This year, profit before tax was affected by increased business volume, effective management of inflationary pressures and other impacts from the environment, in addition to a more intense claims experience and negative investment returns. The Triglav Group maintained its financial strength with capital adequacy in the target range. It is estimated that the planned annual profit will be achieved this year; however, it should be stressed that the risks related to the realization of target profit increased significantly due to negative influences from the business environment. The Triglav Group anticipates a very challenging economic situation in 2023, in which it will continue to consistently implement its strategic development activities, increase its business volume, maintain its financial strength and operate safely and profitably.
Profit before tax. In the first nine months of 2022, the Triglav Group posted a profit before tax of EUR 89.2 million, down by 3% relative to the corresponding period last year. Andrej Slapar, President of the Management Board of Zavarovalnica Triglav, said: "At Triglav, we also feel the impact of the deteriorating environment with high inflation growth and the unfavorable situation in the international financial markets, which primarily affects our claims segment, expenses and investment returns. However, we are effectively dealing with the challenging situation, thanks to a team of more than 5,200 employees. Our robust business model allowed us to maintain our financial strength with capital adequacy within the target range, increase the business volume and generate a profit before tax close to that earned in the same period last year."
The Group estimates that its target annual profit will be achieved, but given the current situation, there are risks related to the realization of target annual profit within the originally planned range. "Negative factors from the business environment are significantly strengthening, and their further development by the end of the year cannot be assessed with an adequate degree of reliability," stressed Andrej Slapar.
Underwriting activities. The Triglav Group's total revenue increased by 10% to EUR 1,241.1 million compared to the same period last year, while the volume of gross written premium rose by 9% to EUR 1,147.7 million. Premium increased in all three insurance segments and in all insurance markets. Premium growth in Slovenia was 6%, which is 1 percentage point above the market growth rate, outside of Slovenia in the markets of the Adria region it reached 12% and in international markets it stood at 19%. Other insurance income grew by 21% to EUR 46.1 million and the Group's other income increased by 35% to EUR 47.3 million, which primarily included income from asset management and the sale of investment property.
The claims experience was more intense than in the comparable period last year. Gross claims paid rose by 16% to EUR 604.0 million. They were not only influenced by the increased volume of the insurance portfolio, but also by the end of restrictions due to the pandemic, higher prices of materials and services due to inflation and the increased frequency of major CAT events. They are estimated at EUR 29.4 million, with the majority (EUR 21.1 million) being claims in Slovenia due to hailstorms. Nevertheless, the combined ratio in non-life and health insurance was very favorable, standing at 89.5%, and similar to the same period last year, which is a result of the favorable development of claims provisions created in past periods, especially prudently during the pandemic.
Gross operating expenses increased by 10% to EUR 269.1 million relative to the corresponding period last year. Uros Ivanc, a member of Management Board of Zavarovalnica Triglav, explained: "So far, the growth of expenses has been equal to the growth of total revenue, which allowed us to effectively keep the expense ratios at a level comparable to last year." Expenses increased mainly due to inflation (e.g. costs of materials and services), increased business volume (e.g. acquisition costs due to a higher number of insurance contracts) and the implementation of strategic activities (e.g. depreciation due to investment in information technology).
Insurance technical provisions amounted to EUR 3,199.9 million as at 30 September 2022, similar as at 31 December 2021. "We are appropriately coordinating reserving with the dynamics of business and the nature of default risks. This year's favourable development of claims provisions created in past years has effectively compensated for the growth of claims and expenses which primarily resulted from the higher activity of the population and the economy, increased inflation rate and other impacts from the environment," said Uros Ivanc.
Investment portfolio and assets under management. The Triglav Group's total investment portfolio, including investment property and investments in associates, decreased by 11% to EUR 3,266.9 million relative to the 2021 year-end due to the situation on the financial markets. Portfolio returns were negative. The portfolio's conservative structure did not change significantly, and the emphasis remains on high-quality and globally diversified investments. The volume of clients' assets managed in mutual funds and discretionary mandate assets decreased also by 11% to EUR 1,362.4 million.
Sustainable development (ESG). The Triglav Group continues to integrate sustainable development factors into its operations; for example, compared to the 2021 year-end, the volume of sustainable fixed-income investments increased by 13% to EUR 231.8 million, with their share in the bond portfolio already representing 10.4%. The Group also makes sure that its efforts in sustainable development are visible and communicated properly, which is why it participates in selected international initiatives (UN PSI, UNEP FI and PCAF initiatives, GRI and SASB sustainability standards, CDP reporting).
Triglav group business plan for 2023. Expectations for the coming year are marked by a very high degree of uncertainty in the business environment, which stems from the further development of the geopolitical situation, the situation in the energy markets, the macroeconomic situation and the epidemic. In 2023, the Triglav Group anticipates the economic situation to become even more challenging, in which it will continue to operate safely and profitably.
"In the challenging year of 2023, we plan to generate a profit before tax of EUR 95-110 million according to the existing reporting framework. Taking into account the currently available projections and the estimated economic situation, it is slightly lower than this year's profit guidance. We also plan to increase business volume in 2023 and for gross written premium to reach EUR 1.5-1.6 billion. In addition, we will ensure a high level of profitability of the insurance business by reaching a combined ratio of below 94% in non-life and health insurance. As the leading insurance and financial group in Slovenia and the Adria region, we plan to further strengthen our position in the existing markets, while seeking opportunities in the EU markets directly according to the principle of free movement of services and through partnerships. We will continue to pursue cost streamlining, effective risk management, financial stability and to retain high credit ratings from recognized credit rating agencies. Our dividend policy remains unchanged, and we will strive to make the ZVTG share a profitable, safe and stable investment for investors. In our operations, we will consistently follow our strategic guidelines, focusing on a high-quality and uniform client experience, the further development of service-oriented business models and ecosystems that address the interrelated client needs, and the implementation of innovative processes using modern technology," Andrej Slapar, said.