Spotlight: Sava Re - The (re)insurance specialist in the SEE region

This report is (co-) sponsored with financial contribution provided by the subject of the report.

  • Sava Re is a reinsurance company headquartered in Ljubljana, Slovenia. It operates as the holding company of the Sava Insurance Group. It is one of the largest non-captive reinsurance companies in the South East Europe (SEE) region and serves more than 450 partners in over 110 reinsurance markets around the globe.

  • In addition to the Slovenian domestic market, where the company has a market share of around 21%, the company is also present in Croatia (1% market share), Kosovo (15%), Montenegro (17%), North Macedonia (9%) and Serbia (4%).

  • Its business activities are split into four main segments, namely non-life insurance (which accounted for 63% of business volume in FY 23), life insurance (20%), reinsurance (14%) and other (asset management and assistance services).

  • The Group ended FY 23 with business volume of over EUR 910 mn, insurance revenues of EUR 698 mn and a net profit after minorities of EUR 65 mn.

  • Through its direct investments, the Republic of Slovenia is the largest shareholder with around 35% voting shares.

  • In FY 24, Sava Group is aiming for overall business volume growth of >5% and aims to achieve a business volume of >EUR 925 mn (FY 23: EUR 910 mn). The target for FY 24 is a net profit of more than EUR 70 mn (FY 23: EUR 64.7 mn) with a ROE of >10.5%. Furthermore, the company aims to keep the combined ratio (non-life + reinsurance) below 95% and the SII ratio in the optimal capitalisation range of 170% to 210%.

Company data
Source: Bloomberg, LSEG Refinitiv, RBI/Raiffeisen Research
Key financials
Source: Sava Re, RBI/Raiffeisen Research

Investment case

Growth potential from a rising insurance penetration and density in the SEE region

The growth story behind the SEE operations lies in an expected increase in insurance density (annual insurance premiums per capita) and penetration (annual insurance premiums as a % of GDP) approaching Western European levels. While insurance penetration in Western European countries reaches around 6-8% of GDP, the share in the main SEE economies ranges between 1% and 5% according to the Allianz Global Insurance Report. The catch-up process in the SEE region should therefore over-proportionately benefit the insurance industry and Sava Re in particular. P&C could likely benefit from the continued inflation-linked indexation of premiums as well as rising consumer spending, while the potential for the life insurance industry lies in the development of the insurance market as a whole, the increasing appetite for savings products and the growing need for private pension provision.

Sava is one of the leading players in the SEE region

In FY 23, Sava generated around 83% of its total business volume, including the unit-linked and index-linked portions of life insurance, in the domestic market, making it an important player in the relatively attractive Slovenian insurance market, which has a significantly higher insurance density compared to other SEE markets. With a market share of 21% in 2023, it ranks second behind Zavarovalnica Triglav with 36%. In our view, there is mild competition with a relatively high market concentration, as the four largest providers (Generali and Vzajemna in addition to Sava and Triglav) held a market share of roughly 84% last year. As a positive factor for the development of the Slovenian insurance market, we highlight the country's relatively robust macroeconomic conditions and emphasise the high GDP/capita (9% lower than the Eurozone average, but higher than any other SEE country) and the low unemployment rate of <5%. In the SEE region, the Sava Insurance Group is number 1 in Kosovo with a 15% market share, #2 in Montenegro with a 17% market share, #6 in North Macedonia with a 9% market share and #6 in Serbia with a 4% market share. NLB, a leading Slovenian bank, recently made a voluntary takeover bid for another SEE bank. In the event of a successful takeover, the competitive landscape in Croatia would change significantly, from which Sava Re would benefit indirectly due to its exclusive distribution agreement with NLB for life insurance products. Sava currently has a market share of 1% in Croatia. Additionally, NLB announced in its recent strategy update that it intends to leverage on its bankassurance business, which could also benefit Sava due to its cooperation with the bank.

