Dividend policy

The Management Boards for PZU decided to update the Capital Structure and Dividend Policy of PZU Group for the years 2013-2015. The key objective of the implementation of the Policy is reduction of the cost of capital.

On 13th May 2014, the Management Boards for PZU decided to update the Capital Structure and Dividend Policy of PZU Group for the years 2013-2015 (Policy), approved on 26th August 2013. Thanks to the introduced changes, on 19th November 2013 an advance paid towards the dividend expected at the end of the 2013 financial year in the amount of PLN 1,727 million, i.e. PLN 20 per share, was recognized as part of the payment of the surplus capital.

The key objective of the implementation of the Policy is reduction of the cost of capital through optimization of the balance sheet structure by way of replacing equity with less expensive borrowed capital at the same time ensuring high security and maintaining funds for development.

Assumptions and implementation of PZU Group’s capital policy

Capital management
Maintain PZU Group’s own funds net of subordinated debt at no less than 250% of PZU Group’s solvency margin
Maintain assets to cover the provisions of PZU Group’s various companies, i.e. PZU and PZU Życie at no less than 110%
External Financing
Potential issuance of subordinated debt up to PLN 3 bn
Dividend Payout
50% - 100% of consolidated net profit of PZU Group under IFRS
Potential amount of dividends paid out from surplus capital up to PLN 3 bn (calculated based on the consolidated net profit for 2013-2015)
Dividend from 2013 profit of PLN 2.9 bn, i.e. PLN 34 per share
Dividend from surplus capital of PLN 1.7 bn, i.e. PLN 20 per share
Debt Issuance
Issue value: EUR 500 mln
Margin: 85 b.p. above Mid-Swap
5-year senior bonds
Lowest coupon in the history of the corporate bond market in the CEE region
Setting the benchmark for issuing subordinated bonds
Subordinated bond issue (work underway)

The policy aims to increase the total shareholder return (TSR) and is based on the following principles:

  • maintaining the own funds of PZU Group, excluding the subordinate debt, at the level not lower than 250% of the solvency margin (according to Solvency I of PZU Group and an attempt to maintain the own funds of PZU Group, including the subordinate debt, at the level of about 400% of the solvency margin (as at the end of the financial year) in order to maintain the financial security of the Group;
  • maintaining assets to cover the provisions of individual companies of PZU Group at a level no lower than 110%;
  • obtaining an optimal financing structure by replacing the capital surplus with subordinated debt up to an amount no higher than PLN 3 billion, not to exceed a 25% own funds to cover the solvency margin as referred to in article 148 of the Insurance Activity Act.
  • maintaining the equity level corresponding to Standard & Poor’s AA rating;
  • providing funds for development and acquisitions in upcoming years;
  • no equity issues by PZU in the upcoming years.

The policy assumes dividend payment calculated based on:

  • the consolidated net profit, where the amount of the dividend paid cannot be lower than 50% or higher than 100% of the net profit shown in PZU Group’s consolidated financial statements compliant with IFRS; and
  • surplus capital, where the total amount of dividends paid from surplus capital in 2013-2015 cannot exceed PLN 3 billion.

Evolution od PZU’s share price (%) compared to selected indices

Evolution od PZU’s share price (%) compared to selected indices

* Quotations from 12 May 2010 (PZU IPO at WSE).

Payment of dividends for 2013

In December 2013, all insurance companies operating on the Polish market received a Recommendation of the Head of PFSA (KNF) regarding restrictions on dividend payment. The supervisory body recommended that the
insurance companies continue their prudent dividend policy using the generated profit to enhance their capital standing.
At the same time, when deciding on the dividend amount, the insurance companies should take into account additional capital needs within the 12 months of the date of approving 2013 financial statements, among others arising from the growth of costs caused by changes in market and legal conditions and capital needs arising from the necessity to achieve compliance with Solvency II.

The supervisory body recommended the dividend to be paid only by insurance companies that meet all the set financial criteria.

At the same time, it recommended limiting the dividend payment (when meeting the criteria) to the maximum of 75% of the 2013 profit maintaining the capital requirement coverage ratio after dividend of at least 110%. The supervisory body allowed for the payment of dividend from the entire profit generated in 2013, as long as the capital requirements cover will stay at the level higher than the one defined in the recommendation after the payment of dividends.

