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20 August 2020

H1 2020 results: operating revenue up 16.6%; growth in revenue and profit also reflects acquisition of Vita

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:

At its regular meeting yesterday, the Sava Re supervisory board was presented with the unaudited financial results of the Sava Insurance Group and Sava Re for January–June 2020.

In the first half of 2020, the Sava Insurance Group generated almost EUR 314.2 million in operating revenue and a net profit of EUR 32.2 million. Operating revenue of the Sava Insurance Group reached 51.5% of the original full-year 2020 target, and the net profit 71.5% of the original annual target. These achievements were also supported by one-off income of EUR 6.8 million relating to the excess of the fair value of the net assets acquired over the cost of the investment in Vita. Because of the material impacts of the Vita acquisition and Covid-19 on operations, we today publish the revised annual and strategic plans.

Operating revenue up 16.6%

In the first half of the year, the Group’s operating revenue grew by 16.6% year on year. In addition to intensive acquisition activities, this growth was achieved through seeking opportunities to expand FoS business (freedom of services) written by Zavarovalnica Sava in cooperation with various EU partners, and through growth in reinsurance business.

Impact of Covid-19 on revenue

The slump in economic activity as a result of the Covid-19 pandemic affected growth in most operating segments of the Sava Insurance Group. The half-year non-life gross premiums written in Slovenia, excluding FoS business and non-life business of Vita, grew by 4% year on year, whereas Slovenian life business, in which some maturities of existing policies were anticipated, excluding the life insurance part of Vita, saw a 4% drop in premiums. There was also a 2% drop in the Group’s non-Slovenian non-life premiums and operating revenues of assistance business also saw a decline. Covid-19 had a major impact on the financial markets, eroding the value of assets under management in pension companies and in the fund management company.

Better cost-efficiency

The net expense ratio improved by 1 p.p. year on year, mainly due to the better expense ratio for reinsurance operations, due to the integration of Vita, which operates at a lower-than-average expense ratio in the Group, and due to measures to contain costs taken by the Group to ease the negative financial impact of Covid-19 on operations.

Improved incurred loss ratio for Slovenian non-life business

Profitability improved as the result of both a better expense ratio and a more favourable claims experience in Slovenia thanks to a lower loss rate in motor business.

Positive effect of Vita acquisition on Group operations

A significant contribution to the net profit for the period came from the acquisition of Vita, consolidated in the Group accounts as from 31 May 2020. Through this acquisition, the Group doubled its market share in the Slovenian life insurance market, while also generating a one-off income of EUR 6.8 million from the excess of the fair value of the net assets acquired over the cost of the investment in Vita. Without the effects of Vita, the Group’s net profit would total EUR 24.5 million, up 8.4% year on year, and 54.4% of the original full-year 2020 target.

Portfolio structure resilient to financial market volatility

The return on the investment portfolio in the first half of the year was 1.5%, which is 0.2 p.p. above the plan. The portfolio of predominantly highly rated government and corporate bonds is fairly resilient to financial market volatility. The key goal of the Group’s investment policy is to maintain a low volatility and a high level of security of invested insurance contract assets, as well as to ensure high liquidity and risk diversification.

Reaffirmed Standard & Poor’s ratings

Following its regular annual rating review, the rating agency Standard & Poor’s affirmed the “A” (strong) insurer financial strength rating on Sava Re and Zavarovalnica Sava. The outlook was stable. In the agency’s assessment, the key strengths of the Sava Insurance Group are its established market credentials in the Slovenian market, solid capitalisation at the “AAA” level, its conservative investment strategy and underwriting risk appropriately limited through reinsurance.

The documents “Unaudited financial report of the Sava Insurance Group and financial statements of Sava Re d.d. for the six months to 2020” and a presentation of results for January–June 2020 are attached hereto.

Attachments:

Financial report 1–6/2020

Presentation of results 1–6/2020