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Life insurance (PZU Życie)

Annual Report 2019 > Life insurance (PZU Życie)
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Market situation

Poland’s life insurance market measured by gross written premium was estimated at PLN 15,898 million in the first three quarters of 2019, meaning that over the most recent 5 years it contracted on average by 5.6% per annum. At the same time, gross written premium in Q3 2019 (ytd) was 3.1% lower than in the corresponding period of the previous year. This resulted principally from the evolution in the single premium business in investment products, while the gross written premium in products with a periodic premium increased slightly.

Gross written premium reported by life insurance undertakings in Poland (in PLN million)

Source: KNF’s Quarterly Bulletin. Rynek ubezpieczeń [Insurance Market] 3/2019, Rynek ubezpieczeń [Insurance market] 3/2019, Rynek ubezpieczeń 3/2018, Rynek ubezpieczeń 3/2017, Rynek ubezpieczeń 3/2016, Rynek ubezpieczeń 3/2015

The changes in the level and the growth rate of the life insurance market premium in recent years have been stimulated mostly by single premiums in investment products. It is worth noting that the premium contraction for the overall market year on year after the first three quarters of 2019 pertained to single premiums (down PLN 699 million, or 17.0% y/y, compared to a decline of 31.7% y/y recorded in the previous year). The single premium compound average growth rate since 2014 was – 17.4%. The changes in circumstances on the capital market and in the legal environment are considered to be the underlying causes for the gross written premium on single premium business to fall in a trend over several years. Initially, the record low interest rates contributed to the decline in the yields offered by term deposits packaged as insurance products, thereby leading to heightened interest in other investment products. Additionally, a tax was introduced as of 1 January 2015 on short-term endowment insurance offering a fixed rate of return or a return based on indices; this also contributed to reducing client interest in such products and ultimately to their retraction, especially the first ones, from the offer of insurance undertakings. In subsequent years the regulatory authority’s guidelines, including guidelines regarding the level of fees incurred by clients of unit-linked products and EU directives regulating the market for these types of products and their distribution led to insurance undertakings constricting their offering of these types of products, especially in cooperation with banks. The first 3 quarters of 2018 were characterized by a rapid dip in the level of written single premium to the lowest figures in many years, followed by its stabilization at PLN 1.1-1.2 billion in each of the subsequent quarters.

Life insurance market – gross written premium (in PLN m)

   

Gross written premium 1 January - 30 September 2018 1 January – 30 September 2019
  PZU Życie Market Market net of PZU Życie PZU Życie Market Market net of PZU Życie
Periodic premium 5,650 12,286 6,636 5,723 12,475 6,752
Single premium 547 4,123 3,576 628 3,424 2,796
TOTAL 6,197 16,409 10,212 6,351 15,898 9,548

Source: KNF (www.knf.gov.pl). Quarterly Bulletin. Rynek ubezpieczeń 3/2019, Rynek ubezpieczeń 3/2018, PZU Życie’s data

The outcome of this market evolution was the expanding significance of periodic premium that constitutes PZU Życie’s competitive edge on the market. In the first three quarters of 2019, periodic premium was 1.5% higher compared to the same period in 2018, with a cumulative average growth rate of 0.3% for the last 5 years. Despite the decline in periodic premium in unit-linked life insurance (by PLN 210 million y/y), the premium from protection products (in classes I and V) continues to trend upward (PLN +395 million y/y), mostly in individual insurance.

At the same time, market concentration measured by the periodic gross written premium remained high. The sequence of the largest market players did not change either, but their combined share, especially of the top four, expanded.

The total technical result generated by the life insurance companies in the first three quarters of 2019 was up PLN 135 million (5.6% y/y) to PLN 2,542 million. An increase of PLN 167 million (34.8%) transpired chiefly in the life insurance group (class I). This was caused by an increase in investment income in the portion allocated to this product group as well as growth in revenues, which more than offset the claims inflation and increase of costs associated with insurance activity.

Life insurance market – gross written premium vs. technical result (in PLN m)

gross written premium vs. technical result 1 January - 30 September 2018 1 January – 30 September 2019
PZU Życie Market Market net of PZU Życie PZU Życie Market Market net of PZU Życie
Gross written premium 6,197 16,409 10,212 6,351 15,898 9,548
Technical result 1,267 2,407 1,139 1,334 2,542 1,208
Profitability 20.4% 14.7% 11.4% 21.0% 16.0% 13.0%

Source: KNF (www.knf.gov.pl). Quarterly Bulletin. Rynek ubezpieczeń 3/2019, Rynek ubezpieczeń 3/2018, PZU Życie’s data

 

In this same period, life insurance companies generated a net result of PLN 2,061 million, representing a PLN 97 million (4.9%) increase y/y. This improved result was the effect of the technical result described above partly offset by a worse performance recorded on insurers’ free funds.

The total value of the investments made by life insurance undertakings at the end of Q3 2019 was PLN 39,918 million, signifying 0.7% growth compared to the end of 2018. In turn, the high level of funds redeemed accompanied by the decline in the level of client contributions to funds led to a lower net asset value of life insurance in which the policyholder bears the investment risk (down 3.3% to PLN 49,231 million).

 

PZU Życie’s activity

Product offer

Most significant product changes in 2019

Factors, including threats and risks, that may affect the operations of the life insurance sector in 2020