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4 June 2024

S&P affirms 'A' ratings on Sava Re and Zavarovalnica Sava, outlook stable

In accordance with 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:

Yesterday, S&P Global Ratings (the Agency) announced on its website www.spglobal.com/en that it had affirmed the “A” long-term financial strength and issuer credit ratings on Sava Re with a stable outlook. The ratings are based on the Agency’s updated capital model with revised criteria for analysing insurers’ risk-based capital dated 15 November 2023.

In its report, the Agency states that the Sava Insurance Group continues to demonstrate capital buffers that meet the risk-based capital requirements in an extreme stress scenario at a 99.99% confidence level.

In addition to Sava Re, the largest subsidiary, Zavarovalnica Sava, has also maintained its high financial strength rating of “A” with a stable outlook.

Also contributing to maintaining strong capitalisation is the fact that the new capital model fully recognises the level of the Contractual Service Margin (CSM), which totalled EUR 149.4 million for the Group at the end of 2023. The audited amount of the CSM is also fully disclosed in the notes to the financial statements in the annual report, in accordance with International Financial Reporting Standard 17. The previous model took into account only part of the expected future profit of the life insurance portfolio.

In its report, the Agency highlights that the key strength of the Sava Insurance Group is its strong market position in Slovenia, where the Group ranks second, with some additional diversification through reinsurance in the international reinsurance markets. The second strength is the large capital buffers mentioned above. The third strength identified by the Agency is the Group’s prudent underwriting, conservative reinsurance protection and prudent investment strategy. On the risk side, the Agency notes that the Group has less geographic diversification of revenue compared to its higher-rated peers, with the majority of revenue generated in Slovenia.

In contrast to last year’s outlook statement, which deemed a positive rating action unlikely, in this year’s statement the Agency allows for the possibility of a rating upgrade. Over the next 24 months, the Agency could consider raising the ratings in two cases. The first is if the Group continues to improve its competitive position; for example, if Slovenia’s GDP per capita moves closer to the euro area average, thereby strengthening the prospects for profitable domestic growth. The second is if the Group’s absolute capital levels continue to rise while its relative exposure to investment and underwriting risks remains contained. As an example of a negative factor that could affect the rating, the Agency cites a significant deterioration in revenue volumes or profitability triggered by external conditions that would also significantly worsen Slovenia’s macroeconomic situation.

The Agency views the first quarter 2024 results and their impact on capitalisation as positive.