Pozavarovalnica Sava

Quarterly Report • Aug 18, 2022

Sava Insurance Group

1–6/2022 unaudited results

17 August 2022

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Highlights 1–6/2022

4.5% growth in gross premiums written – largest growth in motor business, reflecting more policies sold and higher average premiums; growth also in the reinsurance segment, driven by favourable price developments in global reinsurance markets, and in foreign life business because of good bancassurance sales

Despite challenging conditions, net profit at €28.9 million, which represents almost one-half of planned net profit for 2022. Significant impacts compared to the previous year:

• Negative impact on claims: claims provisions increased due to claims inflation, storms, and post-pandemic normalisation of claims frequency in Slovenia's motor insurance
• Positive impact on the underwriting result: improved underwriting results in FoS business, non-Slovenian subsidiaries and reinsurance business
• Negative impact on the investment result: unfavourable financial market developments affected the result of the Slovenian pension company, as well as the investment return due to fair value changes of FVTPL assets

Positive outcome of test case before the Hight Court of Dublin deciding that Zavarovalnica Sava policy does not cover business interruption claims arising out of Covid-19

As from 5 May 2022, Jošt Dolničar was appointed as the chairman of the management board of Zavarovalnica Sava, with Sava Re's management board remaining in a three-member composition for the time being.

The general meeting of 23 June 2022 approved a dividend of €1.50 per share, which translates into a 5.5% dividend yield.

Key figures

million € % , except	1–6/2021	1–6/2022	plan 2022	Change 2022/2021
Group
Operating revenue	363 7	364 2	700 >	1% 0
Gross premiums written	414 5	433 0		5% 4
including revenue* Net ratio operating expense ,	27 7%	28 5%	31 ̶32%	+0 9 p.p.
portfolio* the Return investment on	1 7%	1 4%	1 4%	-0 3 p.p.
Profit of , net tax	43 5	28 9	60 >	-33 4%
Return equity on	17 8%	12 1%	11 5% >=	-5 7 p.p.
Reinsurance and non-life insurance
FX** combined ratio , excl Net	1% 85	3% 92	94% <	+7 2 p.p.
	31/12/2021	30/6/2022
Shareholders' equity	504 1	412 7		-18 1%
of portfolio Total the investment assets	1 581 4 ,	1 466 1 ,		3% -7
for the benefit of policyholders who bear the risk Assets investment	532 1	479 2		-9 9%
funds Assets in pension savings company	971 1	967 1		-0 4%
under investment funds Assets management at management company	570 5	497 6		8% -12

* Impact of exchange rate differences excluded. The return on the investment portfolio does not include subordinated debt expenses. Net expense ratio does not include amortisation of client list.

** Net combined ratio calculated for the non-life and reinsurance segments.

Growth in consolidated GPW of 4.5%

Breakdown of consolidated profit before tax

Growth/decline compared to the previous year

Decrease in profit before tax of 34.2% (after benefitting from lower claims frequency in 2020 and 2021)

Despite the drop, the result is still above that recorded in the last pre-pandemic year

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Results by operating segment – reinsurance

• Growth in gross premiums written due to new business and price rises in international reinsurance markets
• Stronger growth in non-proportional insurance (17%)

• Stronger underwriting result owing to lower net claims incurred and higher net premiums earned, which reflects price rises in international reinsurance markets, favourable claims developments and an appropriate reinsurance protection

• Weaker investment result due to higher expenses for fair value changes of FVTPL assets
• Improved net expense ratio reflecting lower acquisition costs as a result of higher growth in non-proportionate reinsurance business characterised by lower commission rates

Results by operating segment – non-life Slovenia

• Growth in gross premiums written in motor insurance, mainly in the private motor segment, owing to more policies sold and higher average premiums

• Weaker underwriting result owing to lower net premiums earned and higher net claims incurred, which increased because of higher claims frequency after the lifting of Covid-19 precautions resulted in heavier traffic and hence more accidents Net claims incurred increased also because of the increase in claims provisions due to claims inflation, and because of increased storm losses due to a significantly increased event frequency year on year

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

Results by operating segment – non-life international

• Growth in gross premiums across all companies; motor insurance experienced the strongest growth, property insurance and assistance insurance also grew, the latter following the easing of covid-19 measures and the resulting increase in the number of trips

• Stronger underwriting result owing to net • Investment result at the year-on-year level premiums earned growing faster than net claims incurred and costs – strong premium growth allowed companies to improve their loss ratios, at largely unchanged fixed costs

Results by operating segment – life Slovenia

• Weaker gross premiums written due to less single premium payments compared to the same period a year earlier

• Net expense ratio increased as gross premiums written decreased while costs, mainly acquisition costs, increased

• Lower net investment income, chiefly due to higher expenses for fair value changes of FVTPL assets

Results by operating segment – life international

• Growth in gross premiums written owing to increased sales of own network and sales through a new bank channel from mid-2021

• Increase in expense ratio due to higher costs, both acquisition costs and other operating costs, among the latter above all labour costs following new employments in sales and also other costs due to inflation

