Previously, SAVA Re's Financial Strength Rating was A- (Excellent), while the Long-Term Issuer Credit Rating was "a-".
The ratings reflect SAVA Re's balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The rating upgrades reflect SAVA Re's track record of strong operating performance following the acquisition of Zavarovalnica MARIBOR d.d. in May 2013, as evidenced by a five-year (2013-2017) weighted average combined ratio of 94% and a five-year weighted average return on equity of 10%.
SAVA Re's balance sheet strength is underpinned by its risk-adjusted capitalization being at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The assessment also factors in the company's solid internal capital generation, low reliance on retrocession and good financial flexibility, with access to capital and debt markets.
SAVA Re's strong operating performance is driven by solid technical profitability, with an excellent five-year (2013-2017) weighted average loss ratio of 60%. The group originates a material proportion of its non-life business in Slovenia's market (52% of its gross written premiums in 2017), where its leading competitive position and prudent underwriting enables it to generate strong and relatively stable underwriting earnings. This is offset partially by a relatively elevated expense base compared with peers, which translated in an expense ratio of 34% in 2017 (2016: 36%), impacted by the company's operations in the West Balkan markets. A.M. Best expects SAVA Re's operating performance to remain strong over the medium term, supported by disciplined underwriting and good risk selection.
SAVA Re benefits from a strong position in its core market of Slovenia, where it had an 18% market share (in terms of gross written premiums) in 2017. The group also has a solid profile within the smaller insurance markets of the West Balkans and continues to cautiously develop its competitive position in the international reinsurance market. A.M. Best expects growth in premium volume to be moderate over the medium term, reflecting the combination of improving operating conditions in Slovenia, and the highly competitive nature of the international reinsurance market.
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