Strong balance sheet paves the path for growth through M&A

While the high insurance density makes the Slovenian market attractive, the high penetration rate of around 4.8% means that strong volume growth may not be possible. Management’s decision to set growing through acquisitions as one of key strategic priorities for 2023-2027 therefore seems plausible, as the SEE insurance market is relatively unconsolidated. While some of the larger targets may not be digestible for Sava Re, we believe there is ample opportunity to expand market share through M&A, particularly in Croatia, North Macedonia and Serbia, where the company currently lacks scale. Sava Re has a very debt-light balance sheet with a debt ratio of 2.9% and a debt to equity ratio of 12.9% as of YE 23, which gives the company sufficient room for manoeuvre when pursuing M&A opportunities. The company has successfully completed numerous transactions, demonstrating its M&A expertise and ability to successfully integrate the acquired companies. Last but not least, the M&A angle is also supported by a solid capitalisation with an SII ratio of between 190% and 200% and a relatively modest dividend payout of between 35% and 45%, which offers a certain degree of flexibility and provides sufficient dry powder.

Higher interest rates environment as a tailwind for investment portfolio

The current higher interest rate environment significantly benefits insurance companies that pursue a conservative investment strategy and invest the majority of their portfolio in fixed-income investments. In case of Sava Re, the exposure to these assets stood at c. 86% as of Q1 24. Since 2022, fixed-income investments have offered significantly higher yields than in the previous decade. In FY 23, Sava Re was reinvesting at a yield of 3.3%, above the overall portfolio return of 2.1%. In Q1 24, this figure even improved slightly to around 3.4%. This indicates the potential for higher investment income through reinvestment in higher-yielding assets. Despite an expected further 50 bps cut in FY 24, Sava Re’s short-term portfolio duration allows for the reinvestment of 20-30% of its assets at these attractive yields. Due to the valuation dynamics of fixed-income assets, expected interest rate cuts would also increase the investment value of these assets.

Attractive dividend returns are supported by strong capitalisation levels

Sava Re aims for stable annual dividend growth and has a dividend policy with a payout set in range between 35% and 45% of the Group's net profit. We think that the current capitalisation level, with an SII ratio between 190% and 200%, supports Sava's dividend policy with an attractive dividend yield of over 5% and provides some room for manoeuvre when considering M&A, depending of course on the size of the potential target company. In 2024, the assumed further 50 bps rate cut could lead to a small decline in SII ratios of around 10-15%p. We therefore believe that Sava is well positioned to manage a gradual decline in interest rates in 2024 and beyond. In addition, the ongoing review of Solvency II is entering a crucial phase with the aim of implementing the changes by June 2025. This could very well compensate for the assumed decline in interest rates, as insurance companies' SII ratios are expected to improve due to the potential capital release from a lower risk margin and other adjustments.

Insurance peer group comparison
Source: Bloomberg

SWOT analysis

  • Leading market share position in the SEE region

  • Strong capital position with sufficient capital buffer

  • Disciplined underwriting and cycle management

  • Attractive dividend policy

  • Debt-light balance sheet

  • Low penetration rates in most of the SEE markets

  • Improved interest rates environment could increase profitability in life business

  • Relatively high penetration rate in the domestic market limits organic growth

  • Strong dependency to the P/C reinsurance cycle

  • Low share liquidity

  • High inflation rates in the region are eroding reserve positions

  • Alternative capital as a source of competition

  • Peak pricing for NatCat could have been reached

  • Rising NatCat claims trend

Company profile

Founded in 1977, Sava Reinsurance Plc (Slovenian: Pozavarovalnica Sava, d.d.) or commonly referred to as Sava Re, is a reinsurance company headquartered in Ljubljana, Slovenia. It operates as the holding company of the Sava Insurance Group. Sava Re is the largest non-captive reinsurance company in the South East Europe (SEE) region and serves more than 450 partners in over 110 reinsurance markets around the globe. In addition to the Slovenian domestic market, the company is also present in Croatia, Kosovo, Montenegro, North Macedonia and Serbia.

