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8. Equity management

Annual Report 2019 > 8. Equity management
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Best Pratices in PZU

On 3 October 2016 PZU Supervisory Board adopted a resolution to approve the PZU Group’s capital and dividend policy for 2016-2020 (“Policy”).

In accordance with the Policy, the PZU Group endeavors to do the following:

  • manage capital effectively by optimizing the usage of capital from the PZU 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 acquisitions;
  • ensure sufficient financial means to cover the PZU Group’s liabilities to its clients.

The capital management policy rests among others on the following principles:

  • the PZU Group’s capital management (including excess capital) is conducted at the level of PZU as the parent company;
  • sustain target solvency ratios at the level of 200% for the PZU Group, PZU and PZU Życie (according to Solvency II);
  • ensure funds for growth and acquisitions in the coming years;
  • PZU will not issue any new shares for the duration of this Policy.

The PZU Group and PZU dividend policy assumes that:

  • the dividend amount proposed by the PZU Management Board for the 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;

subject to the items below:

  • according to the PZU 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.

External capital requirements


According to the Insurance Activity Act, the calculation of the capital requirement is based on market, actuarial (insurance), counterparty insolvency, catastrophic and operational risks. Assets, liabilities and as a consequence own funds covering the capital requirement are measured at fair value. The capital requirement is calculated in accordance with the standard formula at the level of the entire PZU Group.

Pursuant to art. 412 section 1 of the Insurance Activity Act, the PZU Group is obligated to prepare and disclose an annual solvency and financial condition report at the group level drafted in accordance with the principles of Solvency II. The 2018 report published on 27 May 2019 is available online at For the 2019 report, the publication deadline is no later than 20 weeks after the year end, i.e. in practice until 19 May 2020. Pursuant to art. 290 section 1 of the Insurance Activity Act, a solvency and financial condition report of an insurance undertaking is audited by an audit firm.

Irrespective of the foregoing, some PZU Group companies are required to comply with their own capital requirements imposed by the relevant legal regulations.

The PZU Group’s solvency ratio as at 31 December 2018 published in the PZU Group’s 2018 solvency and financial condition report was 222%. In 2019, the solvency ratio (both standalone and consolidated) reported to the KNF and not subject to verification by an audit firm as at the end of each quarter remained over the level of 200% (as at the end of Q3, the ratio for the PZU Group was 220.38%). As at the date of signing the consolidated financial statements, the calculation of the solvency ratio as at 31 December 2019 has not yet been available.

Estimated data as at 31 December 2019, available as at the date of consolidated financial statements being signed and not verified by an audit firm, show that the PZU Group fulfills the capital requirements imposed on it and holds a considerable surplus of own funds over the capital requirement.

The maintained levels of solvency ratio comply with those assumed in the capital policy of the PZU Group.