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20 August 2020

Revised annual plan of the Sava Insurance Group for 2020

Pursuant to the rules of the Ljubljana Stock Exchange d.d., Ljubljana, and the Market in Financial Instruments Act, Sava Re d.d., Dunajska 56, Ljubljana, makes the following announcement:

Despite the negative impacts of Covid-19, the revised annual plan of the Sava Insurance Group for 2020 provides for higher revenues than originally planned, because of the acquisition of Vita, and also provides for a higher net profit, which is estimated at more than EUR 50 million. Net profit has been revised upwards mainly due to Vita’s integration into the Group and the one-off revenue of EUR 6.8 million arising on its acquisition due to the difference between fair value of net assets acquired and the consideration paid, while Covid-19 has had an overall negative impact on the total planned result of the Group’s various operating segments.

The Sava Insurance Group has revised its 2020 plan for two reasons: the first is the acquisition of the life insurance company NLB Vita, which was integrated into the Group on 31 May 2020, and the other is Covid-19 and the related impacts on Group companies’ operations.

As regards its important development areas, the Group is planning the following for 2020:

Regarding digital transformation and customer centricity, the Group will seek to simplify the purchasing and management of policies, and the reporting of claims for its customers, and it will pay special attention to its online presence and mobile applications, as well as to the adjustment of communications and products to customer preferences.

Regarding IT transformation, the Group will complete the development of unified infrastructure supporting the basic data warehouse, and it will start renovating its core IT systems, including replacements, upgrades and implementation of new IT solutions.

As regards acquisition-based growth, the Group, while efficiently delivering organic growth, will continue with acquisition activities in its existing markets, but it will also explore opportunities for strengthening its insurance business elsewhere in the EU.

Key targets for 2020:

Compared to the previous year, we expect gross non-life premiums written in Slovenia to decline by 2%, reflecting the decline in new car sales aggravated by Covid-19 (original plan: 3% growth). As regards gross life premiums written in Slovenia, we expect an increase of 43%, which is explained exclusively with Vita’s integration into the Group starting with June 2020, whereas the volume of life business of Zavarovalnica Sava has been shrinking due to the large number of policies maturing (original plan: 9% decline in gross premiums). Covid-19 has also made underwriting of these policies difficult due to required social distancing and movement restrictions.

Also as regards insurance business outside Slovenia, we expect a decline in gross premiums in 2020 compared to the previous year due to the impacts of Covid-19. Non-life insurers outside Slovenia expect premiums to decline by 5% (original plan: 6% growth), whereas life insurers still expect premiums to grow at 9%, which is more modest than originally planned (original plan: 15%). In 2020, the Group’s non-life insurers will focus in particular on the development and expansion of the existing sales network, the diversification of their portfolios by means of new products, and the strengthening of bancassurance as a sales channel. In their development of insurance products and services, the Group’s life insurers will focus in particular on reducing or discontinuing guaranteed rates in 2020 in view of the low interest rates prevailing in the financial markets.

As regards reinsurance business, the Group expects gross premiums to grow by 6% (original plan: 8%), reflecting increased business volume in new markets, and it will seek to diversify the portfolio by both region and partner. The downward revision of planned growth is explained with the expected cooling of the majority of economies abroad where the reinsurer operates.

As regards its investment policy, the Group will try to maintain high security and low price volatility of assets covering liabilities under insurance contracts, high liquidity and risk diversification. Investment management in 2020 will be affected by the continued low interest rates. The investment return is planned at 1.4%, which is 0.1 percentage points more than originally planned, reflecting the slightly longer duration of Vita’s portfolio. The investment portfolio structure will also remain relatively conservative in 2020, featuring a high share of bonds and other fixed-income investments and a high credit rating profile, with the share of equity securities and infrastructure projects increasing slightly. Vita excluded, the revised plan provides for a lower investment portfolio value, reflecting the financial markets decline in 2020.

The Group intends to increase its cost-effectiveness in 2020. Compared to the original plan, the net expense ratio will improve by one percentage point, mainly due to the following: the expected decline in the ratio in the reinsurance segment, Vita’s integration into the Group, as the company has a net expense ratio that is below the Group’s average, and certain cost optimisation measures adopted to mitigate the negative impacts of Covid-19 on the Group’s operations.

The Group expects its net profit to exceed EUR 50 million (original plan: > EUR 45 million) and operating revenues to exceed EUR 640 million (original plan: EUR 610 million). Excluding the impact of Vita’s acquisition, the net profit of the Group is planned at the level of EUR 41 million (down 9% compared to the original plan), and its operating revenues at EUR 590 million (down 3% compared to the original plan).

Attachment:

Revised annual plan for 2020