On 17th June 2014 the General Shareholders’ Meeting of PZU adopted the resolution on distribution of the net profit for the year ended 31st December 2013, in which it decided to allocate to the dividend payment the amount of PLN 4,663 million, that is PLN 54.00 per share.

On 17th June 2014 the General Shareholders’ Meeting of PZU adopted the resolution on distribution of the net profit for the year ended 31st December 2013, in which it decided to allocate to the dividend payment the amount of PLN 4,663 million, that is PLN 54.00 per share.

Given the payment made on 19th November 2013 on the account of advance payments towards the dividend expected at the end of 2013 in the amount of PLN 1,727 million, i.e. PLN 20.00 per share, the remaining part of the dividend payable for the year which ended on 31st December 2013 amounted to PLN 2,936 million, i.e. PLN 34.00 per share.

17th September 2014 was chosen as the date according to which the list of shareholders entitled to other parts of the dividend payment for the year ended 31st December 2013 was established.

The following payment dates of the above-mentioned dividends were set:

  • 8th October 2014 – PLN 1,468 million, that is, PLN 17.00 per share;
  • 15th January 2015 – PLN 1,468 million, that is, PLN 17.00 per share.

Because all the key solvency ratios are met and due to the dividend policy, on 19th November 2013 an advance interim for 2013 was paid in the amount of PLN 1,727 million, and was disclosed as part of the payment from the surplus capital of PZU Group, according to the IFRS.

Payment of dividends for 2014

Following the recommendation regarding dividend payment by insurance companies from profit generated in 2013, the supervisory body issued a recommendation regarding the payment of dividend from 2014 profit. In a letter of 3rd December 2014 the supervisory body recommended that the insurance companies continue their prudent dividend policy using the generated profit to enhance their capital standing.

The supervisory authority has recommended that dividend should be paid exclusively by insurance companies that meet designated financial criteria and that the payment of dividends should be limited to a maximum of 75% of the profit generated in 2014. The coverage ratio of capital requirements after dividends should remain at a level of at least 110%.
At the same time, the supervisory body allows the payment of dividend from the entire profit generated in 2014, as long as the capital requirements cover will stay at the level higher than the one defined in the recommendation after the payment of dividends.

By the date of preparing this Management’s Report of PZU Group, the Management Board had not adopted a resolution concerning distribution of profit for 2014.

 20142013201220112010
PZU Group’s consolidated net profit (PLN million) 2,967.6 3,295.0 3,253.8 2,343.9 2,439.2
PZU Group’s consolidated net profit (PLN million) 2,636.7 5,106.3 2,580.7 2,582.3 3,516.7
Dividend paid from the profit for the financial year
(PLN million)
n/a *** 4,663.0 2,564.7 1,936.9 2,245.2
Dividend per share (PLN)* n/a *** 54.00 29.70 22.43 26.00
Dividend per share as at ex-dividend date (PLN) 34.00 49.70 22.43 26.00 10.91
Dividend payout ratio on consolidated profit (%) n/a*** 89.1%* 78.8% 82.6% 92.0%
Dividend rate in the year (%) ** 7.0% 11.1% 5.1% 8.4% 3.1%
TSR (Total Shareholders Return) 15.8% 14.1% 48.7% -5,8 17.3%

* Dividend from surplus capital paid in 2013 (PLN 20.00 per share), not included in dividend payout ratio.
** Rate calculated as dividend as at the date of establishing dividend right versus share price at the end of the given year.
*** 30 June 2015, the Company’s Ordinary Shareholder Meeting („OSM”) earmarked PLN 2 590,6 million as the dividend for shareholders, which constitutes PLN 30.00 per share as a result of distributing the earnings for the financial year ended 31 December 2014. The date for determining the list of shareholders entitled to the dividend payout for the financial year ended 31 December 2014 has been set for 30 September 2015. The dividend payout date has been set for 21 October 2015.

Book value per share and gross accumulated dividend per share (PLN)

Book value per share and gross accumulated dividend per share (PLN)

* Dividend payment from surplus capital in the amount of PLN 20.00 per share in 2013 year