrospective approach, the default method, in fact. Whenever it was possible, the full retrospective approach was applied, so as if the standard had always been in place. In case this approach was not impractical and obtaining, first of all actuarial projections as of the dates, earlier dates, I don't know, maybe beginning of the 1990's or the 1990's in general, it was impractical and didn't have a material impact upon the results. The PZU Group decided to apply the modified retrospective approach, namely, the approach where the expected cash flow revenues were replaced with the actual earned revenues, obtained revenues. The third approach, Radek mentioned it as well, that this is the most often approach that leads to the fact that we cannot recognize the contractual service margin in the balance sheet. It was applied in very few cases. In fact, when the use of any of the previous approaches was not practical anymore. To sum up the theoretical part, we'd like to tell you about how, from our perspective, the implementation of IFRS 17 impacted the financial results reported in some European countries by different companies. The PZU Group was also comparing the impact on its own financial statement with the way it was taking place in different companies. Most countries in Europe used a simplified method, PAA, to the measurement of contracts related to future financial statement and reporting periods. The value and significance of the change of the measurement method for the equity of insurance companies, depends on a large basis on the previous reserving policy that was carried out under IFRS 4. We are dealing with two cases or two groups of companies. The countries marked in the dark blue color that you see on the slide, are countries where even before the reserving policy was such that the valuation was close to the best estimate, well, maybe in addition with some risk adjustment. The new risk valuation and new standard did not really make a big difference in the reporting on the balance sheet. Whereas the countries marked with the light blue color, represent the situation where the previous way of valuating liabilities were characterized with a more conservative approach, and there, the introduction of IFRS limited the value of the accounted liabilities. To the decrease of LIC, this had a result of increase of equity in such countries. What's interesting, if a more conservative measurement methods were used before, we did not have a discounting of liabilities. Right now, the liabilities are discounted. That's also one of the reasons why they are smaller. The fact that they will be discounted makes the equity value not only change as to its value, but also in the future, it will be much more volatile. Because discounting rates, especially in the past months, have a tendency to change. If the company uses the OCI option, then, of course, it will impact the equity, and if not, then directly in the statement result and accounting. That's where it will be seen. That's all when it comes to non-life business. This volatility of discounting rates, it could be also adjusted by the change of valuation on the assets side. If there is a change of the valuation of assets, and if it would be recognized in the equity and capital, then it would have a zero change in the discounting portfolio. If there is a mismatch for any reason, and here I also mean the chosen methods of valuation, for example, it's valued by the amortized expenses, then there is a lack of symmetry. On the liability side, we have volatility because of these changes, and on the asset side, lack of volatility, so this is also an important element. As for life business, the introduction of the standard also impacted the value of capitals. This is similar to the case of non-life business, and it depends on the reserving policy under the old standard. Again, in this case, the countries marked in the dark blue color, these are countries where this reserving policy was less conservative, so it was closer to the best estimate of reserves. Because the standard introduces a new element of liabilities in the shape of CSM, in these countries, actually, we've seen a decrease in capitals as a result of the introduction of this new element. In cases where the reserving policy was more conservative, we had a mathematical reserve being created, the transition to the new standard has the consequence of a significant increase of equity. As to the life business, we should mention the long-term character and the influence on the recognition of profit over time. Not only balance sheet values, but also how we recognize our profit over time. In the previous standard, this recognition could vary to a greater extent, also because of a more prudent approach for the creation of a large mathematical reserve with a greater risk adjustment. In the first period, we could recognize the loss, so some low results, and then in subsequent years, this loss was compensated with higher results. Whereas under the new standard, the introduction of the mechanism of recognition of CSM really stabilizes the result. The result is recognized in an even way over time, and as long as its actual fulfillment matches our expectations, our expectations as to the behavior of future cash flows. That was the theoretical part, an introduction to the examples. Are there any questions? If there are no questions, then let's move to our examples. We'll show you two sets of examples, the first related to the simplified method, so to the Premium Allocation Approach. Then we'll show you examples related to the General Measurement Model or GMM. We've constructed the examples in such a way as to show you the key elements of the mechanics of IFRS 17, of the IFRS 17 standard, to show you how certain events that we can see, for example, changes in the assumptions or changes in rates, how that is being recognized and how that influences the financial results. Before we move to the examples, let us discuss this slide, and we want to show you the detailed list of different results. As I said at the beginning, insurance service result is made of different components. As we take a look at them, each of them separately makes contribute to the results. I guess we can analyze each point and say once again, how the result of IFRS 17 is being construed. Let's analyze the revenue side. The first position that you see here is the amortization of LRC, liability for remaining coverage. This is significant only for the simplified version, for the Premium Allocation Approach, PAA. We should think about this position as the premium that was earned minus the some other elements. I guess we should look at this in the context of the previous standards, this is for the simplified method. Now, as for the general method, this view changes completely. On the revenue side, we have these elements. First of all, the expected future claims and benefits. Here we see the amounts of claims and benefits that we expected in the valuation of our liability for the previous reporting period. The liabilities and expenses that we expected, that for them, the payment will occur in the given period. We have the release of our CSM. Here we are recognizing the revenue over time, and we also show this on the revenue side. The next element is the release of risk adjustments for the period. This also falls under revenue. The last more presentational element is the recognition of insurance acquisition expenses over time. This is on the expenses side, so it does not impact the results. It is also presentational to separate the costs of acquisition and to show you how they are being amortized over time. It has no impact on the results because they are in a way amortized by CSM. Let me just add, we are talking about revenues. Expected claims and benefits, expected expenses, this is the revenue side. Contrary to IFRS 4, where the premium was the revenue, here in the General Measurement Model, GMM, we construct the revenue from the elements of what the premium is dedicated for. Some of it will be dedicated for claims, some for expenses, some for CSM, for our profits, some for risk adjustment. These are all components of our revenues. From the perspective of the whole coverage period, our revenue from insurance services are equal to the premium which we've actually collected from the policyholders. This amount is the actual premium payment that we observe in our portfolio. Now let's move to the expenses side. First of all, claims incurred in the period, this is one of the elements. Here we show claims for a specific reporting period, both the ones already paid as well as adding to the claims reserve. The same goes for expenses. Changes related to the claims reserve, but the one created for previous periods. In the two previous lines, we have the recognition of the new claims reserve for the new claims periods, and the changes in the past claims reserve, according to actuarial assumptions, are presented in a separate line. Another important element is related to onerous contracts. We said that the loss for such onerous contracts is recognized immediately in the result accounting. This is being recognized in the new loss component recognized. Here we have the whole amount of loss for the given contract, whereas the line related to amortization is the presentational line of amortization of the loss component, which was recognized in previous periods, previous reporting periods. The sum of our insurance revenues and the expenses gives us, in sum, the insurance result. We also have reinsurance. Reinsurance can be presented simply as a loss or gain, net gain or loss from reinsurance in one line. In the present 2 financial statement, you'll also see some more detailed distinction into revenues and expenses, also for reinsurance positions. New elements related with discounting, which appear in the finance income section. The impact from discounting of reserves, and the same applies to CSM. This is presented in 2 positions: insurance finance income and reinsurance finance income. Let's also mention 2 important elements. Maybe they will give you a better view of the results according to IFRS 17 and how it's being construed. It's a bit of a simplification, but if the actual paid claims and expenses were equal to the expected ones, then they would level out, and then our whole result would be built through the release of CSM and risk adjustments. If we simplify it this way, then it's easy to see in a conceptual way how the result in IFRS 17 is construed. We account for the whole value of liabilities in the balance sheet, set by the element of future revenue and risk adjustments. When the claims are being paid, are equal to the ones planned according to the best estimate, our result is the effect of the release of CSM. The same goes for discounting. If discounting rates assumed for discounting liabilities are quite close to the rates of return from investment activities from the assets portfolio, two elements level each other out in the results. We have no additional elements related to investments because we've already recognized this element by measuring, valuating future risks and CSM. We've discounted all the cash flows and under the assumption that in the future, we'll get returns from in portfolio, the investment portfolio that we use for this sake. Now let's move to the first set of examples for the simplified method, so PAA. We'll look at a non-life contract, a one-year MTPL product. Our measure takes place in yearly cycles, so we are looking at yearly reporting dates. For this policy, the premium is paid upfront, and to simplify the example, we are not assuming any risk adjustments. We are considering deferred acquisition costs. We'll take a look at several examples. We'll start with a basic one. How to look at revenues and expenses for such a contract, and then we look at the modifications of the most simple example, starting with the impact on the result statement of the situation when our expected cash flows differ from the actual ones. We'll also take a look at the policy, where the beginning is not January 1st of the reporting year, but July 1st. We have a policy where the coverage period includes two reporting years. We'll also take a look at an onerous policy. And we'll show you the impact on the results of discounting, and we'll also take a look at the reinsurance elements. Starting with the most simple example, we have a contract where the gross written premium, according to IFRS 4 standards, is PLN 1,000. Loss ratio is 60%, so the sum of expected claims payment is PLN 600. The acquisition ratio is 10%, so PLN 100. The earning pattern is that the policy starts on January 1st, so in the 1st reporting year, we already have the closing of the insurance contract, and the whole period is already earned in the 1st reporting year. As for payments, claims payment, it happens in the 1st period in the amount of 70%. In the 2nd period, it's 30%. If you look at cash flows, then the assumptions are reflected here. The premium is paid at the beginning, in the 1st payment period. At first, it's PLN 600, spread over two periods. Acquisition costs are also paid upfront. Now looking at the income statement, the simplest one under the new standard, because it's a simplified method, on the revenue side, we have to look at two positions. First of all, amortization of LRC, we recognize this amortization in the amount of PLN 900. As I mentioned before, we have to look at this position at an earned premium minus the amortization of acquisition expenses. The amortization expenses are reported separately in a different line. That's why in amortization of LRC, we have PLN 900, in the second line, we have PLN 100. On the expenses side, we have similar costs of acquisition, which are also separated. In the whole coverage period, our revenue from the insurance contract amounts to the premium collected. As for the expenses side, we have the expenses, the claims incurred in that period, which are recognized in the first reporting year. This is the sum of actually paid claims in the amount of PLN 420. The addition of the claims reserve, PLN 180. The payment of the claims that we expect in the subsequent period, if all is fulfilled according to our expectations and assumptions, in subsequent periods, we have no impact on the result. We have no influence on the result. Here we have IFRS 4, we are showing you how it looked under the previous standard. The simple recognition of such a non-life insurance was quite similar. Presentationally, it looked different. We had the gross written premium of PLN 1,000. Payment of claims, which could be separated from the