Presence in SEE and market shares (FY 23)
Source: Sava Re

Its business activities are split into four main segments:

  • non-life insurance (63% of business volume in FY 23)
  • life insurance (20% of business volume in FY 23)
  • reinsurance (14% of business volume in FY 23)
  • other (asset management and other services)

In Slovenia, Sava Re operates the insurance business through Zavarovalnica Sava and Vita. Zavarovalnica Sava offers a wide range of non-life and life insurance policies distributed through various channels, and Vita is a life insurance company that mainly offers unit-linked insurance products and operates under the bancassurance model (via NLB d.d. branches). Internationally, the Sava Insurance Group is present in Croatia, Serbia, Montenegro, North Macedonia and Kosovo. The business is dominated by motor insurance, with an increasing focus also on health and other non-life products. In pension insurance, the Group offers services in Slovenia and North Macedonia. Sava Pokojninska in Slovenia manages the pension fund assets and distributes annuity payments, while Sava Penzisko Društvo oversees mandatory and voluntary pension funds in North Macedonia. Other non-insurance business is handled by TBS Team 24, a company that provides assistance services throughout SEE, including roadside, home, and travel medical assistance. The Group ended FY 23 with business volume of over EUR 910 mn, insurance revenues of EUR 698 mn and a net profit after minorities of EUR 65 mn. At Group level, Sava had 3,009 employees as at YE 23.

GWP by class of business (FY 23)
Source: Sava Re
Business volume split (FY 23)
Source: Sava Re
Insurance revenue per business line (FY 23)
Source: Sava Re
Unconsolidated GWP per country (FY 23)*
*Non-life and life insurance only
Source: Sava Re
Ownership structure
Source: Sava Re, Bloomberg

There are a total of 17.2 mn shares in circulation, of which 1.72 mn are treasury shares without voting and dividend rights. We therefore consider the net amount of outstanding shares for analysis purposes. The Republic of Slovenia holds 15% of the voting shares (via direct investment) and a further 20% through the state-owned Slovenian Sovereign Holding (SDH).

Additionally, the EBRD holds 7% and around 36% of the total shares are held in fiduciary accounts of various regional financial institutions (e.g. KAD-Pension Fund Management and Modra Zavarovalnica-pension insurance company) with mostly long-term investment horizons. The remaining 22% is in free float.

Historical milestones
Source: Sava Re


All of the Group's subsidiaries are fully consolidated and the exemption rule, according to which individual companies can be excluded from full consolidation, is not applied. Interests in associates and joint ventures are accounted for using the equity method. However, the subsidiaries that manage pension funds (with the exception of the Slovenian company Sava Pokojninska Družba) and the companies that manage their assets are consolidated, but not the pension funds themselves. In legal terms, the assets of the pension funds are separate from the assets of the companies that manage them. The funds are therefore not included in the consolidated financial statements of the Group.

Organisational structure (Q1 24)
Source: Sava Re

Management board

Marko Jazbec
Source: Sava Re

Marko Jazbec has headed Sava Re since May 2017 and is responsible for human resources, legal, public relations, compliance, IT, internal audit, sustainability and strategic investments. With extensive experience in top management roles at institutions such as the Bank of Slovenia, NLB d.d. and Slovenian Sovereign Holding d.d., he brings expertise in corporate governance, asset management, risk management and corporate finance. Marko holds a degree in Economics from the University of Ljubljana.

Polona Pirš Zupančič
Source: Sava Re

Polona Pirš Zupančič has been a member of the management board of Sava Re since January 2018 and is responsible for corporate finance, strategic planning and controlling, accounting, investor relations, risk and capital management, actuarial affairs, and modelling. She joined Sava Re in 1999 and has led corporate finance and controlling since 2009. She has extensive experience in the reinsurance sector and has successfully managed complex strategic projects. Polona holds a Master’s degree in Economics from the University of Ljubljana.

Peter Skvarča
Source: Sava Re

Peter Skvarča has been a member of Sava Re management board since June 2020 and is responsible for the reinsurance business and strategic investments in non-Slovenian insurance subsidiaries. He joined the Group in 2007 and was CEO of Sava Osiguruvanje in Macedonia from 2011 to 2019. Peter started his career at the Slovenian Ministry of Economic Relations and Development and served as Economic Advisor to the Slovenian Ambassador to Macedonia. He holds a degree in Political Science from the University of Ljubljana and a Master’s degree in European integration from the University of Limerick.

