Poland's PZU puts PKO in sights

POLAND - Plans by Poland’s state-owned insurer PZU to acquire a Polish bank could lead to further consolidation in the pensions fund market .

PZU, the country’s largest insurer, also owns the third largest open pension fund (OFE) after Commercial Union, and ING Nationale-Nederlanden.

Zdislaw Montkiewicz, PZU president, has announced that PZU may join forces with PKO BP, Poland’s largest retail bank , to form a Polish financial services group. Both PZU and PKO BP are in the process of privatisation.

PKO BP has a 50% stake in Bankowy, the OFE created by a partnership with Bank Handlowy, now owned by the US bank Citigroup.

Under the rules of the open pension funds regulator, KNUiFE, no financial institution may operate two OFEs. Over the past two years, a number of banks and insurers involved in mergers have been forced to sell off pension funds, notably Commercial Union’s (now Aviva) sale of the Norwich Union fund in 1991.

As a result the number of OFEs has gradually reduced. Currently 17 out of the 21 funds that were established at the start of the pension system reform in 1999 are still operating. Total assets under management at the end of 2002 were 7.9 billion euros.

PZU has been at the centre of a bitter dispute between the Polish Treasury and Eureko, the consortium that includes the Dutch Achmea insurance group and UK asset managers F&C.

Eureko bought a 30% stake in PZU for 694.5m euros in 1999 and was promised a further 21% by the government in an IPO scheduled for 2001. However, the Polish government has backtracked on this assurance, and Eureko says it has now given up hope of further privatisation.