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PZU plans dividend payouts of over 50%, eyes €500M debt issue

PZU SA shareholders will continue to receive a dividend of between 50% and 100% of profits, but the exact amount will depend on the Polish insurer's investment needs, its executives told analysts March 15.

The investment linked to the state-controlled firm's December 2016 acquisition — alongside Polish development fund Polski Fundusz Rozwoju — of a 32.8% stake in Poland's second-largest lender, Bank Pekao SA, has led to investor concerns that it would need to end its generous dividend policy. But CEO Michal Krupinski allayed those fears.

"We are talking about a range of 50% to 100%, but because of the acquisition that range is going to be adjusted," he told analysts after the release of PZU's 2016 results. He added that the insurer intends to look at factors such as its dividend yield, its peers and its investment needs when deciding the exact size of the dividend.

"We have some figures in our head — I think they are higher than market expectations at least up until now, but we can't delve into the details [yet]," he said, adding that a dividend of 50% would be the "floor" and that it would likely "be substantially above" 50%.

Debt issue

In the coming years, PZU will allocate up to 20% of its profits to internal development and up to 30% to potential acquisitions, but the exact amounts would depend on the company's needs, Krupinski said.

The insurer is also planning to issue subordinated debt in order to strengthen its capital ratios after the Pekao acquisition and is mulling a debt issue of up to €500 million, or 3 billion zlotys, he added.

"We don't have to issue subordinated debt — this is only a result of our market statement to have Solvency II above 200%," he said, adding that PZU wants to keep its investment ratings at A minus.

The size of the issue — which could be a combination of zloty- and euro-denominated debt potentially offered in two tranches — will depend on market conditions, he said.

PZU posted full-year 2016 net profit attributable to owners of the parent entity of 1.95 billion zlotys, down from 2.34 billion zlotys a year earlier. Gross written premiums for 2016 reached 20.22 billion zlotys, up from 18.36 billion zlotys in 2015. Revenue from commission and fees stood at 808 million zlotys, up from 243 million zlotys a year earlier, while net investment income rose on an annual basis to 4.17 billion zlotys from 1.57 billion zlotys.

Net insurance claims and benefits reached 12.73 billion zlotys in 2016, compared to 11.86 billion zlotys a year ago.