Slovenia: Sava Re records €47.6 million net profit in first nine months

Slovenia: Sava Re records €47.6 million net profit in first nine months

In the period January–September 2020, the Slovenian Insurance Group Sava increased its operating revenue by 16.4% and net profit by 26.4% year-on-year. After the reporting date, an increased risk was observed relating to potential additional negative effects by the Covid-19 pandemic on the operations of the Group, resulting in the cancellation of the general meeting called to decide on the appropriation of profit.

At its regular meeting, the Sava Re supervisory board was presented with the unaudited financial results of the Sava Insurance Group and Sava Re for the nine months to 30 September 2020.

According to the report, in the first nine months of the year, the Group’s operating revenue grew by 16.4% year-on-year. This growth was mainly driven by the inclusion of the life insurer Vita in the Group, the expansion of the free use of Sava Insurance Company’s services business in EU Member-States, and the greater volumes of Slovenian non-life business and international reinsurance business. Operating revenue generated by the Sava Insurance Group reached 76.5% of the full-year target set in the revised 2020 plan.

In the period January–September 2020, the Group generated a net profit of €47.6 million, an increase of 26.4% year on year. €9.9 million of this increase came from the acquisition of Vita, consolidated in the Group accounts as of 31 May 2020. The trading profit of Vita since its inclusion in the Group amounted to €2.9 million, and in addition € 7.0 million was one-off revenue from the excess of the fair value of the net assets acquired over the purchase price. Without the effect of Vita, the Group’s net profit would have broadly remained plateaued on an annual basis. The nine-month net profit reached 95.2% of the full-year target set in the 2020 revised plan.

Following their regular annual rating reviews, the rating agencies Standard & Poor’s and AM Best affirmed the “A” (excellent) insurer financial strength ratings of Sava Re. The outlook in both instances is stable.

After the reporting date, Sava Re was informed of new circumstances that had arisen in certain EU insurance markets and in the United Kingdom, related to potential additional adverse effects of the Covid-19 pandemic on the operations of Sava Insurance Company and Sava Re. These new circumstances primarily pertain to Covid-19–related claims on policies written in the market of the Republic of Ireland (under freedom of services rules) and reinsurance contracts written in the United Kingdom for business interruption coverage as part of property policies, which under new court and regulatory practices may potentially have an adverse effect on the Group’s business results and solvency position. Based on current detailed analyses of its insurance exposure, the Group has concluded that Covid-related business interruption claims are not covered under its policies written directly under freedom of services rules in the European Union. Regarding its exposure under reinsurance contracts, there may be coverage in some cases. In line with preliminary estimates, in the last quarter of 2020, the Group will most likely set a provision of up to €10 million for potential legal expenses and reinsurance claims in this regard.

Even with this provision for Covid claims, the management expects – in the absence of any major loss events – the Group to achieve its full-year 2020 plan. /ibna