state of reserves. Claims payment of PLN 420, changes in the claim reserves, acquisition costs, which were also fully amortized in the first period. The result is exactly the same as under IFRS 17. The second example. Here, by the end of the first reporting year, we expected that our claims payables would be PLN 180, just like in the previous example, but actually, the actual situation varies from our projections, so the actual value in the second period is not PLN 180, but PLN 230. The difference compared to the previous example is being observed for the second reporting year. The whole difference is presented in the line item, "changes related to past service," because this is actually a change related to the previous claims period. We actually paid PLN 230, contrary to our expectations. We present this whole amount in this one line in the expenses side, and this difference is being recognized in the result. In IFRS 4, we have a similar situation, paid claims, PLN 230. As for the claims reserve created at the end of the first year, PLN 180, and here we are talking about the result statement for the second reporting year, a loss of PLN 250, recognizing the results. There is no difference compared to IFRS 17. Let's take a look at the policy that does not start on January first. We have two overlapping reporting periods for the coverage periods, and as for the assumptions for the premium, the loss ratio and the acquisition ratio are the same, but the earning pattern is different. Right now it's being earned proportionally for two reporting years, 50% of the premium in the first year, 50% in the second year. The payment pattern, if we look at the coverage periods, is similar, so 35%, but compared to comparable reporting years, this pattern changes. Now, as for the income statement, according to IFRS 17, so the PLN 900 that we saw in the previous example is being amortized over two periods. We have amortization two times PLN 450 and the amortization of acquisition costs, so it's equally spread over 2 reporting periods. The amount of PLN 900, then PLN 100. The total sum of the collected premium is PLN 1,000. As for the expenses side, the situation is similar. Claims incurred in the period and the amortization of the claims reserve for the first year, for the first reporting year. The half of the year of the coverage of this specific policy in the first period, the amount is PLN 900. In the middle of the year of the coverage, we expect a payment of claims of PLN 90, PLN 210 of claims have already been paid. In claims incurred in the period, we see the sum of the two factors. In the subsequent period, it's similar. The amortization of expenses. What's important here and what changes compared to the previous one, we have the spread over time, but also the adding of the LRC reserve that was not there before. The reserve for the future coverage period, which for the end of the first year amounts to PLN 450. In all the examples, we are showing at the top cash flows, and they do not differ in both standards. This is quite obvious, because cash flows are actual cash flows. The accounting standard that we use does not influence the value of cash flows, but the differences happen in accounting recognitions, and we'll see that in the subsequent examples, which are a little bit more complicated. A similar situation, according to IFRS 4. Here we would recognize the... In the first reporting year, a gross written premium of PLN 1,000, but we would have the UPR by the end of the first reporting period of PLN 500. The earned premium would be PLN 500 in the first and in the second reporting period. Claims paid according to the way they were fulfilled, and also the change in claim reserves. By the end of the second period, this reserve is not changed in terms of the value, so we have PLN 90 and PLN 90. There is no change in the reserves in the second period. Amortization of acquisition costs over time is being spread evenly and proportionally to the way that the premium is being earned. The profit is exactly the same as under IFRS 17. I think that here we can see what we mentioned before, that our reserve for future coverage in the old standard, we could look at it as our reserve of the premium in the old standard, minus assets related to acquisition expenses. Before we had one of the value of PLN 450, whereas under IFRS 4, we had a separation of this amount. In this simplified example, the only difference occurs in the change in the value of liabilities. Intentionally, we are not going into matters of the leak change of valuation related to already incurred claims, because here the aim of this example is to focus on the parts of the remaining coverage period, whereas this difference, even in the case of some simple contracts, one-year contracts, would also happen in the lead period. Okay, I think let's move on to more interesting example. What is happening in case our policy brings losses is onerous? First, earlier, we're dealing with non-onerous policies. Now, here, the assumptions are changing regarding the policy and looking at the Loss Ratio, which is 110%. After adding the acquisition costs, in fact, we know that our policy will be generating PLN 200 in losses. What to do in such a case? Here, the revenue side doesn't change, so we are looking at the revenue side, and nothing changes on this side. Regarding the expenses side, we are recognizing this loss right away at the zero point in time in the new Loss Component recognized item. This is PLN -200, and we are amortizing appropriately this loss over time in a separate item, Amortization of the Loss Component. What can also is worth noting here is the fact that the payment, the claims incurred in the period where we have the amortization of the loss component, in fact, switched off, is presented in a separate line item. The loss recognized immediately in the initial period. Under IFRS 4, we have an example here that shows that this recognition could be similar, but we would like to draw attention to the fact that it's very much dependent upon the accounting policy also of a given insurance company. In this case, we know that this is an onerous policy. Under IFRS 4, we had an possibility to tie the so-called above premium reserve above the UPR. We had ability to add the URR reserve, the so-called here, adding this reserve in the first period takes place. Outside of adding the premium reserve in PLN 500, we are also adding the URR reserve, so unexpired risk reserve, in the amount of PLN 100. Only because of that. The recognizing of this profit is same as similar as in case of IFRS 17. Whereas this reserves related policy, as a matter of fact, reserving policy was under the old standard up to the insurance companies. The level, the amount that the URR reserve was recognized also was up to the insurance company. It so frequently happened that as a matter of fact, the onerous and the non-onerous contracts at a higher level, the impact of this loss was, as a matter of fact, offset by the impact of the non-onerous contract, so this reserve was not added. When recognizing of this profit over time would be different versus what we are observing under the IFRS 17. Exactly. This requirement of segmenting, of introducing the segmentation of the policies into the onerous and non-onerous policies under IFRS 17, leads to a situation where a loss component, in this case, will be identified and will be included in the financial statement accordingly. As Hanna mentioned, most frequently, the unexpired risk reserve was established. If at all, it was established at quite a high level of aggregation of a portfolio in insurance portfolios. Therefore, in this case, definitely would be dealing with a difference in the amount of the liabilities. Okay, briefly, let's have a look at the including the discounting effect. We include the discounting effect only into a single item under the simplified method, and this element is the claim reserve. Under the claim reserve, we're not showing in the nominal value, but in the discounted amount. In the previous case, we saw the amount of this reserve of PLN 180. Here we have a discounted value, which is PLN 171 in the balance sheet. What is happening to the income statement? The claims incurred in the period changes, the adding of this reserve, including of this reserve in the discounted amount, is already presented there. Whereas in the subsequent period, there is an unwinding of this discounting effect, which is shown in the insurance finance income and expense in the amount of PLN -9. This is what we'd like to draw your attention to, that this discounting effect is explicitly shown in the income statement. Here, it is shown more in detail where these figures come from, the 5%. You can see exactly how it was calculated. Under IFRS 4, the discount was not in place, so in our case, nothing changes. The last example in this part related to the simplified method, reinsurance. We are dealing with the reinsurance, proportional reinsurance. We included in this example the discounting effect, the reinsurance proportional pro-rata reinsurance, the 40% transfer. What is the income statement? What does it look like under IFRS 17? With respect to the insurance part, of course, there are no changes, so the revenue side, amortization of LRC at PLN 900, the amortization of provision expenses at the PLN 100, claims incurred in the period, the total flows in the period, and the including all the discounted reserve, claim reserve in the PLN 591, and the amortization cost, PLN 100 N. We have no changes on this side. Regarding the reinsurance part, similar amounts are presented simply separately in this reinsurance-related part. We can see the recoveries of claims incurred in the period. We have the share of reinsurer in the claims paid out and in our claim reserve in the amount of 40% of what we are observing on the gross side, so in the amount PLN 237 N. In the revenue side, this is simply the share of the reinsurer in our premium, this is 40% out of PLN 1,400. This is the way it is done, of course, this discounting effect that I mentioned in the previous example also is being observed in the reinsurance-related parts. The unwinding of the discount in the subsequent period. Unwinding both on the gross section as well as on the reserve for the share of the reinsurers takes place in the subsequent period. Okay, we have arrived to the end of the examples for the simplified model. Do we have any questions at this point? Okay, we can move on to the live business. In the live business, we'll be presenting examples for the two-year contract, two-year policy. We would like to. We didn't want to extend the coverage period because of the simplicity and the transparency of examples. The specific assumption that's also related to this policy is the linear amortization of a contractual service margin and the cost of acquisitions over time. In pro rata, proportionally over time, we'll be dealing with the amortization of our expected future revenue. Linear amortization of loss component as well. We will not be discussing this element related to the risk adjustment. No risk adjustment is assumed, we'll be seeing the discounting effect only in the last two examples. Similar, as in case of a simplified model, we will start with a basic view of the income statement for the General Measurement Model, we move on to the onerous policy. We will see what is happening, what happening when the actual claims paid differ from our expectation. We'll also see what happens if there's a change of actuarial assumptions and what will impact on the income statements will be visible due to those changes. If we have time, we also look at the discount effect, but will be relatively similar to what we have seen in case of a simplified method. One more comment, because we haven't mentioned that, we haven't spoken about it too much in the theoretical part regarding the amortization of a contractual service margin. According to the standards requirements, the CSM should be amortized in pro rata, in proportion to the insurance service provided at the given time. Of course, the insurance service is not a measurable value or in any clear way defined. When we use the standard in practice, the insurance companies themselves have defined how they understand the insurance service and what measures will be applied for the amortization of a contractual service margin. These are measures related to the insurance amounts. Insurance sums, sometimes they include the discounting, sometimes they do not include it. You could spend a lot of time discussing that here, but however, adoption of a linear amortization is obviously a certain simplification for the needs of example. In practice, this amortization will be taking into account the size, the magnitude of the insurance service provided by the company in the given reporting period. Let's move on to the simplest example. I think I will try to discuss it in detail because this is a more complicated view of what we saw when we discussed the simplified method. First of all, in the General Measurement method, we have to remember that the valuation, the measurement of this contract must be performed at the moment of the first date of recognizing the contract. This is a major change versus the previous standard of the accounting, IFRS 4, where we are looking also only at the specific dates, reporting dates, the specific reporting dates. Here, at the time when, for example, we have the beginning of a coverage period on January 1st, then as of January 1st, we should value, measure such a contract, may perform such a measurement. How is this measurement performed? It's a measurement based on the expected cash flows using the actuarial method. We are looking at the expected premium amount. In this case, we have a premium paid right away, upfront, in the amount of PLN 1,000. This is the cash flow we expect. This, we expect the payment of claims in the first period of PLN 200, in the second period, in the amount of PLN 200. Since this is a live policy, we are not looking into including or setting up the reserve for the claim. The payment and the claim is the same, so it's also worth mentioning, and the expenses payable in line with the benefits into reporting period, the cost, acquisition cost, similar as the premium paid upfront. What we have to do as of the initial recognition date, we have to value, measure our liability, and we have to measure the contractual service margin. The contractual service margin, simply saying, it's a difference between our inflows and outflows, revenue and expenses, so the difference between the premiums and all