Capital and Dividend Policy

On 25 March 2021, the PZU Supervisory Board adopted a resolution to approve the PZU Group’s Capital and Dividend Policy for 2021-2024. The adopted policy is a continuation of the principles set forth in the PZU Group’s Capital and Dividend Policy for 2016-2020.

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 development through organic growth and acquisitions;
  • ensure sufficient financial means to cover the Group’s liabilities to its clients.

The capital management policy orests on the following principles:

  • manage the PZU Group’s capital (including excess capital) at the level of PZU;
  • sustain target solvency ratios at the level of 200% for the PZU Group, PZU SA and PZU Życie SA (according to Solvency II);
  • maintain the PZU Group’s financial leverage ratio at a level no higher than 25%;
  • ensure funds for growth and acquisitions;
  • maintain the financial conglomerate’s surplus own funds above the pertinent requirements for solvency;
  • PZU will not issue any new shares for the duration of this Policy

Under the policy, certain temporary deviations in the actual solvency ratio above or below the target level may occasionally occur.

The PZU and PZU Group’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 the respective financial year is determined on the basis of the PZU Group’s consolidated financial result attributable to equity holders of the parent company, where:
    • not more than 20% will increase retained earnings (supplementary capital) for purposes of organic development and innovations, and implementation of development 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 significant expenditures are incurred in connection with execution of the PZU Group Strategy, including in particular, mergers and acquisitions;

with the 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 of payment or payment of a dividend will remain at a level that will ensure fulfilment of the conditions specified in the Capital Policy of the PZU Group and PZU (items 2 to 5);
  • when determining the dividend the regulatory authority’s recommendations concerning dividends will be taken into consideration.

Dividend payment in 2022

On 20 October 2022, PZU paid out a dividend of nearly PLN 1.7 billion, i.e., PLN 1.94 per share.

A detailed sequence of key related events is presented below.

9 December 2021 – the recommendation of the Polish Financial Supervision Authority (KNF) on paying dividends from the profits generated in 2021

The KNF’s recommendation on the dividend policy of insurance and reinsurance companies allowed insurance companies to:

  • pay out a dividend of up to 100% of the profit generated in 2020 (including dividends paid to date from 2020 profits),
  • pay out a dividend of up to 50% of the profit generated in 2021,

provided that the criteria set by KNF have been fulfilled.

These criteria include a Supervisory Review and Evaluation Process (SREP) (i.e., risk assessment) and the coverage of a specific capital requirement on a standalone (unconsolidated) basis. Moreover, a company intending to disburse a dividend must not have experienced a situation involving a shortage of own funds to cover the capital requirement in any quarter and must not be covered by a short-term financial plan or remedial plan.

KNF also pointed out that, when deciding on the level of dividends, insurance companies should take into account their additional capital needs within the period of 12 months from the approval date of the 2021 financial statements, which may result, among others, from changes in the market and legal environment, in particular from the high degree of uncertainty about the future evolution of the coronavirus pandemic.

1 June 2022 – Motion of the PZU Management Board regarding the distribution of the profit generated in 2021 and the amount transferred from the supplementary capital created from the profit generated in 2020.

In connection with the aforementioned recommendation of the KNF, the PZU SA Management Board recommended distribution of the profit generated in 2021 (and the amount transferred from the supplementary capital created from the profit generated in 2020). The proposed dividend amount was PLN 1.7 billion, i.e., PLN 1.94 per share. On that same day, the Supervisory Board issued a positive opinion on the Management Board’s motion.

29 June 2022 – Ordinary Shareholder Meeting’s resolution on the distribution of PZU’s net profit

The Ordinary Shareholder Meeting of PZU adopted a resolution on distribution of PZU’s net profit, in which it decided to distribute the profit generated in 2021 increased by the amount transferred from the supplementary capital created from the profit generated in 2020. The amount of PLN 1.7 million was designated for the dividend payment. The dividend record date was set for 29 September 2022 and the dividend payout date was set for 20 October 2022.

