Back

25 August 2023

Half-year financial report for 2023 with outlook for full-year result

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

Sava Insurance Group cuts full-year profit target by 25% after wave of storms and floods

The storms and floods in Slovenia and the Balkans in July and August are unprecedented. We are changing our normal reporting format to cover these events and their anticipated impact on our full-year results first and then follow with our first-half results.

At its regular session yesterday, the Sava Re supervisory board reviewed the unaudited financial results of the Sava Insurance Group for January to June 2023 and the reports on the effect and cost of the severe weather events.

• In July and August, unprecedented storms and floods hit Slovenia; gross claims estimated to approach €100m
• Negative impact on the 2023 result estimated at €30m to €35m
• First half business volume up by 11.7% to €495.1m
• Net profit for the half year of €40.0m, higher year on year

Group’s claims from unprecedented storms and floods
In recent weeks, after the reporting period, Slovenia was hit by a wave of devastating storms and floods that caused great personal distress to the people and many communities affected, as well as significant damage to property. The most devastating of these were the floods of 4 and 5 August 2023. We are working strongly with our policyholders to ensure that they receive the support as provided for in their insurance policies to help them through this difficult time. Neighbouring markets in which the Group operates, mainly Austria, Croatia and Serbia, also experienced more frequent storms. Based on available data, gross claims are estimated to be close to EUR 100 million. Together with the claims to be covered by Sava Re on reinsurance business accepted outside the Group (written in Austria, Croatia and Serbia) and considering the reinsurance protection, the management board estimates the total impact on the business result will be in the range of EUR 30 to EUR 35 million. As a result, the management board estimates that the profit for 2023 will be approximately 25% lower than planned, or around EUR 40 million, due to the impact of the storms and floods (helped by the strong half-year results). This estimate assumes that claims experience for the remainder of the year will remain in line with long-term claims statistics and is subject to change in the event of new major claims or other new events of significant magnitude.

Notably, the estimated profit will mainly come from business segments that are not directly affected by natural catastrophes (life insurance, motor third-party liability, business related to the management of assets and reinsurance in international markets), highlighting the Group’s overall resilience and business line diversification. As the Group maintains a conservative investment portfolio, which also provides the Group companies with a high level of liquidity, claims payments will not jeopardise the Group’s liquidity position. Although the Group’s solvency ratio will decline slightly, its financial position is expected to remain strong.

The Group’s business volume for the first half year, measured in terms of premiums written and revenue from other non-insurance services, amounted to EUR 495.1 million, showing strong growth of almost 12% year on year. The main components of this growth were EU non-life premiums (up 15.7%), non-EU non-life premiums (up 24.0%) and the Group’s reinsurance business (up 9.5%). The Group adjusted its premium rates in line with inflation in both its domestic market and international reinsurance markets; however, it also increased its volume of business through new customer acquisition and increased insurance sales. Premium growth in non-EU markets was mainly driven by growth in the number of policies written. Life insurance premiums in the domestic market did not reach the volume of the first half of last year (down 2.8%) due to the exceptionally high sales during last year, but the Group significantly reduced this gap in the second quarter.

The Group’s net profit for the first half of the year of EUR 40.0 million normalised, compared to the same period last year, when it had fallen substantially following materially higher provisions, driven by inflation. However, the more favourable financial market conditions and higher levels of required yields this year contributed to an improved net investment income (up EUR 13.9 million), which also contributed favourably to this year’s half-year results. The Group’s net profit reached 75.6% of the annual profit target, largely because of the absence of major claim events until the end of the first half of 2023. The solvency ratio, estimated at between 183% and 189%, is projected to decline in the third quarter but to remain within the optimal capitalisation range defined in the risk strategy (170–210%).

Attachments

Presentation of results 1-6 2023

Financial report 1-6 2023