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Poland, Eureko Reach Agreement Over Powszechny Zaklad Ubezpieczen SA, or PZU Insurer

By Steve Gavriliuc for CEOWORLD Magazine Updated:October 2, 2009

Eureko B.V. (EUR/YY), the Netherlands-headquartered insurance group, has finally secured a financial settlement and exit strategy from its ownership of Poland’s largest insurer PZU SA (PZU/YY) following a long-running dispute with the Polish government.

An agreement has been signed between the Polish Ministry for State Treasury and Eureko to pay the insurer an interim dividend in November 2009 worth €1.85bn (PLN12.75bn) and create a special purpose vehicle which will allow Eureko to eventually sell its shareholding and free up its capital. The SPV will hold 10% of Eureko’s total 33% shareholding in PZU while the MST will add 4.9%, and this operation will be sold through an IPO of PZU shares before 1 January 2012.

Eureko has been in an almost decade-long dispute with the Treasury Ministry over control of insurer Polish insurer Powszechny Zaklad Ubezpieczen SA, or PZU.

Eureko held issue with the government’s failure to honor an agreement to complete PZU’s privatization. Poland and Eureko hold 55.1% and 32.1% stakes in PZU respectively.

Eureko will maintain its positions in other Central and Eastern European countries, Chief Financial Officer Gerard van Olphen told reporters. The insurer is active in 12 European countries.

Under the terms of the agreement, Eureko will gradually exit PZU as a shareholder, via an initial public offering, in exchange for 4.77 billion zloty ($1.63 billion) in compensation.

Klesyk told reporters that PZU will pay PLN750 million in the form of an advanced dividend from its 2009 profit to shareholders. Thursday, PZU holders approved unlocking PLN12 billion earmarked for dividends, from profits that the insurer had accumulated over the last three years.

Klesyk said that PZU will not need to sell large assets to fund its dividend payment, as it had secured commitment from banks for PLN32 billion in loans to fund the dividend payment.

Polish zloty and Treasury bonds have been under pressure this week as investors were concerned that, in order to pay the dividend, large amounts of treasury bonds held by PZU would hit the market. Meanwhile, investors expected that Eureko would exchange its part of the dividend into euros, and as a result, hurt the zloty.

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