kinds of expenses, so the claims, administrative costs or the acquisition costs. The difference as the initial recognition date is PLN 200. In this specific example, the actual implementation of the cash flows is in line with what we expected as of the initial recognition date, so we have no any difference here. Excuse me for interrupting. You can see the CSM is a balancing item for the cash flows, positive and negative ones. That's why the need in the retrospective approaches to backtrack to the time of issuing the policy, the full retrospective approach, that's the main idea. That's what it's based upon, that we value, that we measure the CSM amount. As of the beginning of insurance policy taking effect, and then we amortize this amount up to the current balancing date, and we cannot arrive at this result in any other way. It's not possible to write this amount, not without backtracking to the time of issuing the policy. When we look at the balance sheet items, we can see that as of initial recognition date, we have establishing of contractual service margin at PLN 200. The best estimate of the liability of PLN -200. Here the obligations of the zero date is PLN 0, whereas in the subsequent reporting period, we can see also this amortization, a proportionate linear amortization of the CSM. We are stuck with a PLN 100 CSM margin at the end of the first reporting period and with the amount of the liability, which is equal to the total of our expected inflows. As of the end of first year, we are expecting the payout of benefits and costs in the amount of PLN 300. Now moving on to our income statements. Here we don't have this amortization of LRC item, which is also only used in case of a simplified method. We are looking now at the expected cash flows. The first item here, we are presenting what inflows we have expected in our actuarial valuation due to the cost, due to the claims, and the subsequent revenue item is the release of the contractual service margin. In proportion, over time, the CSM is released from the insurance revenue, insurance contract revenue, we're also presenting the cost of acquisitions, which is similar to as in the case of a Simplified Approach, also are presented on the expenses side in the same amount. If we talk about the expenses side, here, there's no big differences versus the Simplified Approach. There are no major differences because the same items are also material for the General Measurement Method, general approach. Here we are presenting the claims incurred in the period in the amount of PLN 200, so in line with our actual implementation, actual performance, and also expenses, also in the amount of PLN -100, also in line with our actual performance. Here, it's going to see very clearly on this specific example, what Radek mentioned before, that if the actual performance is exactly the same as our actuarial estimates of the result comes down to releasing of a contractual service margin over time. The expected expenses and the actual expenses, basically in the income statement, offset each other, and our result is the release of a contractual service margin will be estimated as of the initial recognition date, the releasing of this margin over time. If we had risk adjustment using this example, the result would be the sum, the total of the release of a CSM and the risk adjustment. Okay. Looking, however, at the similar view on the IFRS 4, the situation looked a bit different. We were dealing. We didn't have the stability of recognizing revenue over time. The recognition of revenue over time was, to a large extent, dependent upon our accounting policy. One, the first element that had an impact upon the recognition of this result over time was the fact whether the acquisition expenses, acquisition costs, are deferred or not. Here you can see on the right-hand side of this example, the income statement in two cases. In the first case, when the acquisition costs are not deferred, and the second case, when the acquisition expenses are deferred. As you can see, the recognition of this result over time could have differed significantly, depending upon whether we did defer or did not defer the acquisition cost. This was the first element, had an impact upon how the profit was recognized over time. The second important element, maybe I will discuss it on the next slide, is the reserving policy. Now we have an obligation to establish our liability and amount of expected cash flow inflows. Whereas under IFRS 4, as a matter of fact, we were establishing a mathematical reserve, and this arithmetic reserve could have include in itself any risk adjustment, depending upon the accounting policy of the company. We can see also that the fact how this risk adjustment was included, had an impact upon the recognition, on the way the results were recognized over time. What you can see here is two variants of setting up this arithmetical reserve. In the first variant, we set up this reserve in the amount of PLN 900, in the second variant, PLN 1,500. These are some risk adjustments regarding the expected cash flows, but they are not so much explicitly included here. This recognition of results over time may significantly differ. As you can see in the variant 1, we have a result in the first period of PLN 50, in the second period, PLN 150. Whereas in the second variant, we recognize the loss, as a matter of fact. In case of including a very high mathematical reserve, we recognize the loss. In the subsequent period, this loss is unwound, is reversed. IFRS 17 did, basically did not allow for applying such mechanism. As we mentioned in the beginning, certain freedom, certain leeway in establishing the liability amount allows for the possibility of adopting any quantile that the risk adjustment is to correspond to. Where the standard says, as we already mentioned here, that the insurance company that adopted a certain level of this quantile should disclose it. Therefore, in the financial statements, you will be able to see clearly whether the reserving policy is highly conservative, medium conservative, or less conservative. This result, it will be possible to read this result correctly in the context of this information to what quantile the risk adjustment belongs to. Okay, we have discussed the example of non-onerous policy. Now, let's focus a bit on what is happening when we have dealing with an onerous policy. The projection of cash flows as of initial recognition date changes, and now we are dealing with a much higher benefits payments in the first and second period and higher expenses. The expected future outflows are much higher than inflows. When our premium received the difference in the amount of PLN 400, we expect PLN 400 worth of losses. In this specific case, the performance of payments, actual performance of payments, also takes place in line with our expectations and the actuarial valuation. If you look at the balance sheet items, we are not using applying the risk adjustment, the contractual service margin, excuse me, because there's a loss on the contract, so this element doesn't appear. The element the line that appears in the balance sheet is the loss component, the so-called loss component, which is shown at the initial recognition date. It's an amortized over time and also the best estimate of the reserves. What I'd like you to note here is the fact that at the end of the first period, we are expecting those reserves, excuse me, we are expecting the future revenue in the amount of PLN 600, whereas we can see the loss component in the amount of PLN 200. This reserve is reduced by the loss component. For presentation purposes, the loss component, we are presenting the amount of PLN 200, whereas the reserve itself alone of PLN 400 and the total of these two components means future expected payments. This is worth noting here that for presentation purposes, this approach differs. Now, if we talk about the income statement now. A very important element that changes also on the revenue side is the reduction of our revenue, also by this element related to the amortization of loss component. Please take note that in the example, we can see the expected payment of claims in the amount of PLN 400, PLN 400, accordingly, in the first and second period, and the expected payments, of course, in the amount of PLN 200 and PLN 200. What we are presenting, however, in the income statement, are the amounts respectively, PLN 300 and PLN 300, and PLN 100 and PLN 100. This is due to the fact that those amounts are reduced by the amortization of a loss component, and explicitly in the income statement, we cannot see that. You have to remember about is that, both in the balance sheet, the liability is reduced by the loss component as well as in the income statement. This revenue side also, it is by the amortization of the loss component, the revenue side is reduced. Here, a comment also, of course, one may look at the loss component in a way, as a negative contract, contractual service margin. You can be tempted to do that, because in the example, the recognition, in the initial recognition, it's calculated the same way. You just have to remember what Hanna mentioned, the loss fully is recognized immediately in the income statement. This trick or showing the amortization of a loss component is only for presentation purposes. However, in case of a contractual service margin, that is positive, that's true. We recognize the contractual service margin in the income statement gradually as we provide the insurance service. The recognition of a loss component takes place as of the zero date, so we can see that the full loss is recognized in the initial reporting period. The new loss component is recognized. Amortization of this loss component on the expense side is separately listed, so we are presenting the claims paid in the full amount. The expense is paid out in the full amount, and the amortization of a loss component on the expense side, we are showing in an explicit way. On the revenue side, it was including the expected costs and benefits, whereas on the cost side, this amortization is explicitly listed. Okay, so how it was done under IFRS 4? Let me repeat what I already said before, that the recognition of profit over time, as well as recognition of loss over time, in case of such onerous policies, was strongly dependent upon our reserving policy and upon the safety margin or risk adjustment. In this case, we have two variants of establishing the mathematical reserve, more and less conservative. At the end of the first year, the establishment of this arithmetic reserve in the amount of PLN 900, PLN 1,200. Let me just mention here that you're not misled here, but as of a zero date, zero moment, in fact, there's no such obligation to measure, to value this reserve. This reserve was not valued under IFRS 4. Here we are showing it only for present purposes, this PLN 1,800 and PLN 2,400 amounts. In fact, for the first time, this reserve was valued actuarially as of the end of the first year, reporting year. This amount, PLN 900, PLN 1,200, and you can see also that in the income statement. Adding the reserve in the first variant in the amount of PLN 900, in the second variant, adding of this reserve, PLN 1,200 over the entire reporting period. Depending upon this safety margin or risk adjustment, that's what was the release of this result over time done. We could initially report very high loss, and then this loss reverse, unwind this loss, or this loss could have been lower. It could have been if the reserve was not done in a safe manner, we didn't have to recognize this loss at all. Of course, over the entire period of the policy coverage period, the result is similar to what we can see under IFRS 17. Only the recognition over time is different. Talk? Okay, 10 or 15 minutes break. We'll reconvene after the break. Okay, we're back after the break, let's continue with example number two. I have one additional remark. I mentioned that on the revenue side, we are adjusting the expected payments of benefits and claims by the amortization of the loss component, but I did not mention why we are doing this, and this is an important element. After the adjustment, our revenues are still equal to the premiums, and this is very important that the revenues over the whole coverage period must be equal to the premiums. If you would show the whole amount of expected claims and costs and expenses, we wouldn't show the amounts of the expected premium, but the whole PLN 1,400 of our outflows. It's a very important element that we must keep in mind that over the whole coverage period of an insurance contract, that amount is equal to the paid premium. Let's move on to the next example. We are going back to a non-onerous policy. But here we have a difference between the actual payments and our expectations at the time of the initial recognition. On the initial recognition, in the first period, we expected the cost of claims of PLN 200 and expenses of PLN 100, whereas the actual payments of claims were PLN 300, and the actual payments of expenses were PLN 200. There was an increase both in the benefits and the expenses by PLN 100 each, in sum, PLN 200, not in the positive direction. How will this impact our statement, our income statement? We have changes in claims incurred in the period, in the actual amount of PLN 300 and the expenses incurred in the period of PLN 200. The impact on the results will be seen already in this period. In the example where we did not have this variance, we recognized the result of PLN 100 and PLN 100 in the first reporting period, whereas now in the first reporting period, we have the result of PLN -100. We've amortized our CSM. That we've recognized at the initial recognition in the amount of PLN 100, but we've also recognized this negative change in the actual payments of claims and expenses in the amount of PLN -200. The final result is PLN -100. In the second period, everything is actually fulfilled according to our expectations, so this does not affect our result. Whereas under IFRS 4, the situation was quite similar when it comes to recognizing the difference, the variance in the actual payment of claims and expenses. We showed this directly in the income statement. The impact on the income statement was also recognized immediately, directly. In this specific example, so in the actual costs and benefits, regarding our expectations for a given period, there are no differences between the two standards. Now the next example. We also have certain changes, but not in the actually paid benefits and expenses, but changes in the future assumptions. In