PZU’s share price

PZU made its debut on the Warsaw Stock Exchange (WSE) on 12 May 2010. Since day one, it has been included in the following indices: WIG20, WIG, WIG30, WIG-Poland, WIGdiv, WIG20TR and MSCI Poland. Since 2012, the PZU stock has also been taken into account in the sustainable development RESPECT Index (confirmed on 12 December 2018).

Warsaw Stock Exchange indices

In 2018, the Polish blue chip index (WIG20) oscillated between 2,083 and 2,630 (in 2017: between 1,957 and 2,552), ending the year’s last session at 2,276 (down 7.5% y/y). The performance of the index of small and medium-sized companies in this period was even poorer. The mWIG index dropped 19.3% y/y and sWIG index plummeted 27.6% y/y.

PZU’s share price

In 2018, PZU’s shares remained among the most liquid companies traded on the WSE. With the market capitalization of over PLN 37.9 billion as at the end of 2018, PZU was again the fourth largest company listed on the Warsaw Stock Exchange in terms of capitalization. PZU’s share in the total WSE trade value was 8.4% (ranking 4th). PZU’s equities also ranked among the top five in terms of the rate of return within the WIG20 index (10.1%), with the other 15 companies of the index having recorded losses. At the same time, PZU was the only company representing the financial industry in the WIG20 index with a positive rate of return in 2018.

The maximum price per share of PZU stock in 2018 was PLN 47.34 (at closing prices) and the minimum price was PLN 36.31. In 2017, these prices were PLN 49.06 and PLN 32.82, respectively.

After adjusting the price of PZU stock for disbursed dividends (http://stooq.pl/pomoc/?q=9&s=pzu), the price at yearend 2018 increased 10.7% y/y. The highest price levels were close to historical highs recorded in 2017, yet they were not beaten.

PZU’s min/max share price at session closing from May 2010 to 2018

Source: www.infostrefa.com, www.msci.com

PZU’s share price adjusted for dividends paid from May 2010 to 2018

Source: www.stooq.pl

The PZU stock price in 2018 peaked on 26 January at PLN 47.34 per share. This level turned out to be the end of a strong upward trend followed in 2017. For the remainder of the year, the stock performed in a highly volatile manner, following in the footsteps of Polish benchmark indices. The increase in PZU’s relative strength vis-à-vis the WIG index transpired only in the last quarter of the year. At yearend 2018, the value of PZU stock (net of the disbursed dividend) increased 4.1% y/y as the WIG20 index decreased 7.5% y/y. In income terms (taking the dividend into account), throughout 2018 PZU recorded a 10.1% y/y rate of return compared to the WIG drop by 9.5% y/y.

In 2018, PZU’s stock maintained very high liquidity. The average daily spread of PZU’s stock was only 7 bps compared to 16 bps of the average spread for the 20 most liquid companies. PZU’s stock accounted for 8.4% of the total market’s trading value in PLN, having exceeded PLN 17.2 billion. The average daily trading volume of PZU’s stock in 2018 was 1.7 million shares. The largest daily turnover (of 12.4 million shares) was recorded on the falling (-1.4%) trading session of 21 September 2018. This large capital flow was associated with Poland’s reclassification from the basket of emerging markets to that of developed markets by FTSE Russel agency, which issued a favorable assessment of the developments in the Polish regulatory environment, infrastructure and quality of the capital market, and appreciated the condition of the depository and clearing system as well as the development of the derivatives market. As a result, Poland entered the group of top 25 developed global markets, having joined such countries as Germany, France, Japan, Australia and the United States. At the same time, owing to this reclassification, Poland entered the Stoxx 600 index. The session of 21 September was the last session during which investment funds (mainly passive ones) made changes in their portfolios (predominantly during the fixing of prices at the session’s close). Although it will be possible to assess the consequences of the reclassification decision only in the longer term, the immediate conclusion is that concerns about the oversupply of stocks due to the reduction of Poland’s share in the basket of developed countries versus that of developing countries were proven wrong. At the end of the 21 September session, the WIG index recorded a token increase.

PZU stock price versus WIG and WIG20

Source: www.gpwinfostrefa.pl

One of the main factors that affected the increased volatility in the valuation of PZU’s stock for most of 2018 was uncertainty arising from speculations about the possible merger of Alior Bank and Pekao and its impact on PZU. On 23 and 24 October 2017, both banks announced in their current reports that work was initiated on analyzing strategic options available to the PZU Group, including a potential merger transaction. After the 7 August 2018 session, the banks announced their withdrawal from negotiations and completion of the analysis process. The justification for the decision was that it will be more beneficial from the shareholders’ point of view for the banks to keep operating as separate entities and cooperate with each other as members of the PZU Group. The market reacted favorably to this information. PZU’s share price at the close of the 8 August 2018 session went up 2.5% to PLN 42.6.

The trading volume (in OTC block trades) of PZU’s stock in 2018 was 9.5 million shares (up 3.9% y/y). This accounted for approx. 2.3% of the trading volume in session transactions in the whole of 2018.

Factors affecting PZU’s stock price in 2018

Źródło: www.gpwinfostrefa.pl

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Volatility

Compared to the broad WIG market, PZU’s systematic risk expressed by the beta coefficient (PZU stock price vis-à-vis the WIG index for daily shifts) in 2018 was 1.23 (1.06 in 2017). The increase in the beta coefficient was related to the poor performance of the main Polish indices, all of which wrapped up 2018 in the red. In sectoral terms, the situation was not much better either: WIG-Fuels was the only industry-specific index that improved. Against this background, PZU’s stock prices definitely stood out, generating a 4.1% increase (net of the distributed dividend). In 2018, the annualized standard deviation for daily changes in the PZU stock price increased 3.5 percentage points y/y and stood at 27.1%. The value of this statistic for WIG and WIG20 went up 3.4 p.p. and 3.7 p.p. to 15.2% and 18.7%, respectively, which was in line with the global trend of increasing volatility in 2018.

PZU’s total shareholder return, calculated as the stock price difference plus the value of the distributed dividend, was 10.1% as at yearend 2018 (in 2016 and 2017, it was 3.7% and 31.2%, respectively). In 2018, PZU’s performance compared to the best-suited comparative group (WIG20TR index) was significantly better than in 2017, surpassing the benchmark index in 2018 by 15.5 p.p. compared to 2.3 p.p. in 2017.

The dividend yield on PZU’s stock disbursed in 2018 (of PLN 2.50 per share), calculated using the price per share of PLN 42.16 as at the end of 2017, was 5.9%. This was 4 p.p. higher than the dividend yield for the WIG20TR index². The dividend yield for the WIG-Banks index was 3.4%.

Indicators

As at the end of 2018, PZU’s shares had a high value of the P/ BV ratio of 2.5, i.e. twice the average for European insurance companies, which according to analysts is a consequence of a high ROE at yearend 2018, it stood at 22.1%.

PZU’s valuation compared to the peer group (P/BV and ROE)

Source: Bloomberg (Q3 2018); PZU (Q3 2018)

² Warsaw Stock Exchange, https://www.gpw.pl/pub/GPW/statystyki/statystyki_ kwartalne/20184_GPW.xls