The S&P Global Global Ratings reaffirms the „A“ credit rating with a stable medium-term outlook of the Triglav Group and thereby of its parent company along with its subsidiary. S&P states the decision reflects a very strong capitalization of the Triglav Group and its profitable operations on account of its underwriting discipline, effective reinsurance protection, a high level of digitalization and benefits from economies of scale due to its leading regional market position.
According to S&P, the Triglav Group’s business risk profile remains strong. Group achieved this due to its client-centric approach and its profitable operations in both of its core activities – insurance and asset management. Regarding its operations, Triglav uses its advantages arising from its leading market position in the Slovenian market and the region. S&P also emphasized Triglav’s strong brand, well-diversified range of products and services along with the Group’s achieved level of business digitalization. According to S&P, Triglav’s operations are resilient enough to maintain cost-effectiveness and an appropriate pricing policy, along with the potential to increase volume and as a result, achieve stable and strong earnings even during times marked by high inflation. Regarding ESG factors, S&P assesses Triglav’s impact on credit rating as neutral.
Furthermore, S&P assessed Triglav’s financial risk profile as very strong, as Triglav maintained a very robust capital position at the „AAA“ level according to S&P risk-based capital model. Also, the agency emphasizes that Triglav’s liquidity is very high.
Overall, S&P put Triglav’s medium-term outlook as „stable“ as a result of all aforementioned. The agency believes that the Group will continue to effectively implement its business strategy at least over the next two years and as a result, the agency expects Triglav to remain very strong capitalization at least in the „AA“ range over the next two to three years.
The key strengths of Sava Insurance Group are the following: an established position in the Slovenian market, solid capitalization, and underwriting combined with conservative reinsurance protection and sensible investment strategy, all of which support operating performance. The outlook is also stable.
According to S&P, Sava Insurance Group (Sava) managed to solidify its domestic market position in the Slovenian insurance market, with the consolidation of NLB Vita. They believe that a robust balance sheet, strong domestic position with improved scale and diversification, and good risk controls will safeguard stable business development, both domestically and internationally. The acquisitions and operational adjustments Sava made in the past two years, as well as good underwriting controls, will help the Company maintain good top and bottom line performance during motor lines claim frequency normalization, as well as through the impact of higher inflation on claims and costs. S&P also believes the Company will use its solid credentials to get profitable growth opportunities in domestic and international insurance and reinsurance markets. They also expect the growth of the premiums to remain solid in 2022, at app. 5-7%, and then gradually decrease towards a long-term growth of 3-5% over 2023 and 2024.
Furthermore, S&P notes that capitalization remains one of Sava’s key strengths, with the Company maintaining buffers above the “AAA” level in the capital model. The robust capitalization as well as the strong and stable earnings allow Sava to maintain sound capital levels. Because of the conservative asset structure, as well as a favorable capital structure mainly composed of shareholder equity, S&P does not consider the recent capital market volatility had a significant impact on Sava’s capital position. They also believe that the Company could use some of these capital buffers to overcome moderate deterioration in economic and capital market conditions, as well as faster business expansion, given the opportunity.
Moving on, Sava’s FY 2021 and H1 2022 performance remained resilient and compares well with its European, Middle Eastern, and Africa (EMEA) peer group. The 2021 net profit was further strengthened through the consolidation of NLB Vita and through ongoing operating profitability, while also observing some frequency benefits from lockdowns in 2021. In 2021, the Company maintained a strong ROE of 15.8%. S&P expects that the frequency benefit will disappear in 2022, leading to normalization in performance. Even so, they expect Sava’s performance to remain solid due to the robust performance of Slovenian primary insurance operations. With an H1 2022 combined ratio of 92.3% and a net income of EUR 28.9m, Sava is well positioned to reach its 2022 performance targets of above EUR 60m. For 2023-2024, S&P expects resilient performance, backed by good underwriting results, with a combined ratio at or below 94%, and a net income between EUR 53m and EUR 65m.
