PZU Group’s 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 growth objectives through organic growth and acquisitions;
- ensure sufficient financial means to cover the Group’s liabilities to its clients.
The capital management policy rests 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 and PZU Życie (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.
It is assumed that 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:
- nie więcej niż 20% powiększy zyski zatrzymane (kapitał zapasowy) na cele związane z rozwojem organicznym i innowacjami oraz realizacją inicjatyw wzrostowych;
- 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 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 of payment or payment of a dividend will remain at a level that will ensure fulfillment 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.
PZU Group’s Dividend and Capital Policy
* PZU's net profit attributable to the parent company
Source: PZU
Dividend
On 6 October 2021, PZU paid out a dividend of more than PLN 3 billion, i.e. PLN 3.5 per share. A detailed sequence of key related events is presented below.
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16 December 2020 – KNF’s recommendation on paying dividends from the profits generated in 2020
The KNF’s recommendation on the dividend policy of insurance and reinsurance undertakings allowed insurance companies to:
- pay out a dividend of up to 100% of the profit generated in 2019,
- pay out a dividend of up to 50% of the profit generated in 2020, 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 undertakings should take into account their additional capital needs within the period of 12 months from the approval date of the 2020 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.
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11 May 2021 – Motion of the PZU Management Board regarding the distribution of the profit generated in 2020 and the amount transferred from the supplementary capital created from the profit generated in 2019
In connection with the aforementioned recommendation of the KNF, the PZU SA Management Board recommended distribution of the profit generated in 2020 (and the amount transferred from the supplementary capital created from the profit generated in 2019). The proposed dividend amount was PLN 3 billion, i.e. PLN 3.5 per share.
On 12 May 2021, the Supervisory Board issued a positive opinion on the Management Board’s motion and recommended the Ordinary Shareholder Meeting of PZU to accept the profit distribution and the payment dates included in the proposal.
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16 June 2021 – 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 2020 increased by the amount transferred from the supplementary capital created from the profit generated in 2019. The amount of PLN 3,022 million was designated for the dividend payment. The dividend record date was set for 15 September 2021 and the dividend payout date was set for 6 October 2021.
KNF’s stance on the dividend policy in 2022
On 9 December 2021, KNF adopted a position on the dividend policy of insurance companies, reinsurance companies and insurance and reinsurance companies in 2020 (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 2020 and 2021 profits:
- They have received a good or satisfactory SREP risk score for 2020;
- In the various quarters of 2021 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 2021 they were not covered by a short-term financial plan or the remedial plan.
- As at 31 December 2021, the level of own funds, without deducting the expected dividends, was at the level of at least 175% of the capital requirements for insurance undertakings, reinsurance undertakings, insurance-and-reinsurance undertakings operating in section I and at least 150% of the capital requirements for insurance undertakings, reinsurance undertakings, insurance-and-reinsurance undertakings 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 2020 (this including dividends already paid out from the 2020 profit) and 50% of the profit generated in 2021, however the coverage of capital requirements (after deducting the expected dividends from own funds) as at 31 December 2021, 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 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, hence the possible further adverse consequences for the insurance, reinsurance and insurance-and-reinsurance undertakings.
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 2021. A report containing audited information on PZU’s solvency ratios and financial standing on a standalone basis will be published Q2 2022.
Dividend paid by PZU for 2017-2021
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Consolidated profit attributable to the parent company (in PLN m) | 2 895 | 3 213 | 3 295 | 1 912 | 3 336 |
| PZU’s standalone profit (in PLN m) | 2 459 | 2 712 | 2 651 | 1 919 | 2 028 |
| Dividend paid for the year (in PLN m) | 2 159 | 2 418 | ** | 3 022 | *** |
| Dividend per share for the year (PLN) | 2,50 | 2,80 | ** | 3,50 | *** |
| Dividend per share on the date of record (PLN) | 1,40 | 2,50 | 2,80 | ** | 3,50 |
| Ratio of dividend payout to consolidated profit attributable to the parent company | 74,2% | 75,3% | ** | ** | *** |
| (a) Movement in the share price y/y | 26,9% | 4,1% | -8,8% | -19,2% | -9,2% |
| (b) Dividend yield during the year (%) * | 4,2% | 5,9% | 6,4% | ** | 10,8% |
| (a+b) Total Shareholder Return (TSR) | 31,2% | 10,1% | -2,4% | -19,2% | 20,1% |
* Dividend yield calculated as the dividend (as at the dividend record date) in relation to the share price at the end of the previous reporting year
** in 2020, the Ordinary Shareholder Meeting of PZU allocated no portion of the profit to the disbursement of a dividend (in accordance with KNF’s recommendation of 26 March 2020) In 2021 the Ordinary Shareholder Meeting of PZU decided to distribute the 2020 profit increased by the amount transferred from supplementary capital created from the net profit generated for the year ended 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 2021
PZU’s earnings and dividend per share in 2010-2020
* The payout ratio net of the dividend payout from excess capital (PLN 2 per share)
** on 26 March 2020, the Polish Financial Supervision Authority (KNF) issued a decision prohibiting the disbursement of dividends in 2020 by insurance companies and banks from their 2019 profits. On 16 December 2020, the Polish Financial Supervision Commission decided to restore the possibility of making dividend payments up to 100% of the profit generated in 2019 and 50% of the profit generated in 2020. On 12 May 2021, the Supervisory Board issued a positive opinion on the Management Board’s motion to the Ordinary Shareholder Meeting to pay out a dividend of PLN 3.5 per share.
*** Up to the date of preparing this report, the Management Board has not adopted a resolution concerning the proposed distribution of profit for 2021
Source: PZU
Dividend distributions and PZU’s total shareholder return (TSR) (May 2010-2021)
Source: PZU
PZU’s book value per share and gross accumulated dividends per share in PLN (2010-2021)
* in 2013 a dividend was paid from excess capital (PLN 2 per share)
Source: PZU