Sava Insurance Group

audited results

March 2023

Group results

Highlights of 2022

Growth of 6.1% in GPW – mostly in motor insurance due to the growth in the number of policies sold and the average premium; premiums also grew in the reinsurance segment due to positive price movements in global reinsurance markets and in the international life segment, mainly due to the new bank sales channel

Net profit of €68.2 million (2021: €76.2 million); -10.4% compared to 2021, 13.7% above target

Negative impact on claims: increase in claims paid and claims provisions due to claims inflation, storms and the rise in motor claims frequency in Slovenia following the easing of Covid-19 measures
Positive impact on underwriting result: improvement in FoS business result, results of subsidiaries outside Slovenia and reinsurance
Impact on investment result: unfavourable developments in the financial markets affected the result of the Slovenian pension company and the investment result due to fair value changes of FVTPL assets

Standard & Poor's and AM Best's "A" ratings, stable outlook, affirmed

December 2022: new five-year strategy of the Sava Insurance Group published

All 2020–2022 strategic goals achieved

Return on equity > 12%

Solvency ratio within 180–220%

Profit for 2022 higher than planned

High return on equity

Continued high growth in gross premiums written

Growth of GPW in all markets

* 1–9/2022 as data for the full year 2022 have not yet been published. ** 1–12/2021 as more recent data not available.

Group results • Segment reporting • Financial investments • Unconsolidated data

Growth in operating revenue

Combined ratio within target range

* Excluding the effect of exchange differences.

Net combined ratio: all expenses (other than from investments) as percentage of total income (other than from investments) – calculated for the non-life and reinsurance segments.

Impact of natural catastrophe claims

Assets structure

Assets €2,534.0 m

2022/2021: -4.7%

million €	2021	2022
Financial and investments investment property	1 487 0 ,	1 319 8 ,
of policyholders who bear the risk Assets investment	517 4	483 9
Receivables	149 9	174 2
under Assets investment contracts	172 8	172 9
Reinsurers' share of technical provisions	57 8	65 6
Other assets	273 4	317 6
Total assets	2 658 3 ,	2 534 0 ,

Liabilities structure

Liabilities €2,534.0 m 2022/2021: -4.7%

€ million	2021	2022
Technical provisions	1 237 5 ,	1 249 9 ,
Technical of policyholders who bear the provisions investment risk	524 2	499 4
Equity	504 1	412 0
liabilities Investment contract	172 7	172 7
Subordinated liabilities	74 9	74 9
Liabilities from operating activities	54 8	56 2
Other liabilities	90 3	68 9
Total liabilities	2 658 3 ,	2 534 0 ,

AuM impacted by adverse market conditions

Investment return impacted by adverse market conditions

* Excluding FX differences and expenses of subordinated debt.

Book value per share and POSR share

More information on POSR share performance and returns is available at: https://www.sava-re.si/en-si/investor-relations/our-share/

Ownership structure

* Fiduciary account.

** Pursuant to Article 235a of the Slovenian Companies Act (ZGD-1), in April 2022 Sava Re started the process of identifying shareholders who are registered with intermediaries as holders of shares and who are not themselves intermediaries. According to the information received, Adris grupa d.d. held 3,278,049 POSR shares on 26 April 2022 (19.04% of all shares and 21.15% of shares with voting rights).

	31/12/2022
Share capital (€ million)	71.9
Market capitalisation (€ million)	347.1
Trading symbol	POSR
No. of shares	17,219,662
No. of own shares	1,721,966
No. of shareholders	4,316

Investor type	Local investor	Foreign investor
Insurance undertakings and pension companies	18.2%	0.0%
Other financial institutions*	18.0%	15.6%
Republic of Slovenia	13.9%	0.0%
Individuals	11.1%	0.2%
Investment companies and mutual funds	2.5%	0.0%
Other non-financial corporations	2.9%	1.0%
Banks	0.0%	16.6%
Total	66.6%	33.4%

* Within other financial institutions SDH holds 17.7% of all shares.

Dividend policy

PROPOSAL

Dividend as % of consolidated profit

* The 2023 dividend yield depends on the share price movement in the period between the date the dividend is declared and the ex-dividend date.

