On Friday, AM Best rating agency affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) for Zavarovalnica Triglav and Pozavarovalnica Triglav Re, with a stable medium-term outlook. Furthermore, the Agency also affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Pozavarovalnica Sava d.d. (Sava Re) with a stable outlook.
Triglav
Starting off with Triglav, the Agency noted that all elements of this year’s rating are at the same level as last year, and both ratings, i.e. Financial Strength Rating of A, and Long-Term Issuer Credit Rating of “a” have maintained a stable medium-term outlook.
The Agency assessed Triglav’s balance sheet strength as very strong and its operating performance as strong, with the impact of the business profile and the State’s majority ownership on the Company’s credit ratings remaining neutral. Furthermore, the Agency considers Triglav’s enterprise risk management to be well-developed and appropriate for the Company’s risk profile and operational scope. The high ratings of Pozavarovalnica Triglav Re factor in its strategic importance to Triglav, together with its strong integration into the Group.
According to AM Best, the strength of the Group’s balance sheet is underpinned by its risk-adjusted capitalization at the strongest level. Triglav also demonstrates good financial flexibility, with proven access to equity and debt markets. Triglav has steadily reduced its exposure to products with guarantees in its life portfolio in recent years, and their impact is now mitigated by a higher investment yield, driven by the rise in interest rates.
Furthermore, Triglav has recorded strong op. performance over the years and benefits from its competitive advantage, which includes its leading position in Slovenia and the Adria region, as well as its well-diversified portfolio. In 2023, the Group’s profitability was negatively impacted by one-off events. Despite this, the Agency expects 2024’s results to be in line with Triglav’s historical track record of strong op. performance, as can be seen in solid H1 2024 results.
Sava Re
Moving on to Sava Re, the Agency affirmed the similar Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Sava Re. The outlook of these ratings is stable. According to the Agency, these ratings reflect Sava Re’s balance sheet strength, which is deemed very strong, as well as its strong op. performance, neutral business profile, and appropriate enterprise risk management (ERM).
Delving into this further, the Agency noted that 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 collectively contribute to an overall balance sheet strength assessment of very strong.
In terms of Sava Re’s operating performance, 2023’s results were considered strong, driven by sound life and non-life underwriting performance, supplemented by healthy investment income, leading to an ROE of 11.6%. The Agency notes that this is in line with the Company’s record of strong and stable op. results, as can be seen in the 5-year (2018 – 2022) weighted average ROE of 14.3%. By the end of the year, AM Best expects the results to be in line with historical performance.
Lastly, Sava Re benefits from a strong position in its domestic market of Slovenia, with the 2nd largest market share of app. 29% (excl. supplementary health insurance business) in terms of gross written premiums. Sava Re’s insurance business continues to be dominated by premiums written in Slovenia, although the Company continues to expand in West Balkan markets. The Agency expects to see further geographic diversification from Sava Re in the medium term in both the direct and reinsurance segments, as the Company continues to develop its position prudently in the international reinsurance market.