the initial recognition, actuarial valuation, we projected that in the first and second periods, we would pay PLN 200 of claims and PLN 100 each of expenses. Whereas now, during the reporting period after the first period, our expectations for the future change. Now we expect that in the second period, we will pay PLN 100 of benefits more than we planned in our initial valuation of the contract, so we have changes in actuarial assumptions. Here we have a different situation than what we've seen before. The change in actuarial assumptions, it will not impact the whole result, but it will be recognized through CSM. Through our contractual service margin, this change will be shown in the results, both of the first and second periods, and not directly in the period when this change took place. This is very important. What's the reason for this? This stems from the mechanism of calculating CSM for the next reporting date. On initial recognition, nothing changed. We still have CSM in the amount of PLN 200. We expect PLN 1,000 premiums, claims and benefits, and acquisition costs PLN 200. Our expected future revenue in CSM amounts to PLN 200. Whereas, as we move into the next reporting period, so if we think about the development of CSM, so we have the initial date, PLN 200. We take into account the negative change in assumptions of PLN 100, so our CSM is now PLN 200 minus PLN 100, which is PLN 100, and only in the next step, we amortize the contractual service margin or CSM into our income statement. On the revenue side, you will see that the release of CSM is in the amount of PLN 50 already in the first reporting period. The change in actuarial assumptions impacts what parts of the CSM will be released in the first period, but it also impacts the second period. This change of PLN 100 is spread proportionally over time or proportionally to how CSM is being released over time. This is a very significant change compared to what we've observed under IFRS 4, and I'll mention this briefly. Would you like to add something? Yes, just two remarks. First of all, that the impact of changes in actuarial assumptions on the value of liabilities go through CSM, and this stems directly from the provisions of the standard. It's CSM, and not the income statement, absorbs the possible losses or sometimes, some positive changes and the impact of the changes of actuarial assumptions. Another remark that the author of performing the actions on CSM are also defined by the standard. This may seem non-intuitive, that first we change the value of CSM by the effect of the change of assumptions, and only then do we do the amortization. We could imagine a different order of the actions. First we amortize CSM, and then from what is left, is, potentially absorbs the change of assumptions. A discussion was taking place regarding this, these possibilities during the creation of the standard, but they decided that some of the changes of assumptions that we are mentioning here are also impacting the current period, the services provided in the current period. That's why they made such a decision regarding the order of performing the actions. How about IFRS 4? Under that standard, we have a creation of a new reserve. We are creating a new reserve for the second period, in the amount of PLN 600 in total. In the second period, it's the addition of PLN 150. This is seen in the different line items. We have the initial reserve, then the release of the reserve in the period, and then the change in the reserve in the amount of PLN 450, and then a creation of another reserve in the amount of PLN 150. This is a very theoretical example. It would not happen like this in practice, because the full reserve in the amount of PLN 600 would be included in the first reporting period, on the initial date, but the creation of the reserve in the amount of PLN 600 was immediately recognized in the result. We had an immediate recognition in the result, so it was not spread over time. You saw the result in the amount of PLN 550, and here is PLN -100 in the next period, PLN 200. The whole amount of the created reserve was recognized directly in the income statement. That was under IFRS 4. The next example, I think it's quite interesting, the change in the profitability of a policy according to our actuarial assumptions. We expected that it would be a non-onerous policy at the initial recognition. We recognized CSM in the amount of PLN 200, but at the end of the first reporting period, our estimates changed. The result is that the policy becomes onerous, the total amount of all the inflows is lower than the amount of outflows. How does this translate into our income statement? First of all, we recognize the loss component in the amount of PLN 200. The whole loss on this given policy, in the amount of PLN 200, is being recognized in the first period, and we see the creation of the loss component in the line item, New Loss Component Recognized. What happens on the revenue side? Even though at the beginning, on initial recognition, we recognize CSM in the amount of PLN 200, then on the reporting date, CSM in total disappears because we have a loss. Here are our expectations for the future change, so CSM is reduced to zero, so we have a direct recognition of a loss. On the revenue side, we do not see a release of CSM. We see the whole recognized on the expenses cost as a loss component item. What's also important is the element of the adjustment when it comes to expected claims or the payment of benefits and expenses, and also the adjustments related to amortization of the loss component, which is also included in the revenue amount. It's the same mechanism that I've mentioned. The sum, the total of all the revenues in the whole coverage period, and it has to equal the paid premium. It should not exceed this amount. The adjustment of the expectations regarding payment of claims and expectations is required here. The remark regarding classification of policies into non-onerous policies or portfolios and onerous ones. If you have a policy that at the beginning, that is classified as non-onerous, so it receives this label that it's in the portfolio of non-onerous policies. Even if you have a situation like the one in this example, there is a change in our expectations regarding future claims and benefits, which make the policy or portfolio non-onerous, there is no change of the label. There is no change in the portfolio that the policy is falling under, and it belongs to. Once a policy is categorized under a given portfolio, it remains there because it would be an operational nightmare if you had to change the categorization of policies into different portfolios every time. This is a decision and is important for the readability and accessibility of financial statements. As for IFRS 4, I don't want to go into details. The situation is similar to regular changes into actual assumptions at the end of the first reporting period. The whole amount of the created reserve is seen already in the result. I don't want to go into details. We'd like to very briefly discuss a situation in which we have a discounting effect. We have our LRC reserve, which is being discounted. There is also an element of the balance sheet, which is discounted, and that is CSM. We must remember that it's not only the best estimate in terms of the reserve, but it's also CSM. Similarly to what we've seen in the simplified method, we recognize the discounted values of the two items in the balance sheet. The reversal of the discounting effect is placed in the Insurance Finance Income and expenses item, and this is the sum of the reversal of the discounting on two components, both in the CSM component and the Best Estimate of future liability estimate. This component, we don't have an additional element in the income statement. As for other items, other line items, we don't have many changes. We have nominal values of the expected payments. The actual payments are presented in nominal values, and the release of CSM is also provided here in nominal values. Already after the reversal of the discounting effect, which is presented separately. Here we have a very detailed calculation and the last example in this category. What happens when the discounting changes? This is what we've mentioned before. If we have a lot of changes in discounting rates, that influences the valuation of liabilities. We have a change in the second period. Interest rates have increased from 1% to 3% in the second period. We have a change on the valuation of liabilities. The previous valuation at the end of the first reporting period would be PLN 297. We see this in the second table to the left, whereas after the change of the discounting rates, after the increase in interest rates and increasing of the discounting effects, the valuation of this liability at the end of the first reporting period is PLN 291. This change stems only from this effect. The decrease of the reserve by PLN 6, this is not presented anywhere in the income statement, so we don't see this directly. This is a change that directly impacts other OCI, which are presented in the capital part. We must remember about that the fluctuations in rates will not impact the results of the PZU Group, but will impact the amount of the capital. I guess that's the end of the examples. Are there any questions? Maybe we could talk about the relation of revenues to the premium. We said that they have to match. We have an example where they are not the same, so what has to be adjusted to make sure they are equal? This stems from the discounting effects that we see in this margin. Here we are showing CSM in every period, so we are reversing this effect, and it is compensated by what we are showing on the insurance finance income and expense item. In this specific example, there is a difference in terms of the discounting effect. Are there any questions? There are no questions. Thank you very much. Now let's give the floor to Tomasz. Thank you very much. Do we need a technical break just so we can regroup and you can maybe get some coffee or tea? How about a five-minute break? Okay, so a short five-minute break, and let's reconvene in five minutes.... Ladies and gentlemen, we've had a short technical break. We've rearranged the setting. We'd like to kind of sum up what our colleagues discussed in the first part, and we'd like to show you again our results after this technical introduction. Maybe more things will be more obvious to you, there will be less questions, it will be more intuitive, or at least we are convinced that we are on the right path when it comes to helping those who'd like to understand PZU anew. We are on the right path to building a more intuitive, reading, understanding of the numbers. We would like to go over the differences between the old and the new standard. Once again, we would like to show how, especially taking into account non-life insurance, we can try to build this bridge between the old and new world. We have a good information. We have more non-life insurance in PZU, so it makes it a bit easier. When it comes to different components, when it comes to life insurance, we have to try to look at it separately. If we try to have a specific building of this bridge, this may be problematic. Let's start with non-life insurance, and let's remember, I will repeat this, but I'm assuming that this was said many times before. This is a different standard. The first one recognized revenues and expenses in a different way. The first difference is that between the value of revenue based on memorial, so the revenues we've recognized over the given periods, there are differences. The differences are different in the case of a portfolio or a situation when a company has a similar level of revenues year-over-year or quarter-over-quarter. The differences are a bit bigger if you are recognizing a portfolio which is increasing or decreasing, for obvious reasons. In each situation where we have dynamic changes, this will impact the greater differences in revenues in both standards. Starting with the value of the gross written premium, this is the written premium that we would have recognized in the first quarter of this year. Under the old standard, it would be PLN 4,100,000,000. As my colleague said before, the first change is the attempt to reduce this to the value, which, in principle, is similar to the earned premium, and then we have to adjust the value for the premium reserve. This is not a theoretical, but a practical example. These are the results of PZU in Polish companies, so PZU SA, LINK4 and TUW PZUW. This comes down to the value of PLN 300 million. After the adjustment, we are on a very similar amount, so PLN 3,774,000,000. We might say that the differences are very small, and the differences are made up of, on the one hand, of the earned reinsurance commissions, which should be adjusted. We should also adjust the base between the memorial, so the value of PLN 3,790,000,000, this is the memorial value. Through the way, in when and how there was a change between the written premium and the value of the earned premium and the cash flows that we recognized in the given period, adjusted by the value of the written off due to bad loans and also additional remuneration. Based on the fact that maybe some customers have delayed payments, we have some interests stemming from delayed or deferred payments. This is all from the viewpoint of comparing the memorial and in castle on the base, on the proxy earned premium, and this is reduced to the. In the first quarter, to the value of the adjustment in the amount of PLN 12 million. There is one additional value that my colleagues mentioned in the first part, and this is a value that appears, first of all, in life insurance, and we'll mention this soon from the viewpoint of its amounts and its significance. On the side of non-life insurance, this appears on a smaller scale. This is a value that the company will recognize as a deduction, regardless of the form of this. We can think about this in this way, in non-life insurance. Here the value amounts to the reserve for premiums and rebates that will be paid either in the form of premiums or rebates. If the insurance will take place not accordingly to the contract, then maybe there will be an increased claim factor. In the first quarter, there is an adjustment that we should recognize with this regard. This is PLN 1 billion, and we have additional reinsurance costs related to the so-called sliding scale. The progressive method, so scale commission. This all brings us to a full comparability. Here we have the value of the gross revenues from