Dividend policy: 10% average increase in dividend per year; distribution of between 35% and 45% of the net profit of the Sava Insurance Group.
Sava Re did not pay any dividends in 2020 because of increased Covid-19-related risks identified and due to special caution in response to recommendations by the Insurance Supervision Agency. The amount of the 2020 dividend paid out in 2021 was limited on the recommendation of the Insurance Supervision Agency.
Proposed dividend payout in 2023 in respect of the 2022 profit: proposed dividend payment of €24,796,313.60 or €1.60 gross per share. The general meeting of shareholders is scheduled to be held on 5 June 2023.

Solid capital position

Detailed data on capital adequacy of the Sava Insurance Group for 2022 will be posted in the solvency and financial condition report for 2022 (Group SFCR), which will be posted on 12 May 2023 on Sava Re's website and published through the Ljubljana Stock Exchange.

Select sustainability performance indicators

	2021	2022	Difference 2022/2021
Environmental aspect
CO2 emissions per employee (in tonnes)	1.39	1.44	+3.6%
Number of claims reported online	40,011	45,288	+12.9%
Group's ESG integrated investments as at 31/12/2022	11.9%	14.9%	+3.0 p.p.
Social aspect
Employees involved in annual performance appraisal interviews as %	50.0%	49.5%	-0.5 p.p.
Women as % of all employees	54.0%	58.0%	+4.0 p.p.
Employee turnover rate	16.6%	16.9%	+0.3 p.p.
Average hours of employee training	23.0	24.6	+6.9%
Number of injuries in the workplace	7	9	+28.6%
Investments in the community (sponsorships, donations, prevention) (€ million)	4.0	5.1	+27.8%
Heart for the World – corporate volunteering (no. of hours)	n.p.	5,439	-
Governance aspect
Proportion of investments* not aligned with the Sustainability Investment Policy as at 31/12/	3.1%	1.7%	-1.4 p.p.
Women in management bodies as %	18.4%	23.9%	+5.5 p.p.
Women in supervisory bodies of Group companies as %	21.0%	21.8%	+0.8 p.p.

* Investments for which compliance with the Sustainability Investment Policy is verified are investments in corporate bonds, equities, infrastructure and real estate funds, and mutual funds other than mutual funds at policyholders' choice (UL funds).

We build long-term corporate social responsibility in continuous dialogue with our stakeholders, supporting global sustainability goals, with a particular focus on climate change, the health and well-being of our customers and employees.

Segment reporting

Non-life Slovenia

• Growth in gross motor premiums, mainly in the private passenger car segment, as a result of an increase in the number of policies sold and price increases

• Deterioration in the underwriting result chiefly due to the impact of claims inflation, an increase in motor claims frequency due to the subsiding of the impact of the epidemic, and an increase in weather-related claims

• Weaker result largely due to higher expenses for fair value changes of FVTPL assets

Life Slovenia

• Decline in gross premiums written solely because of the exceptionally high sales in the previous year, consisting mainly of high single premiums

• Net expense ratio more favourable in 2021 due to exceptionally high sales – without this effect, the ratio would have been better in 2022 because of savings in other operating expenses

• In 2021, gains on the sale of shares were realised, contributing to higher investment income in 2021. In addition, investment expenses in 2022 were higher due to the change in the fair value of FVTPL assets

Reinsurance

• Growth mainly driven by 17% increase in nonproportional business, favourable pricing developments in global reinsurance markets and new business opportunities

• Improved underwriting result due to higher net premiums earned

Lower investment result owing to higher expenses on changes in fair value of FVTPL assets as a result of financial market conditions
Lower net expense ratio mainly because policy acquisition costs grew slower than premiums

Non-life international

• Growth in gross premiums written across all companies; strongest growth in gross motor premiums, growth also in property business as a result of improved sales, and in assistance business as a result of lifted Covid-19 precautions and the resulting increase in travel

• Improved underwriting result as premiums earned grew faster than incurred claims and expenses

• Flat investment result compared to 2021, as the Group companies hold only a small share of FVTPL assets in their portfolios and are therefore less exposed to financial market developments

Life international

• Growth in gross premiums written due to both the increase in sales through the Group's own sales network and the launch of bancassurance distribution in Kosovo in mid-2021

• A slight increase in the expense ratio, reflecting higher expenses, mainly due to increased sales activities