S&P also commented on the outlook for Sava, and is currently stable. This is due to S&P’s expectation that Sava’s management will continue to implement its strategy of solid operating performance and profitable growth, while further diversifying premiums and solidifying its income streams. Despite the expectation of a deterioration in the macroeconomic conditions, they expect Sava to sustain a strong balance sheet with very strong capitalization and strong and stable earnings over the next two years, allowing the Company to continue developing its domestic and foreign operations.
They also commented on the potential downside and upside scenarios for this outlook.
In terms of the downside scenario, S&P could lower the rating in the next two years if Sava’s competitive positions were to weaken because of significantly eroded volumes or prolonged negative profitability trends, caused by, for example, external conditions that could derail the macroeconomic development in Slovenia.
In terms of the upside scenario, they said that they are unlikely to issue an upgrade in the next two years. An upgrade would be contingent on Sava further improving its competitive position, which could happen, for example, if sustainable economic growth pushes Slovenia’s income in GDP per capita terms towards the eurozone average and strengthens prospects for profitable domestic growth, something they do not estimate will happen in the next 12 to 24 months.
In August 2022, CROBEX increased by 1.6%, ending the month at 2.000,79 points.
Total equity turnover on ZSE amounted to EUR 12.8m (HRK 96.2m), which represents a decrease of 32% MoM and a decrease of 18.9% YoY. This also means that during the month the average daily turnover amounted to EUR 0.56m (HRK 4.2m).
We note that no block turnover was recorded during August 2022.
Looking at the top 10 most traded stocks, they had a turnover of EUR 8.88m (HRK 66.9m), which would account for 69.6% of the total turnover. Breaking this down further, PODRAVKA had the highest turnover, at HRK 11.9m (or 12.4%) followed by Valamar Riviera with 10.4%, ATLANTSKA PLOVIDBA with 9%, HT with 8.3%. and ADRIS GRUPA with 6.3%. This would also mean that the top 5 most traded companies accounted for 46.5% of total turnover on the exchange.
Meanwhile, the largest index on the ZSE, CROBEX, increased by 1.62% during the month and ended it at 2.000,79 points. At the same time, CROBEX10 increased by 2.5% and ended the month at 1.198.30 points. Looking at the CROBEX10 constituents’ performance during the month Ericsson NT had the largest increase at 8.6% followed by HT at 5.6%, Valamar Riviera at 3.5%, Adris at 3% and Arena Hospitality Group at 2.5%. Only 2 companies recorded a decline during August, AD Plastik with a decline of 5.6% and Atlantska Plovidba with a decline of 10.4%.
Performance of CROBEX10 constituents (August 2022, %)
Looking at the YTD performance, we can see that these trends are even more prominent. Again, we had 8 companies recording an overall decline, with Atlantska Plovidba and HT being the only one to record an increase (+7% and 0.8%, respectively). Performance of Atlantska Plovidba happened due to the huge demand for shipping in the period (something that continues to this day, but under higher costs and under higher risks of falling commodity prices due to recession fears, something that influenced ATPL’s performance in August despite good results). On the other hand, AD Plastik recorded the largest YTD decrease, declining by 49.2%, mostly due to the semiconductor shortage which affected the automotive industry during much of 2021, and is still currently affecting the industry, to a somewhat smaller extent. Combined with the fact that AD Plastik has substantial exposure in the Russian market, after Russia’s invasion of Ukraine, the Company recorded some of the largest declines in the Croatia market, something that it still hasn’t recovered from. Following them, we have Arena, which posted solid top-line results in H1 2022, but is still reeling from lower profitability due to higher OPEX, Ericsson NT, which again, had a somewhat positive top line but negative profitability results, and Podravka, which was also affected by the rising OPEX costs.
Performance of CROBEX10 constituents (Beginning of 2022 – end of Augsut, %)