insurance services, and this is, according to what we've recognized in the first quarter for PZU, LINK4, and TUW. As my colleague mentioned, on the revenue side, this value for presentation purposes is being adjusted. Is being adjusted for the acquisition costs for the given period, and they are not acquisition costs that have been paid, but they are the earned acquisition costs. Under the old standard, they are the cost of acquisition, adjusted by the value of, cost of acquisition, incurred over time. Here on this slide, you can see them on the right-hand side, and they are marked in the light blue color, whereas the dark blue color represents the estimated value of the insurance liability. After covering the costs of, ascribing a given portfolio to the whole portfolio of insurance contracts. As to life insurance, here as I said, the situation is completely different because it's difficult to build such a transition. This is not the simplified model. We have the full model being used here. As we try to achieve comparability, of course, we start with the gross written premium, which, amounted for the needs of this presentation. For this slide, this is just PZU Życie. It was PLN 2, 206,000,000. This value is being adjusted by what will also go to our policyholders. As of today, we must say that we don't know, just as in case of non-life contracts, or what will be the ultimate form and shape of the cash flows. Whereas when it comes to life insurance, this is the value of the fund that is being created from the payments of the policyholders. In policies, we have the investment element, as you remember from the first part. This is not an integral part of the revenue from insurance services. This is different than in the local standards, as it used to be under IFRS 4. We are not recognizing in the sum of revenues, the value, which is by definition, value, which creates the equity fund. This is the fund that will be paid to the policyholder, either at the end of the insurance coverage period or in the case of an insured event, in the shape of cash flows, of paying claims and benefits. This is the substantial element and the important difference between the two worlds. This way, we are arriving at the premium earned, adjusted by the investment, the element component, which is called under the standard, non-distinct investment component. This is the not separated investment component. I haven't mentioned that when I was discussing the non-life insurance, because in contrast to the life business, it doesn't have this investment-related relationship or connotation. Continuing the differences and similarities between the standards, one may say that this is where the similarities end. All the rest is a totally different approach to the revenue from the point of view of how and h ow we want to allocate the premiums, how we see that we should allocate the premiums that are not only today paid to us, but will be paid to us throughout the entire customer life cycle relationship, and will be attributed to the given period, and will be, during that period, allocated according to our best estimate, to cover the costs, cover the expenses, cover the claims, benefits, to cover the costs related to attributing the contracts to the portfolio. All the, that's left as a difference between the inflows and outflows will be made up of two components. Will be made up of the contractual service margin, adjusted by the uncertainty element or the premium for uncertainty, the payment for uncertainty. We know with contracts, the contracts and life is life, where for, according to our best estimates, could be accompanied by a completely different actual performance of those cash flows, both in terms of timing as well as values and amounts for various reasons, sometimes irrespective of the abilities of both parties and wishes of both parties. In this way, spreading, by spreading over the entire life cycle, total revenue and total expenses versus during the insurance coverage period, the element component of insurance service, which in case of a PZU, is allocated on the base, on the insured sum, as well as far as the main contract is concerned and the riders. This way, those components are allocated to a specific period, quarter, year, and this way also, we recognize the release of the main component, which is the main component shaping or impacting the results as far as the life business companies are concerned. The Contractual Service Margin adjusted by the risk premium or risk payment, Risk Adjustment. At this point, we would like to move or discuss, walk you over the comparison and the allocation of individual attribution of individual components that you discussed during the previous part of the presentation, either on the examples or by walking over the assumptions of the standard. In a general manner, we'd like to attribute them to the specific components, insurance components, to applicable insurance segments according to our segments. Now, mention a few words about what has an impact upon the changes of individual amounts between periods, what influences the potential change during the period, year-over-year change, what has impacted on the example of PZU upon the individual amounts and values and how to best read it and understand it. Let's start with non-life business. Amortization liabilities for remaining coverage, which is valued using the Premium Allocation Approach or the simplified model. A model that allows to build practically the full transition versus the IFRS 4, and here we have the total of all those amounts, all those values. Accordingly, in the individual columns, we are showing those insurance segments for which this value, this amount is applicable. In case of the amortization of liabilities for remaining coverage, when you take into account the simplified model, the PAA model, which is applicable with respect to the policies that have the coverage period up to 12 months or a bit longer. However, the ones that the results of which are recognized according to the simplified model versus a full model, give us quite a good approximation. We are talking mainly here about the property-related contracts, which are, of course, used in the corporate insurance, non-life, in the mass insurance, in the insurance that are part of our operations in the Baltic countries and in Ukraine. These are those areas where we are conducting operations from the point of view of insurance liabilities covered and measured value using this simplified model. You have the appropriate values listed for the first two quarters, so Q1 2023 and the same period of the previous year. The total of all these amounts in the first quarter, PLN 3,520,000,000. Quite a big increase. An increase, which when you look at the total of the Polish subsidiaries year-over-year, this is almost 12%. A bit more even if we look in a total, including Polish and foreign subsidiaries. What the biggest impact on that? The biggest impact comes not as in case of a IFRS 4 or standard, local standard, the sales reported in the given period, but this is impacted by the fact how and at what growth rate of sales the company was characterized or the group was characterized over the last 12 months. The last 12 months, because let me remind you, we are talking about the simplified approach, so the one that is applicable as a principle with respect to the short-term policies. In this case, property and property-related insurance contracts are characterized by the coverage period, where majority of this coverage period is 12 months. A similar approach, a similar understanding should be applied with respect to the share of a reinsurer in the revenue from insurance. Here we are talking about how, in what manner, using exactly the same methodology, the same approach, the same mechanism for reconciliations, which we had earlier shown with respect to item, gross item, we could achieve and apply with respect to the amount that in the previous world was called the amount of a share of a reinsurer in the premium. Here we should talk, say, in the earned premium. As you can see here, it's going up to PLN 380 million. It's quite a strong growth, this growth is again, influenced by the fact what was our activity like with respect to the policies that we were allocating to attributing to the portfolio, but were reinsured by the PZU over the last 12 months. Not so much is important, not so much what's happening in the given quarter, but much more important is what was happening over the last 12 months. Let me remind you that with respect to this specific value, this specific amount, especially after Q4 last year, we were dealing with a very deeply reinsured contracts that we were recognizing both on the PZU SA, on the corporate side account, as well as in terms of the operations under TUW, which from the point of view of a segment-based reporting, is also a part of the corporate business, corporate insurance. These amounts, as we were showing on the previous slide, are of course, adjusted for presentation purposes by adding the acquisition expenses that or the revenue to cover the acquisition costs. For presentation purposes, here, there's no difference that is shown in case of a live business, the one that will actually occur or appear. That's so much regarding the non-life business, and also how this part of our revenue is being developed. Regarding the life business, mainly the general approach, general model in terms of VFA, as my colleagues presented in the first part of our presentation, less than 1% take into account the contribution of this segment to the consolidated results. That's how much is measured at PZU using this method. The lion's share of the life business is, it's not even a simplification, it's true. It's being measured using the general approach, a similar logic as on the previous slides. The general method was used to measure in the group, individual contributed insurance, protective insurance, individual protective insurance, investment insurance, operations as part of the Baltic countries and the operations in Ukraine. In terms of this component of our revenue, as you remember, ladies and gentlemen, this is this part of revenue, which, according to our best estimate, should reflect the expected at the given period, costs related to the claims and benefits that the revenue come from the insurance contracts in the life business should be allocated, used in the given period. Let me come back to one thing and draw your attention to several issues that probably we will be talking about repeatedly. We'll be coming back to that a number of times. The issues related to the mortality. We are talking here about the payout of the claims and benefits of the risk that to a large extent determines the value under this item. As you remember very well, the distribution of mortality over the year is not a permanent distribution. There are quite significant differences in terms of the number of fatalities of personal disease. In case of PZU, these are not just fatalities of deaths of the main insured person, also the co-insured persons. Therefore, the total amount payout of benefits per one insurance policy is not one-to-one relationship, but one to many in a number of cases for that very reason, and this distribution in Poland is characterized by the heightened, elevated mortality, elevated number of deaths that we can observe in Q1. Later on, there's an improvement in the fatality or mortality rate, if we can just use this term, improvement or a decline of a number of deaths that we are observing in the entire population in Q2 and Q3, and a return, but not so strong, but still to high rates of mortality in terms of Q4. This distribution, that was the distribution like before the pandemic, that's most probably the distribution will be the same from a point of view of seasonality once the pandemic element is been fully eliminated. I think we already mentioned when we are presenting the Q1 earnings. However, we should remember that the mortality rates, especially the COVID-related over mortality, elevated mortality that we're dealing with over the last three years, had a major impact upon the distributions, and had a quite a strong impact upon the way this additional expands due to the fact that we were dealing with a pandemic that was harvesting, quote-unquote, it's. The deaths was accounted for recognized individual quarters. I'm talking about this because depending upon what the company's expectations regarding what was gonna happen in its environment, so namely, how and when we will be observing or realizing these additional expenses related to the pandemic, and in the corresponding way, the company develops its revenue in the part allocated to cover the claims and benefits. It might not be obvious, but if you approach it this way, that there's a normal distribution that somehow characterizes by its normal during the year, normal distribution, then it changes significantly when our flows, our cash flows, and the way how these additional expenses should be covered in the appropriate accounting periods, these assumptions should be adjusted, which of course, took place in 2022, and would have taken place in 2021, had the 2021 been governed by the new standard. Taking into account that with each successive quarter, we are getting closer to the return to a normal situation. With each successive quarter, we are seeing more and more common features between the period or the periods that we are discussing now, and the periods from before the pandemic. On an ongoing basis, we are adjusting the premium-related cash flows that are allocated to cover the expected claims due to the mortality rate. In this respect, in this case, the over mortality during the pandemic period, in the subsequent period. It might lead to a super unobvious situation where during a highly, with high claim payouts, the highly COVID year, that the company has such expectations. Our revenue is higher than in the period when the situation is totally different, and the company to cover the expected claims and benefits, is allocating accordingly smaller amounts due to the fact that accordingly, smaller claims should be realized, for instance, in Q2 and Q3. One can say that in the following way, that at such a time we are dealing with such a non-intuitive situation, which is worth mentioning and remembering when in a situation where we are recognizing an improvement in the environment we are operating in, our revenue could be, in an extreme case, lower than the revenue that we post and are recognized in during the periods characterized by higher expenses, including the expenses related to the