CIG Pannónia Életbiztosító : Pannonia Life Insurance Plc. - Quarterly Report Q1 2024

CIG PANNONIA

LIFE INSURANCE PLC.

Quarterly report

On the basis of the consolidated financial statements prepared according to the International Financial Reporting Standards adopted by the EU

Q1 2024

					30 May 2024, Budapest	1
CIG Pannonia Life Insurance Plc. - Quarterly report

dr. Fedák István

Chief Executive Officer

Summary

PREAMBLE

The Issuer would like to draw the attention of Shareholders and other capital market actors to the fact that this report was prepared in accordance with IFRS 17 as expected by regulation, which remains unique in the domestic market. The interpretation of the results according to the new accounting principles and presenting them in a broader context

• as in 2023 - remains a goal of our Company, in order to facilitate the assessment of the Issuer from the investors' perspective.

In our quarterly flash reports, the analyses focus on growth and the causes of any changes. To remove one-off effects within the year from the year-on-year business comparison of performance, we have revalued our results for the first quarter of 2023 in line with our accounting policy. This fact does not affect our audited results for the full year 2023. Overall, the comparative data for the first quarter of 2023 in the current report are more favourable than what we reported a year ago for the first quarter of 2023. The detailed reasons for this are explained in Chapter 5.

TARTALOM

Preamble	2
Summary	2
Main events and results	12
Financial statements	15
Changes of accounting policy	21
Restatement	22
Operating segments	26
Number of employees, ownership
structure	31
Information published in the preiod	33
Disclaimer	34

1. SUMMARY

1.1. Economic summary

CIG Pannónia Life Insurance Public Limited Company (registered office: 1097 Budapest Könyves Kálmán krt. 11, building "B"; company registration number: 01 10 045857; court of registration: Registry Court of the Metropolitan Court (hereinafter: Issuer or Company) publishes on this day its first quarterly report (hereinafter: Report) for 2024. The Issuer publishes in this Report for the first quarter of 2024, as required by the legislation, its consolidated, unaudited data in accordance with the International Financial Reporting Standards adopted by the EU (hereinafter: EU IFRS). The Report has been prepared in accordance with the provisions of IAS 34.

1.1.1. Significant results of Q1 2024:

• Our consolidated after-tax profit increased in one year by HUF 283 million by 59% - compared to last year's result according to IFRS 17 - reaching HUF 765 million - when we strip off the one- time HUF 498 million corporate tax effect of the capital increase due to the transition to IFRS 17 and the tax effect of the extra profit tax introduced from 1 July 20221, which amounted to HUF 161 million last year and HUF 294 million this year.
• Our premium income grew by 14%, i.e. more than HUF 1.5 billion -
• • Life Insurance premiums by 16%,
  • while EMABIT premiums by 11% -

in one year compared to Q1 2023, reaching HUF 12.1 billion.

2

1 The effects of the extra profit tax are estimates

Summary

1. SUMMARY

(continuation)

• Premium growth was driven by unit-linked life insurance (close to HUF 1 billion growth), corporate property insurance (HUF 712 million growth) and group accident- and health insurance products (HUF 316 million growth).
• Our insurer's capital position is stable, our capital adequacy ratio is 220%.

CIG Pannonia Life Insurance Plc. - Quarterly report	3

Summary

Our consolidated Profit After Tax was HUF 765 million, which is a 59% increase YoY,

if we don't take into account the one-time IFRS 17 transition effect of HUF 498

million corporate tax, and the extra profit tax of HUF 161 million in 2023

and HUF 294 million in 2024

Our gross written premium have

increased by 14%

+16% Life insurer's premium 11% EMABIT's premium

Increase in sales network

(2023Q1 vs 2024Q1)

+20% bank network +22% alternative network

+10 % independent broker chanel

Increase in insurance revenue exceeding premium growth

ITE (IFRS 17)

HUF 4 503 million + HUF 5 327 million, +18 %

The key feature of the increase

is the GWP increase of

• UL insurance by the banking channel

and independent broker chanel of HUF 946 million

• Corporate property insurance by the independent broker channel by HUF 712 million

Our GWP exceeded 12 billion forint

in the first quarter of 2024

220% Consolidated Capital Adequacy

(required rate by the supervisors is 150%)

Life Insurance	. -	report	4

Summary

1.1.2. IFRS 17 valuation methodologies and portfolio groups of the Company

An important feature of IFRS 17 is the use of three different valuation methodologies. We categorize the types of contracts offered by our company according to the following valuation methodologies for each segment:

Life insurance	- traditional (risk) life and
segment	accident insurances	- unit linked life and pension
	- permanent group life
	insurances	- annually renewed individual
	and permanent accident
	- traditional savings (mixed)	and group life, accident and
	insurances
	life, grace and pension	health insurances
	- group credit coverage
	insurances
	insurance with life insurance
	services
Non-life insurance			- home insurance
segment	- technical, suretyship		- travel insurance
	insurances		- fleet casco
	- group credit insurances,		- industrial property and
	non-life insurances		liability insurance
			- group non-life insurances

In order to provide our Shareholders with the most clear and transparent information on our Company's business performance as possible, we have introduced another categorization for our portfolio groups in addition to the assessment along valuation methodologies. The table below summarizes which of our services belong to which portfolio group. No change has occured in this classification compared to the previous quarter

Group life, accident and	- group life, accident and health insurance
health insurance	- group service financing insurance
	- MVM Accident and Health Insurance packages
Individual accident and	- traditional, accident and health insurance
health insurance
Single premium UL	- life insurance linked to single-premium investment
	units in Euro and Forint
Regular premium UL	- life insurance linked to regular-premium investment
	units in euro and forint
Traditional regular	- traditional regular-premium grace, savings and
premium life savings
pension insurance
insurance
Risk life insurance	- traditional regular-premium risk life insurance
Credit coverage	- credit coverage insurance
insurance	- MVM account protection insurance
Fleet CASCO	- fleet casco
	- integrated casco

CIG Pannonia Life Insurance Plc. - Quarterly report	5

Summary

Corporate property

- industrial property

insurance

insurance

- liability insurance

- technical insurance

- D&O

- drone insurance

Suretyship insurance

- Hungarian suretyship

insurance

- Italian suretyship insurance

(run-off portfolio)

Retail property

- travel insurance

insurance

- home insurance

1.1.3. Interpretation of the results for Q1 2024

contract at their issuance and at the preparation of the

Our consolidated accounting result after tax in the first

financial statements would make the analysis too complex

- thus according to our best estimate, as also shown in the

quarter of 2024 was a profit of HUF 472 million2. As

below table, the amount of the extra profit tax was set for

we have highlighted last year, we note that there are

Q1 2023 at HUF 161 million, for Q1 2024 at HUF 294 million.

two significant items affecting the accounting result

that need to be taken into account when assessing the

The HUF 649 million increase in our consolidated accounting

Company's performance:

profit after tax means that the - recalculated - loss of HUF

• a non-recurring corporate tax liability incurred as a result

177 million in Q1 2023 has turned into a profit of HUF 472

million for Q1 2024. Our profit after excluding the one-off

of the HUF 7 billion increase in equity due to the transition

items mentioned above increased from HUF 482 million to

to IFRS 17, which decreased our profit after tax by HUF 498

HUF 765 million. Our growth was significantly influenced

million in 2023, furthermore

by the income generated by our investments purchased

• we also need to separate the effect of the extra profit tax

in recent years taking advantage of the opportunities

whenassessingtheresultoftheordinarycourseofbusiness.

provided by the high yield environment - in the amount of

The exact mathematic calculation of the extra profit tax

HUF 300 million. Our technical result decreased to a lesser

is limited by the IFRS 17 framework - as the difference

extent compared to the value of a year ago: excluding the

between the changes in the terms and conditions of each

effect of the additional tax, by HUF 67 million.

Graph 1

Change of profit after tax 2023 Q1 vs 2024 Q1 - (data in million HUF)

PAT

Profit after tax

1 200

+ 283 m

RD

Reported in 2023

RSD

Restated values

1 000

59%

(the result of the

15

recalculation of the

344

800

2023 values)

-8

600

498

482

400

-67

-294

200

-

161

765

472

-200

-177

-400

-382

-600

Q1

.

Q1

effect

Taxes

Reported

restarted

2023

.

2023Q1

tax

Earnings Earnings

2024Q1

2024

2024Q1

PAT

profit

Tax

extra

PAT

.result

PAT

PAT

2023Q1

2023Q1

.result

Other

Manager's

Restarted

PAT

.tech

CorporateRestarted

.tech

ins

-time

without

Fund

ins

tax

on

.Earnings

tax

on

On

profit

profit

.Tech

Extra

of

Ins

Extra

Change

6

Increase

Decrease

Total

Taxes

Aggregate adjusted value

2 Result including the one-off items mentioned above

Summary

If we look at the change in the technical result by valuation methodologies, we see the following:

Graph 2

Yearly change of Insurance Technical Earnings 2023 Q1 vs 2024 Q1 - (data in million HUF)

800

600

400

200

-

-200

-400

-600

-201 mHUF

-129%

155
	360		27
-204		-60	-46
	-324
LI GMM prod.	LI VFA prod.		NLI PAA prod.
ITE 2023 Q1	LI PAA prod.	NLI GMM prod.	ITE 2024 Q1

