A.M. Best has affirmed credit ratings of Slovenian TRIGLAV and TRIGLAV Re

6 December 2018 — Daniela GHETU
A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of "a" of Zavarovalnica TRIGLAV, the parent company of the Slovenian TRIGLAV Group, and Pozavarovalnica TRIGLAV Re, a wholly owned subsidiary of TRIGLAV.

The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect TRIGLAV'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 (ERM). The ratings of TRIGLAV Re factors in its strategic importance to TRIGLAV, together with its strong integration into the group.

TRIGLAV's balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The assessment also considers the group's good financial flexibility, with access to equity and debt markets, and prudent reserving approach for its non-life operations. Offsetting factors include the high average guarantees embedded within its life portfolio, which, combined with material asset-liability mismatch, exposes earnings and shareholders' funds to adverse interest rate movements.

TRIGLAV's strong operating performance is evidenced by a solid five-year (2013-2017) average return on equity of 11%. Performance is driven by excellent non-life technical earnings in its domestic market, where the group's dominant competitive position enables it to operate with a low expense base. Profitability of TRIGLAV's operations in the West Balkans has been weaker, impacted by intense competitive conditions and high operating costs. Nonetheless, the group continues to demonstrate modest improvement in earnings derived from this region, as it achieves additional scale and actively seeks alternative lower cost distribution channels.

TRIGLAV benefits from its dominant position in its domestic market, with a 36% market share (in terms of gross written premiums) in 2017. The group is also a dominant player in the West Balkans. 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.