claims and benefits, exactly due to the fact how the expected cash flows are allocated to the individual periods. Of course, this phenomenon, on the other hand, should be accompanied by the accordingly higher release of a contractual service margin that we're also dealing with in the first quarter, mainly due to the fact that as a principle, we are expecting lower expenses of claims and benefits, the administrative expenses, the costs related to the assignment, allocation, attribution of the policy to the portfolio. When we should expect over the entire life cycle of our customer relation an accordingly higher margin that is through the so-called coverage units. In our case, these are the some insured are allocated to a given period. Maybe it's not intuitive. It. This could impact the ease of the understanding, easy to understand this value of this amount over time, especially if we compare year 2023, as I said, the year when we see quite a substantial improvement and the departure from this COVID-related higher mortality rates up to year versus year 2022, which with this additional element, was characterized by the element of the additional higher mortality rates that translated into higher benefits paid out. The expected expenses, similar as in the example related to the claims and benefits. Also, in this case, in this example, in this line item, we are only talking about the insurance measured using the General Model. Group, Individual Protective, continued, Baltic, Ukraine, life investment insurance, but taking into account the life business in the Ukraine, the value of these expenses is below the materiality level, so threshold. It's not so that they are not being measured under this item. Again, we are talking here about our expectation. Expectation, not the actual performance, due to the fact how and or in what way, what we are dealing with in a given period, both with respect to the development of the portfolio, for the maintaining of portfolio of policies, and the new acquisition operations during the given period, which has an impact upon how we consider this line to be shaped for now, the theoretical line. How theoretically, the expected inflow should be allocated to cover the expenses expected in the given period to occur. Of course, the same as in case of the claims and benefits. Also, in this case, one should take into account the potential onerous contracts, remembering about the fact that, again, let me refer to the first part of operation. In this case, we are talking about only solely and exclusively about the value, up to 100% of expected inflows. The amount of the outflows above 100% of expected inflows allocated to a given period is shown as this surplus, that for presentation purposes, is listed as a loss components of onerous contracts. The release of a contractual service margin, we still in the live business, the same segment as previously, as we mentioned to you before, the value of the amount of this contractual service margin, which from the point of view about approaching the live business, represents the majority as far as the result. That's determining the profitability, the contribution of a given segment to the consolidated results, the earning is going up, is growing versus Q1 last year, up to PLN 350 million level, which is related to the fact how mainly two parameters were changing. On one hand, the way the claims allocated to the segments we are discussing here were going up, here one could differentiate two types of causes, of reasons that had an impact of on that. We already mentioned one. We mentioned the reduced mortality rate, which was also confirmed in Q1 by the distribution of mortality in throughout the entire population in Poland. On the other hand, by something that's on a working basis, more and more often is called as a health-related debt. The additional utilization of the benefits, medical benefits, on those medical risks that are mainly recognized on the side of the group and individually continued insurance. More even so, the group ones, taking into account the fact how and in what way, in the form of insurance policies, we are performing our operations in the health protection segment, which is on a working basis, called PZU Health. What is shaping the release of this contractual service margin? I assume that you already understand it very well at this point in time. However, let me draw attention to one thing that I already mentioned, namely, what is the basis for the allocation of total amount of contractual service margin, initially recognized at the point of allocating the policy to the portfolio, to the given period. This amount that we decided to allocate, to which we decided to allocate the entire margin to the periods that could represent 20 years or more, is exactly the sum of sums with respect to the basis, including the, also the rider. This is the amount that, in our opinion, is the best reflection of the risk that we incur, that we bear in the given period. Let's move on. The release of a contractual service margin and what this amount is made up of, both from the results point of view, but also from the point of view of a balance sheet point of view, which I again assume you know much more about after the break than before the break, taking into account two most material, most important segments of a group, and continued and individual protective. Accordingly, as of December 1st, the total cumulative amount to be recognized over contractual service margin, to be recognized in the future, under the policy, that as of the day, were attributed to the portfolio, represented PLN 7 million, 800 million. As far as the individual insurance are concerned, protective nature and what happened during the 1st quarter? During the 1st quarter, we were selling a lot. Our sales were doing good. We're informing on an ongoing basis what the sales look like, both on the other side, which means that we are recognizing an additional CSM to be amortized in the given period, in the period that we are providing the insurance service under the contract. The period during which, based on the sum of sums, we will allocate the according value of the expected margin, but for the entire coverage period, was on the balance sheet recognized, and here it's increased as part of the balance sheet item. Partial value is PLN 40 million on the group and continuous services, and less than PLN 40 million with respect to the individual protective insurance. We have something that is called the change of the assumptions and the variance due to the fact how and in what way, versus the original assumptions, our adventure with our customers is actually performing. Here we are dealing with two types of changes. The first one, which is the derivative of the fact that maybe our assumptions, actual assumptions with respect to what the characteristics will be of that portfolio, that was as of December 31st in our hands, what will be its characteristic of the subsequent periods? What will be the distribution of key assumptions that will be affecting, impacting the CSM in the subsequent year? This is the first piece. The second piece is the operations that characterizes PZU, probably to a much larger extent that its competitors. We are trying to derive value from two types of operations, the attribution of a customer to the portfolio, then to offering the customer additional products, rider products, additional additions that for various reasons, we upsell. We additionally sell, not at the moment of the original customer acquisition, but we are saturating the customer with further products during the life cycle of a product for various reasons, strategic, tactical. These are the operations that part of a PZU's DNA on the life business side. Out of the two cubes, PLN 164 million and PLN 78 million, major part is the recognition of a new business. Not in the form of a new business, but in addition to the policies that have already been assigned to the portfolio, and with in terms of the group and continued insurance, out of this value is PLN 103 million on the other side. Of the individual protective insurance, it is the amount of PLN 25 million. I'm mentioning this because I want to draw your attention and not to try to draw inappropriate conclusions from the same following comparison. Okay, since as of December 31st. Now, let me use the example only of related to the group insurance. The CSM balance sheet value is PLN 7,014,000,000, and we assigned as part of a new acquisition of the CSM to be recognized in the future, PLN 240 million, and we consumed PLN 290 million. It means that we are folding, more folding than except if it wasn't for the positive events that we recognize in our environment, then as a principle, we are consuming more than we are develop, creating. Therefore, it would mean the narrowing down of our field of operations and not so much the other way around. Let me draw attention to the fact that this understanding of this is incorrect, and taking into account our distribution model, we should read these two first steps, partly in a joint, in a combined manner. The third item, PLN 74 million and PLN 7 million, this is accrued interest, and this way we are arriving and what's constituting the basis for generating the result in the given period. Namely, the release, on one hand, of the CSM that was available the, as of December 31, 2022, but also partly via CSM, that was attributed as a new business in the new quarter. Of course, in proportion to the coverage period, in proportion pro rata versus the risk, how this risk is priced, as we already discussed. The next element that constitutes a certain type of revenue component is the release of margin over the uncertainty margin or risk adjustment, which is related to the fact that Let me refer to the job with my colleagues used it, in spite of the fact this is the best estimate, often it is the best because done by PZU, obviously. However, the hit rate is never 100%. We have to realize that to cover those differences between the actually performed amount and the estimated amount, so that it might happen in the given period, these estimates, those estimates involve a certain estimate error, despite the fact that these estimates are best they can be. Truly, in order to cover them, must find something, but taking into account the fact that we are an insurance company and depending on the fact that an insurance company and the principle of accounting is accompanied by the principle of prudency, prudent measurement, prudent valuation, and so on and so on. We have to also, as part of our revenue, out of those cash flows that we are performing or implementing with the rest of the customer, we have to recognize the additional component, which is the premium for uncertainty, which is due to the risk profile or the fact, what are the cash flows, at what amount, what is the duration of the contract, whether it's a long-term contract or short-term contract? Here, in a very simple way, one can think about this as follows: if something is characterized by higher risk, then the adjustment, risk adjustment should be higher. If the lesser, the lower risk adjustment. If something has given us higher cash flows, the adjustment is higher, the lesser, the less. The coverage period is longer, the adjustment is higher, the less, the shorter, the lower risk adjustment. Understand, this is, these are quite intuitive relationships. The more the volatility element is higher, at the same time, the uncertainty element reflected in the income statement, in the form of adjustment rate to the uncertainty should be higher. My thoughts are often tense. It's also worth mentioning how this value is being built. It's being built, similarly as to the equity requirement, as a sum of components adjusted by the diversification element. If this element materializes as a risk on the one hand, then it will level out other risks that have a different direction when it comes to their joint appearance. At the end, it's the sum of components adjusted by the diversifying element, the one that diversifies the separate components when it comes to the risks that have the same characteristics. The release of the margin in the first quarter, I think, is quite intuitive, considering the lower risk margin because of the environment, also because the adjustment in terms of COVID expectations. That's why we have a small adjustment on a year-to-year scale. The final value represents acquisition costs. Here we have the volume, the volume ascribed to a given period. In non-life policies, also in the previous periods, which is adjusted by all the costs related to the recognition and acquiring of the contracts and ascribing them to the portfolio. Here, just as in the case of revenue values, we are recognizing both the gross acquisition costs, as well as the acquisition costs on the parts of the reinsurer. What we must remember here is that you will find exactly the same value on the revenue and the expenses side. This is not the expected value, but the already fulfilled value. From the viewpoint of presentation consequences, maybe this is not so visible. In this part, we'd also like to show that this expense is being incurred, and it will always take part in the recognition of the sales and ascribing a policy to a given portfolio and, in the way that it was shaped, so we can adjust the other components in terms of the actual real value. Here is the last factor. Maybe it's not so essential. This is a factor that 90% is shaped by the difference in what we expected and what is actually happening. The variance, experience variance, so the comparison between our expectations and then how the business is behaving in terms of revenues. If we have a certain discrepancy between life models, in terms of how they treat and predict reality and how reality actually behaves. We can say that we have a reversal of the scale of revenue on the group level, PLN 6,400,000,000, and the value of a statistical error. Here we are moving to our experiences. These are not estimates, but actually our calculations based on the experiences in a given period. Just as on the revenue side, when it comes to insurance companies, let's start with claims and benefits that were recognized in the given period. Again, without the investment component. This is the difference between the current and the previous situation. We have this element that is recognized as a cost and expense in all insurance segments, as well as in all the segments that, in terms of coverage, are characterized by a reinsurance coverage. These are not only gross values, but also values related to the share of