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Capital management

Annual Report 2019 > Capital management
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On 3 October 2016, the PZU Supervisory Board adopted a resolution (Current Report 61/2016 of 4 October 2016) to approve the PZU Group’s Capital and Dividend Policy for 2016-2020 (“Policy”). No changes were made to this Policy in 2019.

The introduction of this Policy stemmed from the implementation, as of 1 January 2016, of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), as amended, the Insurance and Reinsurance Activity Act of 11 September 2015 and the expiration of the PZU Group’s Capital and Dividend Policy for 2013-2015 updated in May 2014.

In accordance with the Policy, the PZU Group endeavors to do the following:

  • manage capital effectively by optimizing the usage of capital from the Group’s perspective;
  • maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through acquisitions;
  • ensure sufficient financial means to cover the Group’s liabilities to its clients.

The capital management policy rests on the following principles:

  • the PZU Group’s capital management (including excess capital) is conducted at the level of PZU as the parent company;
  • sustain target solvency ratios at the level of 200% for the PZU Group, PZU and PZU Życie (according to Solvency II);
  • maintain the PZU Group’s financial leverage ratio at a level no higher than 0.35;
  • ensure funds for growth and acquisitions in the coming years;
  • PZU will not issue any new shares for the duration of this Policy.

As at the end of Q3 2019, the estimated solvency ratio (calculated according to the standard Solvency II formula) was 220% and remained above the average solvency ratio for European insurance groups.

The Solvency II ratio for the PZU Group compared to European insurers


Source: Data taken from insurers’ reports as of Q3 2019 in the case of Ageas, Allianz, Aviva, AXA, CNP, Generali, Gjensidige, Munich Re, NN, Phoenix, RSA, Sampo, Scor, Talanx, Topdanmark, Tryg and as of H1 2019 in the case of the other insurers

In Bank Pekao and Alior Bank, the capital adequacy ratio and the Tier 1 ratio were computed on the basis of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR Regulation) and also the various types of risk identified in the Internal Capital Adequacy Assessment Process (ICAAP).

Solvency ratio  2018 Q3 2019
SCR  
PZU Group 222% 220%
PZU * 240% 240%
PZU Życie * 449% 435%
MCR  
PZU Group 352% 360%
PZU * 890% 885%
PZU Życie * 997% 967%
CRR  
Pekao Group – total capital adequacy ratio 17.4% 17.2%
Tier 1 15.8% 15.5%
Alior Bank Group – total capital adequacy ratio 15.9% 16.2%
Tier 1 12.8% 13.4%

*unaudited data