AM Best affirmed the Financial Strength rating of A (Excellent), and the Long-Term Issuer Credit Rating of “a” (Excellent) of Sava Re, with a stable outlook for these ratings.
Following its regular annual rating review, the rating agency AM Best (“the Agency”) issued its ratings on Sava Re on Friday. According to the review, AM Best affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Pozavarovanica Sava d.d., i.e. Sava Re, the operating holding company of Sava Insurance Group. The outlook for these Credit Ratings is stable.
According to AM Best, these ratings reflect Sava Re’s balance sheet strength, which the Agency assesses as very strong, combined with the strong operating performance, neutral business profile, and appropriate enterprise risk management (ERM).
Taking a closer look at the assessment, the balance sheet was deemed very strong. This was due to the following reasons: Sava Re’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), liquid investment portfolio, prudent reserving, and good internal capital generation. Moreover, the Company has a low reliance on reinsurance and sound financial flexibility, with access to both equity and debt markets.
In terms of the operating results, Sava Re has a track record of generating strong and stable op. results, indicated by the 5-year (2018-2022) weighted average ROE of 14.3% (based on the Agency’s calculation). Furthermore, consistent reporting of op. profits over the past 5 years have been driven by solid life and non-life underwriting performance, supplemented by healthy investment income. By the end of 2022, Sava Re reported a combined ratio of 90.4%, with a 5Y average of 91.6%. In H1 2023, Sava Re reported a strong net profit of EUR 40m and a combined ratio of 89.9%. Full-year results, however, will be impacted by the third-quarter floods, particularly in Slovenia. However, AM Best expects these losses to be within Sava Re’s risk tolerances. The Group has app. 70% of its GWPs in Slovenia, where its leading competitive position and prudent underwriting help generate strong and relatively stable earnings.
Finally, Sava Re benefits from its strong position in its core domestic market of Slovenia, where it’s the 2nd largest insurance company with app. 28% market share (excl. supplementary health insurance business), in terms of GWPs. The Group’s insurance business is largely focused on premiums written in Slovenia. However, the company continues to expand in the West Balkan markets. The Agency expects to see further geographic diversification in the medium term in both the direct and reinsurance segments, as the Group continues to develop its position prudently in the international reinsurance market. Taking all of this into account, AM Best considers Sava Re’s ERM to be developed, and appropriate for the company’s risk profile and operational scope.
