Adjusted net results under IFRS 17 grew threefold YoY in Q1/23

CIG Pannonia (Pannonia) reported its first quarter results for the first time in
accordance with IFRS 17 standards, which significantly differ from the results
reported according to IFRS 4 standards used in the market until now. The
introduction of the IFRS 17 accounting transition methodology for 31 December 2021
resulted in an a significant increase of HUF 7.3bn (+56%) from HUF 13.2bn to HUF
18.7bn in Pannonia’s consolidated equity at that date, implying a BVPS of HUF 198
and 1.3x P/BV. However, the application of the IFRS 17 standard also meant a tax
burden of HUF 475mn, which is charged to the result of the first quarter of 2023. Also
importantly, according to the IFRS 17 methodology, Pannonia’s consolidated aftertax profit for the entire year of 2022 was finally ca. HUF 199mn higher (HUF 1.41bn)
than under the IFRS 4 standards.
 Consolidated after tax for Q1/23 was a loss of HUF 382mn compared to HUF 28mn
in Q1/22. The primary reason for the loss is the aforementioned one-off tax charge of
HUF 475mn due to the capital gain from the transition to IFRS 17 accounting
standards. Adjusting for this tax effect, the profit after tax was HUF 93 million, which
is actually three times the net profit in the first quarter of last year. From now on, the
best approach to understand what HUF 93mn was made of is not the gross
accounting of income and expenses, but the change in the result of the product
groups presented according to the new IFRS 17 financial standards applied for
insurance carriers compared to the same period of the previous year. Accordingly,
the insurance portfolios are evaluated using the so-called General Measurement
Model (GMM), the Premium Allocation Approach (PAA) and the Variable Fee
Approach (VFA).