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PZU Group’s Capital and Dividend Policy

Annual Report 2019 > PZU Group’s Capital and Dividend Policy
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PZU Group’s Capital and Dividend Policy in 2016 – 2020 was adopted in a PZU Supervisory Board resolution in 2016. CAPITAL MANAGEMENT. According to this Policy, the PZU Group endeavors to manage capital effectively and 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.

PZU’s dividend policy rests on the following principles:

  • The PZU Group endeavors to manage capital effectively and 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;
  • the dividend amount proposed by the parent company’s Management Board which PZU pays for a given financial year is determined on the basis of the PZU Group’s consolidated financial result attributable to the parent company, where:
  • no more than 20% will be earmarked as retained earnings (supplementary capital) for goals associated with organic growth and innovations as well as execution of growth initiatives,
  • no less than 50% is subject to payment as an annual dividend,
  • the remaining part will be paid in the form of annual dividend or will increase retained earnings (supplementary capital) if in the given year significant expenditures are incurred in connection with execution of the PZU Group Strategy, including in particular, mergers and acquisitions;

with a reservation that:

  • according to the Management Board’s plans and risk and solvency self-assessment of the parent company, the own funds of the parent company and the PZU Group following the declaration or payment of a dividend will remain at a level that will ensure fulfillment of the conditions specified in the capital policy;
  • when determining the dividend the regulatory authority’s recommendations concerning dividends will be taken into consideration.

PZU Group’s Dividend and Capital Policy

Payment of a dividend from the profits generated in 2018

On 24 May 2019, the PZU’s Ordinary Shareholder Meeting adopted a resolution (in accordance with PZU’s capital and dividend policy1) to distribute PZU’s net profit for the financial year ended 31 December 2018 in which it resolved to distribute profit of PLN 2,712 million in the following way:

  • PLN 2,418 million as a dividend payout, i.e. PLN 2.80 per share;
  • PLN 7 million as an allowance to the Company Social Benefit Fund;
  • PLN 287 million as supplementary capital.

The dividend record date for the financial year ended 31 December 2018 was set for 14 August 2019 and the dividend payment date was set for 5 September 2019.

PZU’s earnings and dividend per share in 2010-2019

Dividend distributions and PZU’s total shareholder return (TSR) (2010-2019)

PZU’s book value per share and gross accumulated dividends per share (PLN) (2010-2019)

The Polish FSA’s recommendation on paying dividends from 2019 profits

On 3 December 2019 the Polish Financial Supervisory Authority took a stance on the dividend policy of insurance and reinsurance undertakings (download).

As recommended by the regulatory authority, dividends should be paid only by insurance undertakings meeting certain financial criteria and ones that received a good or satisfactory score on their Test and Regulatory Assessment [Polish abbreviation: BION2] for 2018. At the same time, the dividend payout should be limited to no more than 75% of the 2019 profit, while the coverage of the capital requirement for the quarter in which the dividend was distributed should be maintained at no less than 110%.

At the same time, KNF permitted a dividend payout equal to the entire 2019 profit (implying that it is not permissible to make distributions from any of the other capital accounts) provided that the capital requirement coverage (after expected dividends are deducted from own funds) as at 31 December 2019 and for the quarter in which the dividend is paid, is at least 175% for insurance undertakings operating in section I and at least 150% for insurance undertakings operating in section II.

The Polish FSA also recommended that the undertakings that satisfy the above criteria, when deciding on the level of dividends, should take into account the additional capital needs within the period of twelve months from the approval date of the 2019 financial statements, which may result, among others, from changes in the market and legal environment.

Up to the date of preparing this Report on the activities of the PZU Group, the Management Board has not adopted a resolution concerning the distribution of profit for 2019.

Dividends paid by PZU from its earnings in the 2015-2019 financial years

  2015 2016 2017 2018 2019
Consolidated profit attributable to the parent company (in PLN m) 2,343 1,935 2,895 3,213 3,295
PZU SA’s standalone profit (in PLN m) 2,249 1,573 2,459 2,712 2,651
Dividend paid for the year (in PLN m) 1,796 1,209 2,159 2418 **
Dividend per share for the year (PLN) 2.08 1.40 2.50 2.80 **
Dividend per share on the date of record (PLN) 3.00 2.08 1.40 2.50 2.80
Ratio of dividend payout to consolidated profit attributable to the parent company 76.7% 62.5% 74.2% 75.3% **
(a) Movement in the share price y/y (30.0)% (2.4)% 26.9% 4.1% (8.8)%
(b) Dividend yield during the year (%) * 6.2% 6.1% 4.2% 5.9% 6.4%
(a+b) Total Shareholder Return (TSR) (23.8)% 3.7% 31.2% 10.1% (2.4)%

** yield calculated as the dividend (as at the record date) in relation to the share price at the end of the previous reporting year
** up to the date of preparing this Activity Report, the Management Board has not adopted a resolution concerning the proposed distribution of profit for 2019

1 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
2 The BION assessment is a thorough process involving the utilization of all available information in the regulator’s possession regarding an insurance undertaking / reinsurance undertaking, including information obtained from licensing activities, desktop research and on-site inspection-related activities in an insurance undertaking / reinsurance undertaking as well as inquiries / questionnaires addressed to an insurance undertaking / reinsurance undertaking