PZU (PZU PW) Hold: Discount stuck on structure and motor headwinds

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PZU (PZU PW) Hold: Discount stuck on structure and motor headwinds

ime, they were

explicit that claims inflation remains a structural issue and that prior price increases have not been

sufficient to restore MTPL profitability across the market. This is the crux for the investment case:

adverse pricing trends, combined with ongoing claims inflation, are likely to keep non-life margin

and growth challenging, particularly in motor, even if PZU executes well.

The quarter’s mix of motor outcomes illustrates that tension. MTPL benefited from lower claims

frequency year-on-year and operational improvements, supporting profitability in mass MTPL

(combined ratio improved to 93.0% from 97.5%). MOD was the problem area: weather-driven

claims and competitive pressure weighed on margins, with mass MOD combined ratio deteriorating

to 99.7% from 89.4%. It’s consistent with management’s message that pricing pressure and claims

inflation are squeezing the economics of motor, especially where competition is most intense.

We forecast that pricing pressure will erode margins over time, and it is unlikely that the

company sustain a sub 90% combined ratio. The company could try to mitigate some of the

pressures by improving efficiency and prioritising non-motor – higher margin business. But a

shift in business mix will come at the expense of top-line growth. Within mass insurance we saw

insurance revenue was down y/y for the motor business, and overall non-life insurance revenue

growth in Poland was flat y/y.

Life insurance a bright spot but minimal CSM growth

Life insurance was a clear bright spot in 1Q26, combining strong top-line momentum with improving

profitability. Under IFRS 17, total life insurance revenue in Poland rose 7.6% y/y to PLN2,412m,