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17 December 2021

Business plan of the Sava Insurance Group for 2022

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, 1000 Ljubljana, makes the following announcement:

Based on its 2020–2022 strategy, the Sava Insurance Group has prepared its business plan for 2022. The Group is planning to exceed EUR 700 million in operating revenue and generate a profit after tax of more than EUR 60 million, which translates into a return on equity of more than 11.5% in 2022.

The management board believes that, despite the impacts of the Covid-19 pandemic on macroeconomic trends and the expected volatility of financial markets, the business plan is ambitious and has considered all key aspects required to support the Group’s sustainable long-term development, risk management and profit generation. The Group’s key development activities in 2022 will continue to focus on placing the customer at the centre and introducing new core IT systems for improved enterprise efficiency and service.

Revenue planned to exceed EUR 700 million

The financial targets are based on autumn forecasts for GDP growth by country where the Group is present and the assumption that there will be no major fluctuations in financial markets. It is also premised on the projection that there will be no lockdowns in 2022 or restrictions on movement similar to those imposed in these countries in 2020 and 2021.

The Group’s operating revenue is planned to exceed EUR 700 million in 2022.

The Group expects Slovenian non-life insurance revenue to decline slightly. The projected decline reflects lower premium income from Freedom of Service (FOS) business, largely discontinued in 2021. In the Slovenian insurance market, the Group is targeting 2% growth in revenue against the backdrop of expected lower growth in car sales and potential lower insurance sales due to inflation. For international non-life insurance, the Group is targeting 6% organic growth in operating revenue.

The life insurance business in Slovenia is forecast to grow by 2%. While new annual premiums are planned to be slightly higher, revenue is projected to grow at a slightly lower rate due to the impact of the maturing of large parts of the life portfolio. These effects on revenue trends will largely fade away by the end of 2022. This operating segment has seen a significant boost in revenue since the takeover of Vita in 2020. In international markets, revenue growth of 17% is planned in this segment.

Reinsurance is expected to see a 16% drop in revenue in 2022. This decline is due to the expected one-off effects on growth in 2021 (positive development of income from the 2020 underwriting year) and unwavering underwriting discipline with a strong focus on profitability, risk and portfolio diversification by both region and partner.

Revenue from the pensions and asset management operating segment is expected to increase by 13%.

Conservative investment policy

The key goals of the investment policy in 2022 remain maintaining low volatility and a high level of security of invested insurance contract assets, as well as ensuring high liquidity and risk diversification. As regards the performance of financial investments, management expects a very slow but steady rise in interest rates, which will remain relatively low. Thus, the planned return on the investment portfolio is 1.4%. The investment portfolio structure will remain relatively conservative in 2022, with a high share of bonds and other fixed-rate investments and a high credit rating profile, but with a slightly higher allocation to infrastructure and real-estate funds, and infrastructure debt.

Main development areas

The Group has set itself the following main tasks in its key development areas for 2022:

The Group’s plans for digital transformation and putting the customer at the centre include the following:

1. Development of a self-service portal for customers – both individuals and companies – will continue. The portal will make possible greater transparency and easier access to information on the services and products offered by the companies of the Sava Insurance Group. It will also allow online purchases of services and facilitate customer communication with Group companies.
2. With regard to communication channels and work processes, the focus will be on improving response times for customer queries and the delivery of the Group’s services.
3. Customer data collection and processing will be enhanced.
4. Website content will be optimised in terms of capturing customer data, and tailoring offers and communication channels to customer profiles. Online shops will be redesigned.
5. Claims handling will be improved through greater accessibility of claims reporting and faster handling of individual claims.

As part of the Group’s IT overhaul in 2021, work continued on the comprehensive overhaul of core IT systems. Regarding underwriting business, the 2022 plan proposes the completion of an upgraded core business IT system in the Croatian branch of Zavarovalnica Sava. In addition, work will start on renovating the IT system supporting non-life insurance business in Slovenia, reinsurance business and life insurance business in Serbia. The Group will continue optimising and expanding its data warehouses to allow advanced analysis of data for new regulatory (IFRS 17) and business purposes. Technological and process upgrades in cyber security will also continue, with an emphasis on end-user training and continuous enhancement of technical capabilities.

The third pillar of the Group’s strategy is acquisitions-based growth. In addition to effective organic growth, the Group will continue to seek opportunities for growth through acquisitions in the areas and countries where it is already present.

Sustainable development efforts

In 2022, the Sava Insurance Group will aim to meet its sustainability targets. In addition to achieving compliance with regulatory requirements regarding reporting, the Group will continue its activities aimed at promoting good health and well-being for its employees, policyholders and the broader community, with commitment to the principles of the UN Global Compact. When investing, the Group will have a strong bias towards sustainable investments, such as green and sustainable bonds, ESG funds and energy efficiency projects (ESCos), and the Group will follow PRI principles.

Attachment:

Summary of Sava Insurance Group business plan 2022