• Investment result at approximately the same level as in 2021

Pensions and asset management

Recently, more policyholders have opted to remain in the accumulation part of the scheme even after having met the requirements to retire.
Weaker result due to adverse financial market developments and strengthening of provisions for failure to meet the guaranteed return in the Slovenian pension company

• Higher revenues reflecting year-on-year increase in average assets under management

• Operating expenses broadly at the same level as the previous year

• The decrease in the fund balance is entirely due to the adverse developments in the financial markets; net inflows positive in all companies

Other

Financial investments

High quality of the investment portfolio

million €	31/12/2021	31/12/2022
bonds Government	718 5	732 6
bonds Corporate	592 1	417 8
Cash and cash equivalents	0 74	78 4
Infrastructure funds	44 5	53 9
Shares	36 0	23 1
Investment property	3 14	22 8
Mutual funds	35 9	22 2
& Deposits CDs	18 6	19 3
funds Real estate	15 8	16 5
Other	31 8	33 6
Total investment portfolio	1 581 4 ,	1 420 0 ,

The lower weighting in corporate bonds is due to maturities and sales, as well as negative revaluations as a result of the increase in required yields in the financial markets. Assets were mainly invested in government bonds.

The average time to maturity of fixed-rate investments is 4.0 years:

Life segment: time to maturity of assets 5.3 years; time to maturity of liabilities 6.2 years
Non-life segment: time to maturity of assets 3.6 years, time to maturity of liabilities 2.0 years

Group exposure by region

Exposure by region did not change significantly. Assets were reinvested taking into account the exposure of each region/country to concentration risk.

Group exposure by industry

In 2022, assets were invested in top-rated government bonds to ensure the safety of the investment portfolio.

* Includes direct investments in real-estate and property funds. Corporate bonds classifed as real estate under GICS are also included.

Good rating profile

Investment grade assets accounted for 86.5% of fixed rate investments (2021: 86.6%).

Investment income by type

million €	2021	2022	Absolute change
effective Interest income interest at rate	16 8	16 4	-0 4
Change fair value of in FVTPL assets	1 3	0 7	-0 6
disposal of Gains FVTPL assets on	0 0	0 2	0 2
disposal of other Gains IFRS categories asset on	8 7	6 8	-0 9
from Income associates	0 8	1 3	0 5
from dividends Income	3 6	3 5	-0 1
foreign exchange gains Net	4 4	1 2	-3 2
Other income	1 6	1 7	0 1
Total income	36 4	31 8	-4 6
Total income , excluding exchange differences	32 0	30 6	-1 4

Interest income at the effective interest rate was €0.4 million lower compared to 2021. The main reason is that higher-yielding investments have matured.

Income from change in fair value of FVTPL assets were lower due to worsening financial market conditions.

Gains on disposal were €0.9 million lower. Realised gains are the result of exposure to shares in the life insurance portfolio, funds due to compliance with the sustainability investment policy and the sale of the subsidiary S Estate. No bond sales contributed to realised gains in 2022 due to the situation on the financial markets (fall in the value of assets).

Investment expenses by type

million €	2021	2022	Absolute change
Interest expense	3 0	3 1	0 1
Change fair value of in FVTPL assets	0 9	6 3	3 5
disposal of Losses FVTPL assets on	0 0	0 1	0 1
disposal of other Losses IFRS categories asset on	0 3	1 2	0 9
from investments in associates Loss	0 0	0 0	0 0
Other investment impairments	0 2	0 5	0 4
foreign exchange losses Net	0 0	0 0	0 0
Other	1 6	3 1	1 5
Total expense	6 0	14 3	8 3
Total excluding exchange differences expense,	6 0	3 14	8 3

The expenses from change in fair value of FVTPL assets increased by €5.3 million, resulting from poorer capital market conditions for the Group's investments in this group.

Other expenses: upon the first consolidation of Vita's HTM portfolio, the Group recognised a gain due to the revaluation of the portfolio to fair value. The effect of the difference between fair value and amortised cost is gradually decreasing (in 2022, €2.4 million effect on expenses).

Unconsolidated data

Slovenian insurance business – non-life (non-consolidated)

Data for Vita are shown for all years, although Vita has been included in the consolidated accounts since June 2020.

-

Slovenian insurance business – life (non-consolidated)