PZU Surges After Saying Acquisitions Won’t Stop Dividend Boost

  • Dividend policy assumes payouts from 50%-80% of annual profits
  • Potential takeover of Raiffeisen unit won’t hurt dividend

PZU SA, Poland’s largest insurer, rose the most in seven months in Warsaw trading after Chief Executive Officer Michal Krupinski said the company may pay a dividend at the higher end of its range despite its acquisition plans.

The shares climbed as much as 5.3 percent, the most since Feb. 18, and were up 4.7 percent up at 25.53 zloty as of 1:56 p.m. PZU intends to pay a dividend at the upper range of 50 percent to 80 percent of full-year profit, the CEO said on Tuesday. The final decision will depend on “potential growth projects and acquisition targets,” he said.

Eastern Europe’s biggest insurance company is shifting its strategy toward expansion through takeovers and wants to fund bank and insurer acquisitions from part of its surplus capital, the CEO said. The potential acquisition of Raiffeisen Bank International AG’s Polish unit by PZU-controlled Alior Bank SA won’t impact the dividend, according to Krupinski. He declined to comment on talks with UniCredit SpA on the sale of the Italian bank’s local unit.

“Some investors were afraid that PZU may skip the dividend due to heavy M&A plans, therefore the management comments are seen positively,” Andrzej Powierza, an analyst at Citigroup Inc. in Warsaw, said by e-mail today.

The state-controlled insurer will retain 20 percent of profits annually to fund organic growth and innovation, according to a policy document released today. The rest will be paid out as dividends or kept as reserve capital for potential “significant capital expenditures,” particularly M&A transactions, it said. PZU plans to maintain its solvency ratio at 200 percent.

The insurer, which bought two Polish lenders in the past 15 months, seeks to double its bank assets to 140 billion zloty ($36.4 billion) by the end of 2020, it said in August. Banks will contribute 450 million zloty to annual profit by the end of the decade, it forecast. PZU reported net income of 2.3 billion zloty last year will probably post a similar result this year, according to a Bloomberg survey of eight analysts. An acquisition of the Raiffeisen unit by may require PZU to participate in Alior’s capital increase.

PZU will present the dividend policy published today to minority investors in the U.S. It may also sell subordinated debt by 2020, it added.

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