			Increase		Decrease		Total
LI GMM prod.	Technical result of life insurance products valuated with the GMM method
LI PAA prod.	Technical result of life insurance products valuated with the PAA method
LI VFA prod.	Technical result of life insurance products valuated with the VFA method
NLI GMM prod.	Technical result of non-life insurance products valuated with the GMM method
NLI PAA prod.	Technical result of non-life insurance products valuated with the PAA method
ITE	Insurance technical result

In the life insurance segment, our technical result	contracts and the improvement in the result of fleet
casco contracts essentially cancel each other out.
decreased by a total of HUF 168 million compared to
the same period of 2023, thanks to the classical (long-	• The decrease in the result on the portfolio of contracts
term, multiannual) and the annually renewing individual
valued using the GMM methodology was due to the
and group life insurance products (products valued
recognition of an improvement in the result on the
using GMM and PAA methodologies). The decrease in
Italian suretyship products in 2023 on the reserves held
performance was mainly due to an increase in claims
in foreign currency due to the change in exchange
ratios for group life products, which are assessed in both
rates, which has the effect of a loss this year. However,
methodologies. Compared to last year our result was
improved by the performance of savings (unit-linked	this was partly offset by the credit coverage products'
and regular savings) products (products valued using	improvement in the results in line with the growing
the VFA methodology). The increase in performance was	stock. However, the Company has fully offset this loss
driven by the relative stability of the forint yield curve,	with foreign currency forward contracts, the effect of
with yields in 2024 not falling as much as a year ago.	which is reflected in investment income.
In the non-life insurance segment our technical result
decreased by HUF 33 million, which is due to two effects:

• For typically short-term contracts (PAA valuation method): the decline in the result of corporate property

CIG Pannonia Life Insurance Plc. - Quarterly report	7

Summary

The decrease of our technical result by HUF 201 million distributes along the portfolio groups as follows:

Graph 3

Change of Insurance Technical Earnings by Portfolio-groups 2024 Q1 vs 2023 Q1 - (data in million HUF)

			-201 m
			-129%
600
500
400						236
300
200	155		285	26		55
100					-109	-246	-46
0						-166	-6
-100	-95	18	48
-200
	-342
-300

23Q1Reported Restarted

products products

.

.

.saving

.

.

.

.

UL

UL

in

property

ins

prem

.

Prod

&

ins

prod

prod

insurance cover

.

acc

prod

.prod

ITE

23Q1

Group

Individual

premium premium

CASCO

insureanceproperty

ITE

life

Credit

Single Regular

.regular

Risk

Corporate

Retail

Trad

Suretyship

24Q1 ITE

Increase

Decrease

Total

Group life, accident and health products (annual profit decline: HUF 342 million):

The size and revenues of the portfolio group increased compared to the same period last year.

At the same time, the claims ratios for the group life-, accident- and health insurances and the group service funding insurance portfolios deteriorated compared to the same period last year, leading to a decline in the result. The Company has already taken the necessary steps to restore the profitability of the product group in the first quarter.

Individual life, accident and health insurance products (annual profit improvement: HUF 18 million):

The Insurance Company's profitable individual accident insurance portfolio (which includes the Company's 'Bajtárs' products) has grown significantly, and so has the Insurer's result.

Single premium UL products (annual profit improve- ment: HUF 48 million):

The portfolio group's result for the first quarter of last year was adversely affected by the fact that the insurance

CIG Pannonia Life Insurance Plc. - Quarterly report

company recognised one-off losses, so-called loss components, due to differences between expected and actual cash flow assumptions. In addition, in the first quarterof2023,theamountoftheso-calledriskadjustment related to the increase in claims reserves increased, which also worsened the result for the comparative period. There was no need to recognise similar losses this year, largely due to the smaller change in yields compared to last year, therefore, our result increased in the year-on- year comparison.

Regular premium UL products (annual profit improve- ment: HUF 285 million):

The portfolio group's contract service margin (CSM, which is the sum of the positive results expected for the whole period of the contracts) increased compared to the same period last year, typically due to an improvement in our pricing. As a result, both the impact of the CSM recognised in this quarter - its release - and the result increased compared to last year.

In addition, this portfolio group is also affected by the effect already mentioned for the single premium group: the result for the first quarter of last year was adversely affected by the fact that the Insurer recognised one-off losses,

8

so-called loss components, due to differences between expected and actual cash flow assumptions. There was no loss component recognition of a similar extent this year, which increased our result in the year-on-year comparison.

In addition, the Insurer released claims reserves related to the portfolio group in the first quarter of this year, which increased the portfolio group's result compared to the same period last year.