the reinsurer. These are the amounts that we've recognized in a given period as outflow and as the best estimate of reserves, so the potential claims that took place, but they have not been reflected yet in terms of cash flows. They will materialize in a cash form in subsequent periods. Just a few words about amounts. Let's remember, we are talking about only the value of new claims and benefits when it comes to the development of the reserve from previous years. It's represented in other amounts. We'll talk about this soon, but here the decrease of the value over the first quarter compared to the previous quarter. The first quarter of the previous year, PLN 3,800 million. In last year, it was PLN 3,902 million. This is the impact of a greater claims frequency when it comes to motor insurance in a non-life insurance in both segments, the corporate and the mass one, and the lower claims frequency, claims ratio in the mostly mass segment. When it comes to mass claims related to, for example, weather phenomenon. Weather phenomenons that we've observed quite frequently in the first half of the previous year. Let me remind you that that was a time when we had a lot of storms over Poland, and that increased the claims ratio by over 6% in the given period. Now on the Life side, there is a lower increase in mortality in terms of COVID-19 risk and a greater claims ratio when it comes to medical services. In light of what we said before, that is the Covid death. The next item, expenses incurred. For the sake of this discussion, we can call them technical or administrative expenses related to insurance service. Contrary to the previous standard, here, these expenses are related only to the actual activity, so the maintenance and development of the portfolio, but they do not contain certain elements, which, according to the regulation of the Minister of Finance, regarding of accounting for insurers, were allowed in local standards as well as under IFRS 4. Some of the main differences in these two standards is the equivalent of administrative expenses ascribed to different insurance segments. We do not have PR costs, we do not have costs related to brands or to the brand, or to oversight, or to expenses related to different stops in activity, for example, due to the COVID-19 pandemic. Due to different factors, sometimes, we have periods when we cannot carry out our activities, for example, just like in the risks related to Covid. In the previous standards, we did not have such factors. The expenses are occurring, and they will be occurring. IFRS 17 is characterized by a somewhat greater technical matching to different categories of the expenses accounts, compared to the general and the insurance reports. It limits the allocation of expenses to the insurance results. That is only to the expenses that you can see here in the description. Those which are directly related to the actual activity, to the maintenance and development of the portfolio. As a principle, the expenses in the perspective of 12 months should be slightly lower. Let's move on. Runoff. This item tells us to what extent what we witness in a given period has already been reflected in our estimates related to claims that have been recognized in the shape of their best estimate, because this is positive in previous periods. How this estimate changed over time. Here we have a non-intuitive behavior in the sector of corporate customers, both in the share of the reinsurer and in the growth value. We have a large value, PLN 1,216,000,000, and PLN 1.234,000,000. This is the sum of what we've recognized in a given period. On the one hand, we did not have reserves in the opening balance sheet. In the situation that the reserves, due to the prudence level, were slightly overestimated. Here, as you can see, we have a situation that describes a large claim in a corporate client from previous years that was not estimated in the reserves in the opening balance sheet. We did not expect it, but it's a claim that was deeply reinsured. As for its impact on the net result and the contribution of this segment of corporate insurance, it doesn't have a big impact. As a principle, both on the side of gross value and the share of the reinsurer in these values, it's quite a large event. It's an event related to a claim of one of the very large corporate clients from the energy sector. That's how it was recognized in the first quarter, and that's how we should understand it. Amortization of Loss Component. As you see, this value is recognizing basically all the segments, both in this and the previous quarter. As a rule, this is the value that we have recognized in the balance sheet as of December 31st. It was recognized as the value of the Loss Component. It was a value that when it was fulfilled, if I may say so, it was fulfilled both on the expenses and the revenue side. Here we are describing how a value that was an expected surplus of the sum of expenses over revenues, and it was recognized, at the time of the initial ascription of the policy of the contract to a given portfolio, and how this was fulfilled over time in the first quarter. Here we may say that this value was growing, luckily not a lot. It was growing as a consequence of what this value in the balance sheet was growing over the course of the past 12 months, and then how this increased value, that, as I said, stems from the historic surplus of expenses over revenues. How it was recognized, accordingly, in the quarters of this year and the previous year. The recognition of the new loss component. This value is the same in all the insurance segments. Over the course of the past 12 months, it has increased by PLN 46 million. This is a value that describes our expectations. This is not the fulfillment of this expectation. This is in the previous amounts that we've discussed a second ago. This is our expectation as to how the policies and portfolios that were ascribed in a given quarter, so we are talking about the current cohorts. How they are characterized by the spread of expected revenues and expenses? And then how large is this expected surplus of expenses and revenues? As you already know, in line with prudency, we have to take into account this surplus in our income statements, in the recognition of the policy. here we are not doing any comparisons. I guess the costs from this contract, if they are higher than the revenues, then we have to recognize the surplus and ascribe it to the result value as a loss component. This is the very significant difference compared to the previous standard, which as you know very well, the offsetting is happening naturally. especially as we analyze the need of creating an additional result component, which is the reserve for unexpired risks. To what extent in a given segment, we recognize the sum of negative values over the sum of positive values. If one covers the other, so they are offsetting each other, then it's all okay, and then we don't have to create an additional reserve. In this case, the rule of prudency makes us do it immediately after we recognize such a situation. We have to deal with the situation, and we have to report this fact. The next value is already outside of the insurance result. The previous one was the last component related to the insurance result, and the next two values will complete the results of the segment of insurance, but this is the non-insurance part. We here, we have the expenses of the time value of money and the results of al location activities in the part related to the covering of the technical and insurance provision. It has a dual character. Its first feature... It should be well matched in terms of the strategy carried out in the portfolio, which should be securing the liabilities for the technical and insurance provisions. It should cover the costs of activities, which are recognized as the reversal of the discounting, so of the value of money over time. On the other hand, this is the local characteristic of PZU, because PZU, differently than in the expectation of the creators of the standard, was not able to implement symmetrically, this implementation on the side of assets and liabilities. As we were implementing IFRS 17, did not introduce the right adjustment compared to Standard 9, which showed the valuation of financial instruments in our valuation, so that the value of assets and liabilities in terms of their valuation in the volatile environment, mostly in the environment of volatile interest rates, so that it can react symmetrically. We were not able to implement that. Why? Because we had to take into account also the local requirements stemming, among others, from the necessity to maintain and to keep the local technical rate. That's why we were not able to have a situation where one or the other company would face a situation where a change of the investment strategy, which is reflected in the value strategy, would lead to some short-term gaps, so it would lead to the necessity of a top-up and to have an additional write-off. We did not want to have that. As you may have heard, the PZU Group made a decision, according to which we will see these mismatches, first of all, in terms of differences when it comes to the value of insurance liabilities between the current rate and the historic rate. What we see in the income statement is the valuation of liabilities with the historic rate, and this will be completed in the report on the other comprehensive income. We will mention this situation again in terms of an index. We will talk about this discrepancy in terms of the index that we wanted to propose as the best, as a better measure, which can track the profitability of one's equity. Since the revenue from investment activities on the portfolio, which secure the liabilities, have this dual character and dedication, first of all, covering the technical rate and then covering the time, the cost of money over time. We have changed this as we implemented the new standard, we also changed the method of allocation of the results of location activities compared to other insurance results. We have to take into account that as we discount cash flows, as we move to the next period, we are recognizing the cost of the discount, and this is best shown in this chart on the right-hand side of the slide. If you have the sum of payments in, let's say, the year three plus, this is the large dark blue bar. It's being discounted minus one or two or three years. We have the small blue bar to the time of the initial recognition in the balance sheet. We, here we have the wide bar, and this covers the three years of discounting between the day of the valuation and the day of the expected appearance of this cash flow. Moving from point zero to point one, from point one to point two, and so on, we have to recognize the values of the discount as a certain additional expense. This is an expense related to the time value of money. This has increased appropriately between the first quarter of this year and the first quarter of the previous year. It has grown by PLN 30 million. You can ask, why? Here we see four hundred and something. Where do you get the 300 from? Well, it's a very special character of policies with the unit-linked products. When we have a change in valuation in the unit-linked, that as a rule, is not the value of PZU, and the result on this fund is not the result of PZU, but of their...o f its clients, which is carried out in their strategies, based on the platform and the policy solutions which are being sold by PZU. Here we have two different aspects. On the one hand, we have a grow or a loss of the value of this fund. If the fund is growing, we have to give back more to our customers in the future. We have a situation when we have additional insurance expenses, so financial insurance expenses. If we have a contrary situation, so our customers are very aggressive on financial markets, but maybe this aggressiveness is not always accompanied with the right intuition about the market changes, so it leads to losses. If this fund is shrinking because our customers, based on their strategies, are incurring losses, then we in the future, based on the today's value, we have to give back the funds, but in a smaller amount. This was the situation in this quarter, in the previous quarters. As you may remember, the past quarters and the whole year, 2022, we had a situation when, especially in 2022, it was a period when basically no investment strategy was able to guarantee a positive return rate. Even the strategies that, as a rule, are seen as safe strategies, so based on the financial market or debt securities and so on, and debt instruments, even when interest rates are growing, so there was a loss in valuation, so the portfolios and the assets were shrinking. This amount, which is responsible for the revaluation of the value of those assets of our customers, so their investment, in fact, shrunk last year by the amount of about PLN 200 million. Therefore, it should be interpreted as follows: that PLN 42 million was the deflated value, reduced value by PLN 200 million. Why PLN 200 million? Because since this amount shrank by PLN 100 million, we have to return less, and we had more. As a principle, this is a negative financing cost. Therefore, this adjusted amount is PLN 245 million. In this quarter, we had a completely different situation, not so much different regarding the direction, but the magnitude as well. During this quarter, this year, the impact of the performance of those portfolios and that change in relation to the closing balance sheet is PLN 212 million. Therefore, PLN 375 million minus PLN 212 million, since this is the amount that the value of this fund went up. By so much, we have to give back of a return of that fund, which is translating to the cost that we need to recognize. This is PLN 475 million, but the adjusted amount by these PLN 212 million, that's accordingly, the amount of PLN 460 million PLN Therefore, the difference year -over -year, adjusted by stripping out the single component, is PLN 220+ million, and this is PLN 20 million something. This is what was our cost, and this is the amount, adjusted amount, this component of a financial cost allocated in the gross amount to the insurance operations. Of course, a copy of that goes to the share of the insurer. The change of investment policy from the point of view of how we allocate the results to the insurance operations, how we allocate the results to the investment operations, to the investment segments. As you remember, the model introduced in the beginning by PZU, the so-called the risk-free rate model, was based on