The PZU Group’s Capital and Dividend Policy in 2016-2020 was adopted in a PZU Supervisory Board resolution in 2016, and contains the following rules:
with a reservation that:
Due to the expectation expressed by the Polish Financial Supervision Authority (KNF) in a letter dated 26 March 2020 addressed to the management boards of insurance undertakings, regarding the retention of all profit generated in previous years, the PZU Shareholder Meeting (in compliance with the Management Board’s recommendation and a positive opinion issued by the Supervisory Board) adopted a resolution to refrain from the disbursement of a dividend from the 2019 profit.
According to KNF’s recommendation, dividends should be paid out 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: BION] for 2018. At the same time, the dividend payout should be limited to no more than 75% of the profit earned in 2019, while the coverage of the capital requirement for the quarter in which the dividend was distributed should be maintained at no less than 110%.
KNF permitted a dividend payout equal to the entire profit earned in 2019 (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 (life insurance) and at least 150% for insurance undertakings operating in section II (non-life insurance).
According to KNF’s recommendation, those undertakings that satisfy 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 2019 financial statements, which may result, among others, from changes in the market and legal environment.
The Chairman of the Polish Financial Supervision Authority, in his letter of 26 March 2020, sent to the management boards of insurance undertakings, expressed the expectation that in connection with the state of epidemic announced in Poland and its possible adverse economic consequences, insurance undertakings should retain the entirety of profit earned in previous years.
By doing so, the Authority changed its position presented in KNF’s Communication of 3 December 2019 concerning the regulatory authority’s position on the objectives for the dividend policy of commercial banks, cooperative banks and affiliation banks and insurance and reinsurance undertakings in 2020, according to which the possibility of dividend payment up to the entire profit earned depended on the BION assessment, the solvency level in 2019 and the capital needs within 12 months from the moment of approving the financial statements for 2019, while the solvency requirements were set at the same values as in previous years.
Moreover, on 2 April 2020, the European Insurance and Occupational Pensions Authority (EIOPA) recommended a temporary suspension of dividend disbursements by European insurance undertakings.
The PZU Management Board issued a recommendation to distribute the 2019 profit in compliance with the recommendations received from the regulatory authority. On 28 April 2020, the PZU Supervisory Board issued a favorable opinion on the PZU Management Board’s motion.
The PZU Ordinary Shareholder Meeting adopted a resolution on the distribution of PZU’s net profit for the financial year ended 31 December 2019, in which it resolved to distribute the profit of PLN 2,651 million in the following manner: PLN 7 million as an allowance to the Company Social Benefit Fund, PLN 2,644 million as supplementary capital.
The document permits insurance undertakings to:
These criteria include a Regulatory Review and Evaluation (BION) assessment (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, as it may bring new adverse consequences for insurance, reinsurance and insurance-and-reinsurance undertakings.
Up until the date of this Report, the PZU Management Board has not adopted a resolution concerning the distribution of profit for 2020. A report containing audited information on PZU’s solvency ratios and financial standing on a standalone basis will be published Q2 2021.
|Consolidated profit attributable to the parent company (in PLN m)||1,935||2,895||3,213||3,295||1,912|
|PZU’s standalone profit (in PLN m)||1,573||2,459||2,712||2,651||1,919|
|Dividend paid for the year (in PLN m)||1,209||2,159||2,418||**||***|
|Dividend per share for the year (PLN)||1.40||2.50||2.80||**||***|
|Dividend per share on the date of record (PLN)||2.08||1.40||2.50||2.80||**|
|Ratio of dividend payout to consolidated profit attributable to the parent company||62.5%||74.2%||75.3%||**||***|
|(a) Movement in the share price y/y||(2.4%)||26.9%||4.1%||(8.8%)||(19.2%)|
|(b) Dividend yield during the year (%) *||6.1%||4.2%||5.9%||6.4%||**|
|(a+b) Total Shareholder Return (TSR)||3.7%||31.2%||10.1%||(2.4%)||(19.2%)|
* 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
** The Ordinary Shareholder Meeting allocated no portion of the profit to the disbursement of a dividend (in accordance with KNF’s recommendation of 26 March 2020)
*** 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 2020
Source: PZU's data
1 The BION assessment is a thorough process involving the utilization of all available information in the regulator’s possession regarding an insurance/ reinsurance undertaking, including information obtained from licensing activities, desktop research and on-site inspection-related activities in an insurance/reinsurance undertaking as well as inquiries/questionnaires addressed to an insurance/reinsurance undertaking