David Benedek
Source: Sava Re

David Benedek joined Sava Re's management board in March 2023, overseeing financial operations, asset management, management of strategic investments in pension, healthcare as well as asset management companies and cross-sector cooperation with banks. He has extensive experience in senior positions at Nova Ljubljanska Banka, Gorenjska Banka and Zavarovalnica Triglav. David holds a degree in Banking and Finance from the University of Ljubljana and an MBA from the Kelley School of Business at Indiana University.

SEE insurance market

Insurance density* in selected markets in FY 23 (EUR)
*ratio of premiums collected per capita
Source: Sava Re, UNIQA
Insurance market size in FY 23 (EUR mn)*
*by business volume; **only 9M 23 data available
Source: Slovenian Insurance Association, NBS, HANFA, Insurance Supervision Agency of North Macedonia, Central Bank of Republic of Kosovo, Insurance Supervision Agency of Montenegro
Insurance penetration (FY 23)
Source: Sava Re
Insurance business by type*
*only 9M 23 data available
Source: SIA, HANFA, NBS, ISA of N. Macedonia, CBK, ISA of Montenegro
Slovenia market shares (FY 23)
Source: SIA
Croatia market shares (FY 23)
Source: HANFA
Serbia market shares (9M 23)
Source: NBS
North Macedonia market shares (FY 23)
Source: ISA of N. Macedonia
Kosovo market shares (FY 23)
Source: Sava Re
Montenegro market shares (FY 23)
Source: ISA of Montenegro
Real GDP (% yoy)
Source: RBI/Raiffeisen Research estimates
CPI inflation (avg,% yoy)
Source: RBI/Raiffeisen Research estimates


Sava Re's operating model can be divided into four segments according to business lines:

  • non-life insurance
  • life insurance
  • reinsurance
  • asset management and other

Historical business volumes (2019-2023)*
*Business volume corresponds to GWP+revenue of non-insurance services
Source: Sava Re

From 2023, the transition from IFRS 4 to IFRS 17 significantly impacted how insurance companies account for revenue. Under IFRS 4, gross written premiums (GWP) were recognised as revenue when due, which increased revenue in the initial year. IFRS 17 changed this by introducing the concept of insurance revenue, which aligns with the provision of insurance services over the coverage period, providing a more accurate and consistent presentation of the insurer’s financial performance. We base our assumptions and forecasts for the projection period exclusively on IFRS 17 and therefore present the top- line as insurance revenue instead of the previously used GWP (business volume).

Insurance revenue (in EUR mn)
Source: Sava Re

Non-life insurance

Accounting for roughly two-thirds of the total business volume, non-life insurance is by far the most important and largest top-line contributor at Group level. Land motor vehicles, motor third party liability and property insurance are the key classes of non-life insurance business. In terms of geographical distribution, around 80% of the total non-life business is generated in the Slovenian domestic market, followed by growing business in Serbia, Montenegro and North Macedonia. Until 2023, the company distinguished between two reporting segments within the non-life insurance business line, namely Slovenia and International. However, with the change in accounting standards to IFRS 17/9 from FY 23, the company reports the non-life insurance business as EU (Slovenia & Croatia) and non-EU (Serbia, Montenegro, N. Macedonia, Kosovo).

Non-life GWP by class of business*
*combined EU and non-EU business volumes
Source: Sava Re

In FY 23, Sava Re further strengthened its cooperation with banks at Group level and introduced credit protection insurance, which covers borrowers in the event of inability to repay a loan due to accidental death, loss of employment, illness and similar risks. Typically, the non-life insurance contracts are of a short-term nature and have a term of c. 1 year. In addition to the adjustments made to the underwriting guidelines for non-life insurance policies due to the increasing occurrence and severity of extreme weather events in FY 23, claims inflation, particularly in motor insurance (i.e. more expensive repair services and replacement parts) and health insurance, has prompted price increases across the portfolio.

As far as pricing is concerned, there is no statutory automatic indexation of premiums to inflation, but the company can set prices for its insurance products at its own discretion. Although the measures taken by the central bank have had a dampening effect on the overall high inflation rates in the key markets, these are still above the historical averages. We expect volume growth to be higher in the non-EU markets due to relatively lower insurance penetration, while pricing is likely to be the main driver in the EU markets, at least in FY 24e and FY 25e.

