Merger of the titans?

Central Europe's largest domestic insurer, Grupa PZU, recorded a 71-percent jump in its H1 profits thanks to a boom in demand for its core services, life insurance and vibrant financial markets.

The state-controlled insurance group saw a net profit of zł.2.62 billion, which it stated was not boosted by any one-off transactions. Its return-on-equity ratio, a key indicator of financial performance, rose to 36 percent from 30.6 percent a year ago.

However Jaromir Netzel, who was PZU's chief executive until last Friday, when he was fired in connection with the CBA leak scandal, did not boost ambitions for the whole year. He said that while the group would stand by its net-profit target of zł.5 billion, a satisfactory figure would be above 4.5 billion.

Netzel, who is also a former PKO employee, said that to further boost PZU's success it should merge with the country's largest lender PKO Bank Polski as quickly as possible. "PZU's Achilles' heel is the fact that the group does not include a bank," said Netzel. "[If they had merged earlier,] profits would have been decisively higher both in PZU's and the bank's case," he added.

"The plan to merge, which has been presented by the Prime Minister, is right and should be put in place as quickly as possible," Netzel said in a press conference. "At the Treasury Ministry's level the work is already ongoing," he added.

The plans are hindered by the ongoing legal battle for control of PZU between the State Treasury and the insurer's strategic investor Eureko. The Netherlands-based group has won initial decisions in its arbitration case to force Poland to honor a promise to sell a majority stake in PZU.

Early elections in October or November is seen as another obstacle to the merger. Netzel said the government should push ahead with the tie-up despite political turmoil, adding the merger would benefit both companies. (Reuters)