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Polish pension fund sector set for another merger

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Poland’s biggest insurer has struck an agreement to take over pension funds run by one of its biggest banks.

Under an agreement reached between state-owned PZU Life and Bank Pekao – Poland’s second biggest bank by assets – PZU’s pension management company is to take over the open and voluntary pension funds run by Pekao Pioneer.

The transaction would shrink the number of second-pillar open pension funds (OFEs) to 10, and would be the second in the space of 12 months, following Aegon’s takeover of Nordea’s pension fund in November.

Currently OFE PZU “Złota Jesień” is the third biggest by membership and assets, behind those of Nationale-Nederlanden and Aviva BZ WBK.

At the end of October, according to the Polish Financial Supervision Authority (KNF), it had net assets of PLN23.5bn (€5.5bn) and a membership of 2.1m, accounting for 13% of total industry assets and 13.2% of the total pension fund membership.

The Pekao OFE, whose managing company is owned by Bank Pekao and Pioneer Global Asset Management Company, was the smallest in the industry, with asset and membership shares of 1.5% and 2% respectively.

In the case of voluntary pension funds, as of the end of March PZU had PLN32.1m in assets and Pekao Pioneer PLN60.2m.

The arrangement is expected to be completed by mid-2018, pending approval from the KNF.

Pekao’s relatively small share of the OFE market should address one of the regulator’s main concerns – the avoidance of excessive market concentration – when it considers fund mergers.

The consolidation became necessary after Italy’s UniCredit sold its 32.8% controlling stake in Bank Pekao in June to PZU and the Polish Development Fund, with the insurer taking 20%.

Under Polish law, an entity and its connected companies can only be shareholders in one and the same pension company, and the event of a merger or acquisition of the type proposed the parties have to establish a new entity to remain compliant.

Meanwhile, PZU Group’s recent transactions consolidated its position as one of the country’s biggest investment groups, as well as the government’s policy to “re-Polonise” its financial sector.

PZU Life accounts for more than a third of gross written insurance premiums, and is the market leader in employee pension programmes, managing 376 of the 1,036 plans of the end of last year. PZU’s investment fund was second with 122.

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