On June 2, 2025, PZU SA and Bank Pekao SA signed a memorandum of understanding, which aims to reorganize and increase the efficiency of the capital group. The potential transaction mentioned in the memorandum, still subject to several conditions and necessary approvals, will release a capital surplus of up to PLN 20 billion. The banking-insurance group formed by the merger of both companies will be one of the largest financial institutions in Europe. Its ability to finance the needs of Polish families and businesses, including the development of sectors strategic for the economy, will significantly increase.

The memorandum of understanding was concluded as a result of the actions announced in the letter of intent from December 2 last year, aimed at reorganizing the assets of the PZU Group to optimally utilize the potential of all its companies. It is also the result of an analysis of the impact of changes in regulations important for the financial sector, including the CRR regulation and the Solvency II directive. The transaction planned by the parties to the memorandum is intended to better utilize the capabilities and resources and further develop both PZU and Bank Pekao.

"The PZU and Pekao brands are worth a bold vision that matches their potential and ambitions. We are starting the implementation of a project whose significance goes beyond the internal architecture of our group and is the result of reflection, analysis, and work by a wide range of experts, managers, and officials associated with the financial market. We will create a more transparent, highly diversified, resilient, and efficient business entity and release a large capital surplus. This will bring greater benefits to shareholders and also facilitate the financing of important projects and investments needed by the Polish economy, including areas of energy, defense, and new technologies," says Andrzej Klesyk, acting CEO of PZU.

"The signed agreement is the result of effective cooperation within our capital group. We are facing a great opportunity to create a significant banking-insurance entity on a European scale. Together, we have managed to develop a concept attractive to shareholders, which effectively utilizes the potentials of PZU and Bank Pekao and optimizes the allocation of capital resources of these two large organizations. This will allow us to significantly increase the ability to finance the Polish economy," points out Cezary Stypułkowski, CEO of Bank Pekao.

The entity formed by the merger of the largest insurer and the second-largest bank in Poland will have a credit potential increased by approximately PLN 200 billion compared to the current group model.

Both brands will retain their identity, distinctiveness, and autonomy in their business areas, as they have been operating within the PZU Group for many years, but the new group will be led by the bank, not the insurer. To achieve this, the first step will be the division of PZU SA by separating a holding company and a fully-owned subsidiary conducting operational activities in the field of property and other personal insurance. Then, the holding company PZU SA will be merged with Bank Pekao SA as the acquiring company. Ultimately, one company with significantly higher capitalization and greater liquidity than the current two, will be listed on the Warsaw Stock Exchange, increasing the attractiveness of such an entity from the perspective of investors and the entire capital market.

The memorandum of understanding outlines a plan of actions preparing the transaction, which is initially expected to be finalized in mid-2026. Its implementation is still dependent on many factors, including the agreement of the relevant transaction documentation by the parties, the entry into force of appropriate legislative changes, obtaining a number of regulatory approvals, and granting appropriate corporate approvals by the general meetings of shareholders of PZU and Pekao. In the course of further work and cooperating closely, the parties also want to develop an optimal strategy for the future of Alior Bank.

Among the most important benefits that the transaction model agreed upon by PZU and Pekao will bring are:

• Simplification of the group's ownership structure by adapting it to models preferred in the European market,
• Improvement of corporate governance and transparency of the entire organization,
• Increase in cross-selling of all products offered by the group and full utilization of the banking channel for insurance distribution,
• Creation of a financial group with a highly diversified revenue structure and significant dividend potential.

Reorganizing the group according to the scenario indicated in the memorandum of understanding is necessary to achieve capital gains. An important benefit will be the possibility of applying the so-called Danish compromise at the level of the merged group, i.e., regulations resulting from the CRR regulation of the European Parliament and the EU Council from 2013 and confirmed in the CRR3 regulation, which has been in force since the beginning of this year. In this way, the shares of the insurer included in the financial conglomerate led by the bank will be able to be risk-weighted by the bank, rather than deducted from own funds when calculating the solvency ratio.

In practice, this will allow the entity formed by the merger, with the bank as the dominant entity, to free-up a capital surplus of PLN 15-20 billion. This would not be possible while maintaining the current structure of the PZU Group, as new capital adequacy and solvency requirements resulting from changes made to the Solvency II directive, increasing capital requirements for insurers holding shares in banks, will come into force at the beginning of 2027. The PZU Group would lose the ability to utilize the vast majority of the current capital surplus of approximately PLN 6 billion.

The surplus generated after the transformations planned in the memorandum may be used by the new group created by PZU and Pekao, i.a. to increase financing for development projects in the Polish economy, and will also increase the dividend potential of the merged institutions. The final decision on the distribution of the generated capital surpluses belongs to the shareholders.

The management boards of PZU SA and Bank Pekao SA, under the leadership of the CEOs of both companies, are preparing a detailed schedule of planned actions to fulfill the provisions of the memorandum of understanding and will soon jointly present it publicly.