Powszechny Zakład Ubezpieczeń (PZU) Status Update summary

Strategic rationale and transaction structure

• A two-stage reorganization will split PZU SA into a holding company and an operating company, followed by a merger of the holding company with Pekao SA via a share exchange, resulting in a single large listed entity and delisting PZU Holdco.

• The structure leverages regulatory changes and the Danish Compromise to optimize capital management and shareholder value, freeing up approximately PLN 20 billion in capital.

• Shareholders of PZU SA (HoldCo) will receive Pekao shares currently held by PZU and newly issued Pekao shares.

• The state treasury is expected to retain around 27% ownership in the new entity, with the remainder as free float.

• Alior Bank's position within the group remains under review, with options including disposal, merger, or reducing the stake below 10%.

Regulatory and legal considerations

• The transaction requires changes in insurance and banking law to allow operational separation and enable a bank to merge with a holding company.

• Regulatory authorities, including KNF, have been involved from the outset, and the changes are considered technical.

• The Danish Compromise approval will be sought after full transaction implementation, with ongoing dialogue with regulators to ensure a high probability of approval.

• The timeline targets completion by June 2026, ahead of new solvency requirements in 2027.

Capital impact and utilization

• The reorganization is expected to release approximately PLN 15–20 billion in capital, with pro forma excess capital after potential Alior optimization reaching up to PLN 21.6 billion and total excess capital post-transaction up to PLN 24.6 billion.

• Pekao's current excess capital above 14.5% TCR is PLN 3.9 billion, with the merger releasing an additional PLN 10.7 billion.

• Surplus capital may be used for credit expansion (potentially PLN 100–200 billion in new loans), M&A, or dividends.

• Pekao SA’s own funds post-transaction are estimated at PLN 56 billion.