Key assumptions Principal

We will continued to be a dividend company while generating an above average return on capital.
Every year we will pay a dividend of 50 to 100% of the PZU Group’s3 consolidated annual earnings.
We will maintain our solvency ratios a level no lower than 200% for the PZU Group, PZU and PZU Życie (according to Solvency II).
We will maintain the our financial leverage ratio at a level no higher than 25%.
We will procure funds for growth and acquisitions in the coming years
We will maintain the financial conglomerate’s surplpus own funds about the requirements for solvency.

KNF’s stance on the dividend policy in 2023*

On 6 December 2022, KNF adopted a position on the dividend policy of insurance companies, reinsurance companies, and insurance-and-reinsurance companies in 2022 (download).

The Commission permitted a dividend to be paid out only by the companies that meet all of the following criteria for distributions from the 2021 and 2022 profits:
  • They have received a good or satisfactory SREP risk score for 2021;
  • In the various quarters of 2022 they reported no shortage of own funds to cover the capital requirement (defined as the maximum of the minimum capital requirement (MCR) and the solvency capital requirement (SCR));
  • In 2022 they were not covered by a short-term financial plan or the remedial plan.
  • As at 31 December 2022, the level of own funds, without deducting the expected dividends, was at the level of at least 175% of the capital requirements for insurance companies, reinsurance companies, insurance-and reinsurance companies operating in section I and at least 150% of the capital requirements for insurance companies, reinsurance companies, insurance-and-reinsurance companies operating in section II.

The undertakings satisfying the above criteria may pay a dividend in the maximum amount of 100% of the profit generated in 2021 (this including dividends already paid out from the 2021 profit) and 50% of the profit generated in 2022, however the coverage of capital requirements (after deducting the expected dividends from own funds) as at 31 December 2022, and for the quarter in which the dividend was paid, will be at the level of at least 175% for undertakings operating in section I and at least 150% for undertakings operating in section II.

The undertakings satisfying the above criteria, when deciding on the level of dividends, should take into account their additional capital needs within the period of 12 months from the approval date of the 2022 financial statements, which may result, among others, from changes in the market and legal environment, in particular from the high degree of uncertainty about the macroeconomic perspective regarding, among others, inflation, interest rates, currency exchange rates, energy resources or effects brought about by the invasion of Russia on Ukraine, and therefore potential future negative consequences of these circumstances for insurance companies, reinsurance companies, insurance-andreinsurance companies.

* As of the date of this management report, PZU’s Board of Directors has not adopted a resolution on the proposal for profit distribution for 2022. A report containing audited information on PZU’s solvency ratios and financial condition at the unit level will be published in the second quarter of 2023.

XLS

PZU profit and dividend 2018 2019 2020 2021 2022
Consolidated profit attributable to the parent company (PLN million) 3,213 3,295 1,912 3,336 3,374
PZU’s unconsolidated profit (PLN million) 2,712 2,651 1,919 2,028 1,637
Dividend paid for the year (PLN million) 2,418 ** 3,022 1,675 ***
Dividend per share for the year (PLN) 2.80 ** 3.50 1.94 ***
Dividend per share for the year (PLN) 2.50 2.80 ** 3.50 1.94
(a) Change in share price y/y 4.1% -8.8% -19.2% 9.2% 0.2%
(b) Annual dividend ratio (%)* 5.9% 6.4% ** 10.8% 5.5%
(a+b) TSR Total Shareholders Return 10.1% -2.4% -19.2% 20.1% 5.7%
* ratio calculated as dividend (according to the year in which the right was established) compared to share price as at the end of the previous reporting year
** In 2020, the Ordinary Shareholder Meeting of PZU did not allocate profit to pay out the dividend (following the recommendation of the KNF of 26 March 2020); in 2021, the OSM of PZU resolved on the distribution of the profit generated in 2020 increased by the amount transferred from the supplementary capital created from net profit generated in the year ending on 31 December 2019
*** up to the date of preparing this report on the activities of the PZU Group, the PZU Management Board has not adopted a resolution concerning the proposed distribution of profit for 2022
Source: PZU figures

* in 2013, the dividend was paid out from the excess capitals (PLN 2 per share)
Source: PZU

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