Company: Powszechny Zaklad Ubezpieczen SA
Business: The largest Polish insurance company. It is divided into three parts: Property and Casualty Insurance (market leader with 31% of the market), Life Insurance (market leader with 30% of the Polish market) and finally Open-End Pension Funds (third largest in Poland with 2.2 million customers).
Active: Poland which means no company diversification benefit but on the other hand Poland is booming at the moment so it might be good to focus.
P/E: 11.3
The P/E of PZU is pretty ok with 11.3 but the P/B is too high for my liking with 2.6 which then also gives that Graham would have little interest in this company. Their earnings to sales are excellent with 21% and the ROE is also superb with 23.4%. The book to debt is however at a low ratio with 0.3 which is not uncommon for insurance companies. Their growth in the last five years has only been so, so with 2.2% but I guess that might come from them already being the market leader. This then gives us a motivated P/E of 9 to 13 which means that PZU is today fairly valued by the market. They pay a very nice dividend of 6.8% which however correspond to 77% of their earnings so far too high for my liking.
Conclusion: An excellent Polish insurance company with high dividend payment and an excellent P/E ratio. However P/B and debt is a bit too high and the dividend payment is too close to their full earnings which means that also I will back down on this one just like Graham decided to do.
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