Covid-19: Sava Re estimates that the largest loss of GWP compared to the plan will be in non-life LoB

21 April 2020 — Andrei Victor
In its SEOnet announcement "Amendment to financial calendar" of 26 March 2020, the Sava Insurance Group announced it prepared a preliminary assessment of the impacts of the circumstances related to COVID-19 on the operations of the Group and its solvency position.

Slovenian Group noted that the assessment is based on the latest forecasts of economic trends issued by the Office of the Republic of Slovenia for Macroeconomic Analyses and Development, predicting a fall in Slovenian GDP of between 6% and 8%.

"How low GDP will fall, depends on the further spread of the epidemic and its duration. According to UMAR, during the emergency situation Slovenia is facing a fall in activities in industry and services, a decline in imports and exports, a fall in added value in a number of sectors, lower private consumption, lower investments, lower employment and an increased number of unemployed. Given the circumstances, it is difficult to make a reliable estimate of future impacts, and the actual development up to the end of the year may differ significantly from the assumptions used in this assessment".

"In terms of impact on operations, we have looked at two periods, the first period stretching until the end of May, in which the Group expects a direct impact on insurance underwriting and contacts with customers but with a lighter claims burden, and the second period, from early June to the end of the year, in which we expect an indirect impact on operations due to lower GDP than originally forecast".

"We estimate that the largest loss of premiums compared to our plan will be in non-life business, in motor business, primarily related to the decline in sales of new vehicles, lapsed registrations of vehicles, especially goods vehicles and purchase of narrower covers. Premiums are also expected to decline in travel insurance and assistance business. In life insurance, we expect that new business volume will decline as the result of restricted contact with customers. Reinsurance business is expected to shrink in the proportional business segment. Operating revenues of pension companies and the investment fund management company will decline because of a drop in assets under management as the result of falling financial markets".

Sava informed that almost all the Group's employees have been moved to home working, for protection and to allow them to continue to serve customers and business partners. "The Group continues to process customer claims in the normal way, and also continues renewal and sale of insurance policies for protection in the future. The Group's financial position is strong allowing it to continue meeting its obligations. There will be an impact on the Group's business, as set out below, but the Sava Insurance Group intends to continue to invest in growth and progress in line with its strategic goals for the 2020-2022 period".

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