For all these reasons, the portfolio group's result increased compared to the comparative period.

Traditional regular premium savings products (annual profit improvement: HUF 26 million):

The Insurer released - reduced - claims reserves related to the portfolio group in the first quarter, which increased the portfolio group's result compared to the same period last year. The reserves for annuity services from pension insurance policies were reviewed and the Company decided to release part of this reserve, which improved the result of the Insurer in this quarter.

Risk life insurance products (annual profit decline: HUF

109 million):

The portfolio group's result decreased compared to the same period last year due to higher than expected claims ratios in group life-, accident- and health insurances, valued using the GMM valuation model, which negatively impacted the Insurer's quarterly result.

Credit coverage insurance and account protection products (annual profit improvement: HUF 55 million):

The main driver of the profit improvement is the increase in the contract portfolio. There were two major, partially offsetting effects on the performance of the portfolio group. One of the effects was that in the first quarter of 2023, significant premiums received for prior periods increased the result, which was not the case this year, negatively affecting the change in result. The other impact was that due to the changed regulatory environment - the progressive insurance tax's thresholds have changed and increased - the expected result (CSM) increased, and this had a positive impact on the current quarter. Altogether these improved the result by HUF 55 million.

Summary

Casco products (annual profit improvement: HUF 235 million):

The reason behind the improvement in profit is basically due to the decrease in costs and expenses - i.e. the claims ratio. The reduction in the claims ratio was facilitated by the streamlining of the insurance portfolio, changing premiums in line with cost increases. In addition, the change in insurance tax legislation also had a positive impact on profit.

Corporate property insurance products (annual profit decline: HUF 246 million):

The decrease in profit for the year is due to the slightly different timing of revenue recognition for the direct portfolio - written with the contractor - and reinsurance contracts written for risk reduction, in accordance with the relevant standard rules. Slightly different valuation assumptions for direct and reinsurance models lead to different revenue recognition and volatility in portfolio results, especially at the beginning of the financial year. In the remainder of the year, methodological features should allow this volatility to become more balanced.

Suretyship insurance products (annual profit decline: HUF 166 million):

On the Italian suretyship products - which have already expired - in 2023 we recorded an improvement in the result on the reserves held in foreign currency due to the change in exchange rates, which effect is a loss this year, so our technical result deteriorated year-on-year. However, the Insurer offset this effect by entering into foreign exchange forward contracts, the positive impact of which is reflected in the investment result.

Retail property insurance products (annual profit decline: HUF 6 million):

The decrease in the result was mainly due to the loss component recognised for the product group in 2022 and released in 2023, which improved our result last year on a one-off basis.

CIG Pannonia Life Insurance Plc. - Quarterly report	9

Volume of sales

Although our technical result has not increased, our sales continue to rise.

Graph 4

Summary

We also analyze the year-on-year change in written premium by segment and valuation type in IFRS 17. The following figure shows our growth along this division:

Change of Written Premium 2024 Q1 vs 2023 Q1 - (data in million HUF)

14 000					2023Q1		2024Q1		+14%
12 000									12 119
10 000									10 587
8 000					+19%
6 000					5 923
				4 984
4 000	+7%						-30%	+35%
		+38%				2 570
2 000	1 586	1 472				1 116		1 907
994	1 368		786
-
	L GMM PROD.	L PAA PROD.	L VFA PROD.	NL GMM PROD.	NL PAA PROD.	TOTAL

Our premium income increased by 14% year-on-year. Our fees have increased under all but one valuation methodology.

Contracts included in the GMM methodology, which is used to assess long-term contracts, include credit coverage insurance policies taken over from BNP Paribas Cardif insurers, whose premiums in last year's quarter included significant premiums for previous periods. This one-off positive effect has not materialised this year, causing the apparent downturn.

Our fees can be analysed not only by valuation methodology, but also by portfolio group, as shown in the graph below.

Graph 5

Change of Premium by portfolio-group 2024Q1 vs 2023Q1 - (data in million HUF)

1. 000
   13 500

1. 000
   12 500

1. 000
   11 500

1. 000
   10 500

1. 000

				+1 532m
				+14%
		128	71	712	74	12 119
	822
		-12		-6
				-507
316	59			-126
10 587

Q1

products products

.

.

.saving

Prod

.

products

.

.

.

Q1

UL

UL

.ins

acc

ins

ins

2023

2024

prod

prod

&

prod

.prod

.

Premium

Group

Individual

premium premium

.regular

prem

insurance

cover

CASCO

property insurance

property

Premium

life

Single

Regular

Risk

Credit

Corporate

Retail

Trad

Suretyship

Increase		Decrease		Total	10