Natural catastrophe claims (EUR mn)*
*Includes net claims affecting the (re)insurance portfolios of the Group companies resulting from natural perils
Source: Sava Re

The year 2023 was no ordinary year when it comes to natural catastrophes in Europe. Slovenia, one of the countries affected, was hit by heavy rain, hail and storms during the summer months. In addition, catastrophic floods struck the country in August 2023, which caused great devastation. Major rivers quickly burst their banks and the extreme amounts of rainfall triggered several landslides. A large part of the country was affected, resulting in the government to declare the highest level of alert and initiate emergency measures as the floods inundated the towns. At least seven major bridges were swept away, isolating some areas and hindering rescue efforts. Significant property damage was caused, from motor vehicles to entire residential and commercial properties. Initial estimates put the damage at over EUR 10 bn. At the year-end, Sava Re reported gross claims from these events totalling EUR 88.3 mn. Taking reinsurance protection into account, the net impact of these events on the Group’s result was EUR 27.4 mn. In Sava Re's other markets, net losses in connection with natural perils totalled EUR 18.2 mn. As highlighted above, the company has responded by adjusting its underwriting rules. Furthermore, due to the updated reinsurance terms and conditions and other key risk shifting mechanisms, as well as the ongoing climate change, we expect the net result from reinsurance contracts to be above historical averages at Group level, although we do not rule out the possibility of further extreme weather events resulting in claims with fat-tail risk profile.

Life insurance

The company's life insurance business is highly concentrated, with the domestic market accounting for 93% or EUR 172 mn (as at FY 23) of the total business volume. In terms of insurance revenue, the EU life insurance business totalled EUR 60 mn, almost all of which was attributable to the Slovenian market.

As already explained, the transition from IFRS 4 to IFRS 17 has had a significant impact on the way in which companies report their life insurance revenues. This mainly affected unit-linked products, where investment returns are often a key feature. IFRS 17 separates the investment and protection elements, allowing for clearer assessment of the profitability of the insurance component.

Life GWP geographic split (EUR mn)*
Source: Sava Re
Life GWP per class of business (FY 23, %)
Source: Sava Re

In 2020 Sava Re acquired the life insurance company Vita from NLB, a leading Slovenian bank. The long-standing bancassurance partnership with NLB continues to be the main pillar of Vita's development, with bank branches being the primary sales channel. Given NLB's high market share in the SEE region, particularly in Slovenia and Serbia, we think that Sava Re is in a strong position to further expand its offering and benefit from distribution exclusivity with NLB in the region.

In terms of class of business, unit-linked life products represent almost two thirds of total business. According to the company, demand for unit-linked products often increases in line with bullish cycles on the capital markets, particularly in times of strong equities performance. In 2023, Sava Re redesigned the existing group accident and health insurance packages, with a particular focus on developing and improving a wide range of additional cover for health risks, such as treatment of critical illnesses abroad and access to a second opinion. In addition, the range of bancassurance products was expanded and new banking partners were acquired.

Total life insurance business
PBT also includes Finance result
Source: Sava Re


Sava Re conducts reinsurance business as a partner to its subsidiaries in the SEE region as well as with external customers around the world. Only the latter is recognised in the consolidated financial statements, as transactions with internal partners are treated as intra-group transactions. One of the company's most important strategic focus areas is the appropriate diversification of the reinsurance portfolio, both geographically and within individual markets, by classes of insurance and forms of reinsurance cover. Business is conducted in more than 100 markets globally, from Asian countries such as China, Taiwan and Vietnam to European countries like for example Germany, Austria and Romania, as well as some African countries. However, the USA and the Caribbean countries are not part of Sava Re's area of interest, as these markets are more frequently hit by severe hurricanes, which can lead to significant losses. In addition, reinsurers may need to hold more capital reserves to cope with the heightened risk, which increases their cost of capital, and set their premiums higher to compensate for the elevated risk, making this product less attractive or unaffordable for primary insurers.