• Stronger investment result owing to higher interest income (from a larger investment portfolio fuelled by cash flows from operations) and a positive impact of exchange differences

Results by operating segment – pensions and asset management

• Recently, more insured persons remained in the accumulation part of the pension plan after meeting retirement conditions
• Weaker result due to adverse developments in financial markets and strengthening of provisions for non-achievement of the guaranteed return at the Slovenian pension company

• Increase in revenues owing to more assets under management compared to a year earlier

• Increase in operating costs due to growth in business volume
• Decrease in fund assets entirely due to adverse financial market developments; all the companies have net inflows. Average month-end fund assets increased by 19.3% over the last 12 months (to €1,479.9 million in July 2021 – June 2022 from €1,240.8 million in July 2020 – June 2021)

Results by operating segment – other

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Investment portfolio and AuM

Structure of the investment portfolio

million €	31/12/2021	30/6/2022
bonds Government	718 5	686 9
bonds Corporate	592 1	475 4
Cash and cash equivalents	74 0	123 2
Infrastructure funds	44 5	53 0
Shares	36 0	24 8
Mutual funds	35 9	22 9
Real funds estate	8 15	0 17
& Deposits CDs	18 6	16 1
Investment property	14 3	14 0
Other	31 8	32 7
Total investment portfolio	1 581 4 ,	1 466 1 ,

Share of corporate bonds down by 5.0 p.p., reflecting negative change in fair value reserve, maturities and sales, which led to an increase in the share of cash and cash equivalents. Part of funds from maturities and sales was invested in government bonds.

Net inv. income of and return on the investment portfolio

million €	1–6/2021	1–6/2022	Absolute change
relating the portfolio Net investment income investment to	13 7	11 2	-2 5
of the portfolio , excluding differences investment income investment Net FX	6 11	9 0	-2 6
the investment portfolio , excluding differences and subordinated debt Return FX on expense	7% 1	4% 1	-0 3 p.p.

Net investment income relating to the investment portfolio consists of net investment income relating to financial investments, investments in associates and investment property.

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Shareholders and share trading

Book value per share €26.63 30 Jun 22 / 31 Dec 21: -18.1%

	30/6/2022
Share capital (€ million)	71.9
Market capitalisation (€ million)	387.4
Trading symbol	POSR
Number of shares	17,219,662
Number of own shares	1,721,966
Number of shareholders	4,288

Dividend policy

• 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.

• At the general meeting held on 23 June 2022, the shareholders adopted the proposal of the management and supervisory boards to use EUR 23,246,544.00 of the profits for dividends. A dividend of EUR 1.50 gross per share was paid out on 12 July 2022 to the shareholders listed in the shareholders' register on 11 July 2022.

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Capital adequacy

€ million	31/12/2021
Eligible own funds	601.3
Solvency capital requirement (SCR)	304.4
Solvency ratio	198%

€ million	31/3/2021 (unaudited)
Eligible own funds	597.2
Solvency capital requirement (SCR)	304.4
Solvency ratio	196%*

* The ratio reflects the value of eligible own funds at 31 March 2022 and the value of solvency capital requirements from the annual calculation as at 31 December 2021. Foreseeable dividends of the current year are not subtracted from eligible own funds in this calculation.

The Sava Insurance Group's solvency and financial condition report for 2021 was posted on the Sava Re website and that of the Ljubljana stock exchange on 19 May 2022.

Contents

• Group results
• Segment reporting
• Financial investments
• POSR share and dividend policy
• Solvency position
• Major development areas in 2022

Major development areas in 2022

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Thank you for your attention.

Disclaimer

Forward-looking statements

This document may contain forward-looking statements relating to Sava Reʾs expectations, plans or goals, which are based on assumptions made by Sava Re management. By their nature, forward-looking statements involve risk and uncertainty. As a result, actual developments, in particular performance, may differ materially from expectations, plans and goals set out in this document; therefore, persons should not rely on forward-looking statements.

Duty to update

Sava Re assumes no obligation to adjust any forward-looking statements or other information contained in this document to future events or developments.

Appendix

Group exposure by region

Compared to year-end 2021, exposures to Slovenia, EU member states and USA decreased, whereas there was a rise especially in exposures to issuers from the rest of the world.

The exposure to Slovenia decreased due to government bonds maturing, while the exposures to EU member states and USA decreased due to securities maturing or being sold, and negative revaluation of debt investments.

The exposures to the rest of the world increased mainly due to securities of issuers from other regions maturing or being sold.

Group exposure by industry

The exposure to the banking industry increased due to the increase in the item cash and cash equivalents and decreased following dividend payment after the end of the period. Part of the assets from maturing investments of other sectors were partially reinvested in government securities, which increased the exposure to the government sector.

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

Rating profile

Investment-grade assets represented 85.8% of fixed-income investments, down 0.9 p.p. from year-end 2021.

The share of A-rated asset classes remained largely the same as at year-end 2021.

The share of non-rated assets increased by 0.9 p.p from year-end 2021, mainly due to a decrease in other asset classes.