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18 December 2020

Annual plan of the Sava Insurance Group for 2021

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 annual plan for 2021. The Group plans to generate more than EUR 685 million in operating revenue and to close 2021 with a net profit above EUR 53 million, which translates into a planned return on equity of at least 11.5%.

The management board believes that, given the impacts of the Covid-19 pandemic, the business plan is ambitious and has considered all key aspects required to support the Group’s sustainable long-term development, risk management and appropriate profit generation.

The Group is planning the following activities in its key development areas in 2021:

Regarding digital transformation and placing the customer at the centre, in 2020, the Group further stepped up its already underway efforts to provide online solutions to support insurance operations, partly accelerated by the Covid-19 situation, and it intends to continue along this path in 2021. Activities will focus on facilitating communication for the customer, exploring omni-channel marketing and replacing paper-based communication with electronic means. The Group will pursue new digital avenues, offering a wider array of online sales options, informative solutions, service subscriptions and information points providing advice on selecting optimal coverage for individual customer segments. The launch of solutions in individual markets will be timed based on the individual market’s needs and maturity.

As part of its IT transformation, in 2020 the Group embarked on a comprehensive redesign of its information systems supporting the Group’s core business. The 2021 plans for insurance business are to complete the renovation of the core business IT solutions for 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 its data warehouses to allow advanced analysis of data for new regulatory (IFRS 17) and business purposes. The management of IT processes will be improved by implementing an IT service management solution. Technological and process upgrades in cyber security will also continue, with an emphasis on end-user training.

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

This plan is based on autumn forecasts for GDP growth in these countries and on expected relatively stable and less volatile financial markets than those experienced in 2020. It is also premised on the assumption that there will be no new lockdowns in 2021 or restrictions on movement similar to those imposed in these countries in 2020.

The Group’s operating revenue will exceed EUR 685 million in 2021, growing at a rate of approximately 5% in the Group’s strategic markets.

In Slovenia, the Group is planning 2% growth in gross non-life insurance premiums, taking into account the expected slowdown in car sales and longer economic recovery from Covid-19. Gross life insurance premiums written in Slovenia are expected to grow by 23%, reflecting the full-year inclusion of the life insurer Vita in the Group.

The Group’s non-life insurers outside Slovenia are planning their gross premiums written to grow by 8%. This increase mostly relates to the motor insurance business, in which companies wrote less in premiums in 2020 than planned due to Covid-19 impacts, whereas less of such adverse impact on premium volume is expected in 2021.

The Group’s life insurers outside Slovenia are also planning their gross premiums written to grow by 8%. In 2021, product and service development will mainly focus on preparing adaptable risk products tailored to selected customer groups and specific distribution channels.

The reinsurance segment expects gross premiums written to grow by 1% in 2021. The lower growth rate reflects more selective reinsurance underwriting focused on profitability, with steps taken towards de-risking the portfolio and further diversifying it in terms of regions and partners.

The key goals of the investment policy in 2021 remain maintaining low volatility and a high level of security of invested insurance contract assets, as well as to ensure high liquidity and risk diversification. The management expects that returns on financial investments will continue to be affected by low interest rates, which is why the planned rate of return is 1.5%. The investment portfolio structure will also remain relatively conservative in 2021, 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.

We are building a customer-centric, modern, digital, community-minded and sustainable insurance group. Through commitment to customer centricity and constant progress, we ensure security and quality of life. We are aware that we have set ambitious goals for 2021, despite the volatile and uncertain macro environment. We also believe we have the knowledge, experience and dedication required to successfully realise the planned activities.

Attachment:

Highlights of Sava Insurance Group annual plan 2021