Last week, S&P Global Ratings upgraded Triglav Group’s (Triglav Insurance Co. Ltd and Triglav Re) to ‘A+’ from ‘A’, while at the same time, raising its rating on Triglav’s two subordinated instruments to ‘A’ from ‘BBB+’, with a stable outlook. In this article, we review the reasoning behind this decision.

S&P Global Ratings (The Agency) has upgraded Triglav Group, which in this case includes Triglav Insurance Co. Ltd and Triglav Re’s issuer credit and financial strength ratings from ‘A’ to ‘A+’, while at the same time, raising its rating on Triglav’s two junior subordinated instruments from ‘BBB+’ to ‘A-‘, with a stable outlook.

This action follows a similar action on Slovenia, whose long-term ratings were raised to ‘AA’ on strong public finances and sustained growth, with a stable outlook. As the agency regards Triglav as a government-related entity, with a strong link with, and an important role for, the Slovenian Government, and the Group maintains a moderately high likelihood of receiving government support if needed. The agency noted that it still continues to asses Triglav’s stand-alone credit profile at ‘a’, but now they also factor into its group credit profile of Triglav a one-notch uplift to reflect the benefits from Slovenia’s improved creditworthiness.

In regard to the reasoning behind this upgrade action, the agency noted the following:

Firstly, the agency noted that the expected strength and resilience of Slovenia’s economy support further development of Triglav Group. Comparably favorable economic growth in Slovenia in 2021 – 2024 allowed Triglav to capitalize on domestic opportunities and materially scale operations. They assume the Group’s Slovenian operations, Zavarovalnica Triglav, which is the largest insurance group in Slovenia with a market share exceeding 40%, will see similar benefits over the coming few years, with continued solid top and bottom-line development, while solidifying the Group’s already very conservative risk profile.

Secondly, Triglav maintains very solid stand-alone operational and financial strengths. As noted by the agency, throughout 2024 and into 2025, the Group reestablished a track record of comparably very strong underwriting and operating performance. The Group’s reported combined ratio stood at 93.6% at the end of 2024, which further improved to 88.5% in Q1 2025. Furthermore, Triglav retains very solid new business margins in life insurance, growing contractual service margins, as well as solid fee contributions from its asset management business. The Group’s ROE in 2024 was 14%, before it increased to 19.8% in Q1 2025, which is favorable among EMEA insurers. In general, the agency expects an EBT in the range of EUR 130m – EUR 150m in 2025, which should gradually increase until 2027, leading to a potential ROE of 12-13% in the 2025 – 2027 period.

Thirdly, Triglav’s strong balance sheet and robust capital position, alongside the growing absolute size of capital, will likely remain among the Group’s key rating strengths. Triglav’s capital position has sizable buffers above the 99.99% threshold, according to the agency’s risk-based capital model at the end of 2024. This was further confirmed at the end of the year by very solid regulatory solvency levels of app. 225%, which was in the middle of its targeted capital range. In 2024, Triglav’s capital buffers became even stronger, due to the good performance during the year and only moderate dividend payment. Also, the Group in H2 2024 issued a capital-qualifying hybrid capital in the amount of EUR 100m.

The agency also noted that despite the current uncertainty in the global economy, Triglav should continue to see moderate growth in markets outside Slovenia. They further noted that the Group’s strategy envisages ambitious business development, with a focus on further internationalization until 2030. In 2024 and Q1 2025, the Group recorded strong growth both domestically and internationally, driven by non-life, life, health insurance, reinsurance, and asset management operations. This growth came from price increases, new business expansion, as well as continued inflows into its asset management. While domestic operations in Slovenia continue to show strong growth, international primary insurance and reinsurance segments are experiencing even stronger growth as Triglav expands into selected markets and capitalizes on the still-favorable reinsurance cycle. The agency expects that, alongside ongoing expansion in Slovenia, Triglav will continue to grow in existing international markets, leading to better earnings.

Next up, the agency also commented on the recent Triglav Group announcement of the entry into the Italian motor insurance market (more info available here) through a partnership with Ageas Re, which should yield a substantial increase in the Group’s top-line premium. The agency noted that both companies aim at leveraging the distribution capabilities of the rapidly growing Insurtech Prima, which has become the leading player in the Italian direct motor business since its inception in 2015. This move aligns well with Triglav’s 2030 strategy, envisaging further internationalization if its operations and a solid increase in Group earnings. The agency further notes that new business from Prima, in particular, should provide a notable boost to premiums in 2025 and 2026. Furthermore, in the long term, the entry into Italian non-life business might provide some geographic and business diversification for Triglav, as well as enhance Group earnings from international operations.

Lastly, the agency’s stable outlook on the Group reflects its view that, over the next two years, Triglav’s important role for the Slovenian Government will not change. They also note that the Group’s operational and financial performance should remain strong, on the back of a market-leading position on its key Slovenian insurance markets alongside ongoing international expansion. The agency also expects that the Group will continue to show a robust capital position, with a capital buffer staying above its 99.95% threshold in 2025 to 2027.

In terms of upgrades or downgrades, the agency noted the following:

They view the upgrade as unlikely over the next 12-24 months, given Triglav’s materially more limited geographic diversification compared to its higher-rated peers.

On the other hand, they view a downgrade as a remote possibility in the next 12-24 months, but a downgrade might stem from:

• A downgrade of Slovenia to below ‘AA’, while Triglav’s stand-alone credit profile stays at ‘a’, for example, due to international diversification efforts that lead to a material and prolonged weakened operating performance of the Group; or
• Triglav’s capital levels are materially and continually declining below the 99.95% levels.

The full report can be accessed here.