A.M. Best Affirms the Ratings of Pozavarovalnica Sava d.d.

LONDON--()--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Pozavarovalnica Sava d.d. (Sava Re) (Slovenia), the operating holding company of the Sava Re group. The outlook for both ratings is stable.

The ratings of Sava Re reflect its strong consolidated risk-adjusted capitalisation, good operating performance and strengthened business profile in the Slovenian insurance market. A partly offsetting rating factor is Sava Re’s exposure to the challenging operating market conditions in Slovenia.

Sava Re’s consolidated risk-adjusted capitalisation is expected to remain strong in 2014, in spite of the inherent volatility associated with its significant holdings in Slovenian-issued investments. Nonetheless, solid earnings retention and a cautious growth strategy are factors expected to support consolidated risk-adjusted capitalisation in the near-term.

Sava Re group reported a pre-tax profit of EUR 13 million for the first six months of 2014, compared to the EUR 19 million produced in the same period in 2013. Results for the first half of 2013 were bolstered by a one-off realised gain of EUR 7 million due to the revaluation of its investments in Zavarovalnica Maribor d.d. (Maribor), which Sava Re fully acquired in 2013. The group’s focus on underwriting discipline and cost efficiencies continues to support technical profit and was able to report a combined ratio of 96.7% for the first half of 2014 (half-year 2013: 96.1%), in spite of a material net loss of EUR 6.1 million from weather-related events. In the absence of a major event in the remaining quarter of 2014, A.M. Best expects Sava Re’ pre-tax earnings in 2014 to be on par with the EUR 24 million forecasted by the group for the full year.

Sava Re group has a strong business profile in its core market with a 17% market share in 2013. The group also benefits from its leading profile within the West Balkans markets and a developing position in the international reinsurance markets. Excluding the effects of the integration of Maribor, underlying growth in premium volumes is expected to be modest in 2014. This reflects the challenging economic and insurance conditions in Slovenia and the highly competitive international reinsurance markets.

Positive rating actions are unlikely in the near-term. Negative rating actions may occur if there were a decline in Sava Re’s risk-adjusted capitalisation to a level below A.M. Best’s expectations or a decline in profitability, particularly due to the acquired business of Maribor. Additionally, any further deterioration in the economic fundamentals of Slovenia may place negative pressure on the ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilised:

• Analyzing Insurance Holding Company Liquidity

• Best's Credit Rating Methodology - Global Life and Non-Life Insurance Policy

• Catastrophe Analysis in A.M. Best Ratings

• Equity Credit for Hybrid Securities

• Evaluating Non-Insurance Ultimate Parents

• Evaluating Country Risk

• Insurance Holding Company and Debt Ratings

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Understanding BCAR for Life/Health Insurers

• Understanding BCAR for Property/Casualty Insurers

• Understanding Universal BCAR - A.M. Best's Capital Adequacy Ratio for Insurers

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Company, Inc.
Nicola Gaisford, +(44) 20 7397 0306
Financial Analyst
nicola.gaisford@ambest.com
or
Deniese Imoukhuede, +(44) 20 7397 0277
Associate Director, Analytics
deniese.imoukhuede@ambest.com
or
Chris Sharkey, +(1) 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Company, Inc.
Nicola Gaisford, +(44) 20 7397 0306
Financial Analyst
nicola.gaisford@ambest.com
or
Deniese Imoukhuede, +(44) 20 7397 0277
Associate Director, Analytics
deniese.imoukhuede@ambest.com
or
Chris Sharkey, +(1) 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com