STA, 20 November 2020 - Insurance group Sava Re, Slovenia's second largest, reported a net profit of EUR 47.6 million for the nine months to the end of September, an increase of 26.4% year-on-year, as gross premiums written rose by 12.4% to EUR 527.1 million.
The unaudited financial report, filed with the Ljubljana Stock Exchange, shows the group's operating revenue rising by 16.4% year-on-year to EUR 489.5 million.
The growth in profit, operating revenue and gross premiums is attributed in great part to the acquisition of life insurer Vita, consolidated in the group accounts as of 31 May 2020.
The acquisition contributed EUR 9.9 million to the increase in profit, and without this effect group net profit would have broadly been at the same level as in the same period last year.
Since its inclusion in the group Vita generated a profit of EUR 2.9 million and in addition EUR 7 million was one-off income from the excess of the fair value of the net assets acquired over the purchase price.
Growth in operating revenue was driven mainly by the inclusion of Vita, expansion of freedom of services business written by the insurer in EU member states, and greater volumes of Slovenian non-life business and international reinsurance business.
The inclusion of Vita contributed EUR 28 million to the growth in gross premiums written, with additional contribution from the insurance business written with various companies in the EU. Excluding that business, the growth in gross premiums written would have been 9.5%.
The net expense ratio improved by 1.6 percentage points y/y, also as the result of the integration of Vita, which operates at an even more favourable expense ratio compared to other group members.
Improved expense ratios were also achieved in the reinsurance and Slovenian non-life segments, mainly because income grew faster than expenses due to both the fixed nature of certain expenses and certain cost optimisation measures adopted to mitigate the negative impacts of Covid-19 on the group's operations.
Profitability was also supported by a more favourable claims experience thanks to a lower loss rate in motor business and the absence of catastrophic loss events.
Despite the profitability, the insurer will not pay out dividends and the shareholders' meeting to take a decision on that was cancelled a few days ago due to increased risks detected relating to potential additional negative impact of the Covid-19 pandemic on the operations.
"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," the company's release reads
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 EU.
"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 EUR 10 million for potential legal expenses and reinsurance claims in this regard," it said.
Even with this provision for Covid claims, the management expects - in the absence of any major loss events - that the group will achieve its full-year 2020 plan, that is more than EUR 50 million in net profit and an operating revenue of up to EUR 640 million.