this following assumption: PZU is from the point of view of investment type operations, using the money it receives to be for management, it has to use this amount to cover its expenses and pay out as benefits. We receive those amounts for some time, like a float, so as to manage it best in a way that it's, we have a guaranteed return of that money, irrespective of the market situation, might distribute to the insured ones, either in the form of a fund or benefits or any other form. We have to have and maintain in line with this model. We have to perform and behave in line with this model to be ready to pay back at any time. That was the idea behind the investment result allocation to the insurance components originally. We're saying we are getting the money for management to manage this amount of money. Using this money, we can buy very safe. Why safe? We cannot risk. It's not our money, we have to pay it back. A very safe financial instrument, and this is the bonds, state treasury bonds, where we will invest our money in, and this amount of return on those bonds on the individual segments will be allocated to the investment segments. The problem is that, as you know, the insurance instruments are frequently long-term in instruments, 20, 30 years. The obligations, insurance obligations are long-term. For instance, annuities, for instance, in the extreme case, the beneficiary of an annuity benefit is a child until the end of the child's life, which may take 70, 80 years even, while the financial instruments do not exist with such a duration. Therefore, after a certain period of time, in the best case, 10 years, this is what the debt instrument maturity is still available, and this model goes into a super theoretical phase, which took place roughly two years ago. Maintaining this model at such a situation becomes completely theoretical. It is not responding, definitely not accounting for what's happening in the company from the point of view of asset management and the coverage by asset of liabilities by assets. Therefore, we changed our investment policy, allocating to the individual portfolios of liabilities, insurance liabilities, specific and name by name investment portfolios. Starting from this year, not less, no more, the result on those portfolios will be the amount allocated to the business segment of insurance, corporate insurance segment, from the investment activities. Investing activity as the revenue-giving segment, the investment revenue realized earned on the assets portfolio to cover the obligations related to the insurance. It's an important change from a point of view of a model, from a point of view of maintaining it more intuitive, definitely much easier to maintain and much easier in terms of explaining over time the reasons for the changes, increases, decreases of value over time. This is how, where we ended the analysis of the components that the result is made up of a few words about how we want to measure in the new world, the efficiency of the effectiveness of the insurance operations here. We'd like to stick to something that is a new value of a combined ratio, new combined ratio, operating ratio, which in this is the in the numerator, it will have the total insurance expenses that of claims, payouts, run-off recognition, and the loss component of the recognized cost and the amortization of acquisition costs related to the net revenue from insurance. As you remember, this value for first quarter is 85.7%n. This is the best proxy of what we all got used to under the previous standard. This is our best proposal, and this way, we would like to track the profitability of our insurance operations in the new world. In terms of the operating margin, this is, again, similar to IFRS 4. The result on the segment made up of, insurance results adjusted by financing costs and the investment revenue allocated to individual insurance segments, refer to related to the revenue, insurance revenue, that we all remember very well, are made up of the expected claims, benefits, released amount of this revenue, which is the insurance margin, the contractual service margin, the CSM, adjusted by the element related to uncertainty. The risk adjustment referred to or related to the segment's result. In contrast to what was done in the previous world, the results, posted by the segment related to the written premium amount. Due to what we discussed a number of times in this part and the previous parts, PZU, taking into account the, this methodology-related decisions, decided to recognize the revaluation of the reserves in terms of the current rate that's dominating in the income statement versus the spot rate by up to the other comprehensive income, so below the income statement. With especially taking into account this dichotomy, and duality, and the fact that we were not able to adjust the implementation of Standard 9 semantically versus the implementation of IFRS 17, we decide to recognize it in the comprehensive income, namely, in fact, in the change in the capitals over time. Again, this amount will be impacted 1.7%, as shown on the graphic, mainly will be affected by changes in our environment related to the changes in these interest rates, that have an impact upon the valuation of our liabilities, and which, due to the reasons that we described, should not constitute the assessment type of element regarding whether PZU is able to carry out, to implement, to accomplish its main strategic goals, in this case, the strategic objectives related to the return on equity. Why? Exactly because in spite of the fact that we are trying to impact this market in a very responsible manner, we are not able to take responsibility in any way for the fact how over time, the interest rates are changing over time and how, as a result, in light of those changes, the valuation of our balance sheet looks like comes in net. Each time talking about the return on equity, when we talk about return on equity, we want to adjust it by this component, which is completely outside of our reach, our control, beyond our control, and completely remaining outside the ability to offset it by the fact how, in what way, what manner we could, if we were to approach valuation of assets differently, in a different way, we could shape our investment-type operations. Let me remind you, we are not able to do that due to the dichotomy that we exist in, and the fact that at the same time, we have to comply with two road traffic regulations, road traffic codes, one being local and the other being international. The specifics of the company or the group, which is locally listed on the Polish exchange, valued according to the international standard. At the same time, subject to the regime, the framework of loan accounting, international accounting, and the ordinance, there's regulation related to the insurance companies. This is basically everything that we have prepared as of today. I understand that from the point of view of information, you have received quite a lot to absorb over a 4-hour time frame, maybe that's why you will not have many questions. Of course, if there are questions, of course. One, yes? More related to the numerical parts, more... Let me hand over in a moment the floor to anybody from the audience. Nothing from the audience. There is one question that I know that came up, and I'd like to answer it. The question related to the fact whether we will tell you how in individual quarters PZU looked like in the previous years. Yes and no. Yes, of course, we'll tell you what will be this position in 2022. This will be comparative data for 2023. This will have to do because this is comparable data and there's nothing we can do about it. However, we will not be going back further into the past because of the fact that, A, this is impractical, and B, it's a gigantic effort of the entire group. From the point of view of implementing the standard is...w ould be also burdened with quite a lot of distortion elements due to the fact that the transition date is the 1st of January 2022. From that time onwards, you should view the group in a new way. As we mentioned to you, here I'd like to again emphasize that this was our obligation. Over the next 12 months or over the next four quarters, we'll be showing you information according to two standards, IFRS 4 and IFRS 17. IFRS 4 non-existent, the IFRS 17 one, the new one, in order to try to develop in the most responsible way for you and with you, this bridge between the old world and the new world. Of course, we'll give you all the comparative data for 2022. That's all regarding our obligation and commitment to help you. As to make it easier, your job easier, this is those workshop, the goal of this workshop. I am at any time ready to spend time with you and talk to you how to understand what would have happened, what could, what if, and so on. I understand how non-obvious or quite complicated matter we are dealing with, especially not everyone of you who is not, after all, an actuary. I'm not able to take onto myself responsibility regarding 2021 and the previous years since this question was posed. This is how we are planning to answer this question and to address this need on an ongoing basis moving on. I still we have a question to the numerical part. Thank you very much for your attention. I will now hand over the floor to Hanna, I understand you. Let me ask the question. Read this question. Is there any slide? But I should... This is the question regarding the first part of example six, seven of a general approach. Which slide? 46. The question is, in example six, the operating result is PLN 200 million. In example seven, the total of operating result in OCI is PLN 206 million. Shouldn't it be the same in both cases, since we are looking at the after the contract expiration status and did the same contract generate more equity? No. What we are looking at is, in fact, the operating result in the amount of PLN 200. The line that we see below is the balance sheet amount. This what you should take note of, what's presented in the balance sheet on the capital side. If we wanted to look at the Other Comprehensive Income statement, then we would have the situation of adding time establishing 6 and solving - 6 in the subsequent period, without any final effect upon the amount of equity of capital. In both cases, the impact on the capital is exactly the same and the operating result is PLN 200. A second question was just posed. Can we quantify the impact of discounting on the combined ratio of 85.7%? At what rate we are expanding the discounting regarding the assets? I think it's more of a question to me, because it's not related to the theoretical part, it's related to the actual part. I'm not able to give you now what's the actual interest rate and at what discount rate will be, the discounting will be unwound. We here, we are talking about the property insurance. In case of non-life insurance, the main discounting element of reserves, claims reserves, which in particular are important in case of the annuities portfolio. This is where the impact of this component is highest, is strongest on the results of correspondingly the mass insurance and the corporate insurance. I am not able to give you the amount, the values. What, the locked-in value, taking account the portfolio that we have built, the annuities portfolio, and therefore, what would be the situation if, and so on and so on. I understand then in the offline mode, we will respond to the one person asking the question, providing the amount, the value he's asking. Second question of the same person, can we present any guidance regarding how this impact of discounting can shape, evolve over the future? Yes and no. We will say what factors have an impact upon the today's situation. On one hand, we all know what this annuities portfolio looks like. We will also say what is the combined, created over time, value of rate. On the third side, everyone knows what economy we are dealing with. On the fourth side, the fourth factor, here we're getting into the models, as a matter of fact. The fourth factor, what and in what way, what is the distribution of claims and the split between the property and personal harm or claims, and the ones who are especially interested in that, let me refer to the quarterly data of the Polish Financial Supervision Authority, KNF, in Polish acronym. You can see what are the changes over time and what are the proportions between those figures, so I invite you to look into that. The way how we expect that, on one hand, we'll be capitalizing the annuities portfolio, so we'll bring up about the situation where this amount of the future discounted cash flows for the given point in time, in the form of those annuities that frequently are adjudicated, verified, raised by the courts, how it converts into a one of benefits. What is the conversion process? What does it look like, this conversion process? We will not be telling you that in detail here. Let me leave this to your judgment, your assessment. This is not a parameter. This is not a behavior that differs. What's the difference between the two standards? The difference between the two standards is evaluation, the measurement of these two events as part of the results of segment, the insurance result, and this is all. I assume the same as you, by the 31st of December last year, you had been trying to estimate this component related to the personal claims, person-related claims, and its impact on the property-related risks and the TPL. Same way you will be doing it starting from January 1st this year, because from the point of view, what operations we are conducting, the way we are conducting it, nothing has changed. What has changed is the value, the amount of valuation of the measurement of these events, both in the balance sheet as well as in the P&L statement. We will provide those elements, the data that needs to be complemented, supplemented, in order to make your modeling easier, but we will not tell you what will be the distribution over time. Okay, since there's no more questions, I'd like to very cordially thank everyone, all those who have endured today's meeting. I assume the questions will still be coming, I encourage you, invite you to feel free to contact us, I thank you very much today. I thank our, on one hand, advisors, on the other hand, I can say our definitely partners, I can call them, thanks to whom we've been able frequently, during the difficult times, maintain a strong component of positive emotions. I thank for that as well. I thank for today and see you next time. Thank you very much. Thank you. Thank you.