Non-life reinsurance GWP by class (FY 23)
Source: Sava Re
Gross NatCat exposure by country (FY 23)*
*For exposure, in countries where modelled exposure data is available, probable maximum loss assumptions (250 year events) are used, but where this data is not available, the sum insured is used as the maximum exposure
Source: Sava Re

The environment in key markets deteriorated recently due to severe natural catastrophes (storms, floods, fires, etc.) and other loss events, prompting the industry to tighten reinsurance conditions, both in terms of pricing and contract terms (war risk exclusions, sanctions clauses, specific exclusions and limits of cover). Sava Re's main strategy involved shifting from proportional to non-proportional reinsurance in order to better diversify its portfolios. With the purpose to compensate for the reduction of one proportional reinsurance contract in terms of revenue, the company has to enter into several non-proportional contracts. Although the retention limits (i.e. a predetermined cap on the amount of risk an insurance company retains itself before passing on the excess risk to a reinsurer) are not publicly disclosed, reinsurers have recently been relatively successful in passing on more of these risks to primary insurers, effectively increasing the retention hurdle. Additionally, the company has focused heavily on geographic diversification and has made significant changes by reducing concentrations in key markets, seeking opportunities in new markets and reducing exposure on individual treaties. The company stated that it will continue its portfolio balancing process in 2024 with a shift in premium composition towards more profitable non-proportional contracts. We expect this to result in slower top-line growth but will support and improve the overall profitability of the business over the projected period. We expect that NatCat-related major losses in the projection period would pose a far greater threat than man-made losses, especially in view of the ongoing climate change.

Asset management and other

Asset management and other services are reported together as non-insurance revenue, with revenues from asset management accounting for just over 75%. In addition, the asset management business generates immaterial amount of insurance revenues (some EUR 0.5 mn at Group level). This revenue generally consists of new business written and gains from exceeding guaranteed returns on annuity accounts.

We assume Sava Re to be able to grow its assets under management (AUM) base, supported by favourable developments in the financial markets and fund inflows. Furthermore, while some additional interest rate cuts are expected in the short term, yields are likely to remain above the average of the last ten years.

Asset management business
PBT also includes Finance result
Source: Sava Re

The segment "Other" includes the assistance services offered by the subsidiary TBS Team 24, income from subsidiaries and the cost of subordinated debt (approx. EUR 3 mn p.a.). These services complement the Group's core business in all of its markets, with TBS Team 24 being one of the leading providers of assistance services in SEE, offering its policyholders roadside, home, travel medical, and other assistance services.

We think that inflation-adjusted price increases for assistance services will sufficiently compensate for the pressures on the cost side and that steadily growing sales volumes will support the overall profitability of the assistance services. We expect income from subsidiaries and cost of subordinated debt (fixed at interest rate of 3.75% until November 2029) to remain relatively stable over the projection period.

Other segment
Source: Sava Re

Investment portfolio

Sava Re’s investment strategy ensures a robust and secure portfolio that is aligned with industry standards to maintain stability and mitigate risk. The company pursues a strategic approach characterised by a high degree of diversification and a preference for liquid securities, effectively managing credit risk. A key aspect of Sava Re’s strategy is to hold a significant portion of its assets in debt securities and cash equivalents. This conservative policy requires that at least 75% of the portfolio value is allocated to these asset classes. At YE 23, fixed-income assets made up 87% of the total investment portfolio, while cash and cash equivalents accounted for 3%. This represents a decrease in cash holdings compared to FY 22, which is due to the reinvestment in higher-yielding fixed-income investments. The reinvestment yield in FY 23 was 3.3%, above the total return of the investment portfolio of 2.1%. We believe that Sava Re could still slightly increase its current investment income by reinvesting in higher yielding investments despite the assumed further 50 bps rate cut in FY 24e. In addition, alternative investments, such as real estate and infrastructure, accounted for around 6% of total assets in FY 23. Moreover, the company’s risk strategy stipulates that at least 20% of the investment portfolio must be invested in highly liquid financial assets. At YE 23, the company held EUR 192 mn, or 52% of its portfolio in highly liquid investments.

Investment portfolio composition (FY 23)
Source: Sava Re
Investment portfolio composition (FY 22)
Source: Sava Re

As of the YE 23, Sava's exposure to the ten largest issuers stood at 37% of total at the Group level, reflecting a well-spread risk across its portfolio. The company's focus on EU-based issuers is evident, with 60% of investments located in the EU. Germany, the largest single issuer, accounted for 10% of the exposure, representing a concentrated but manageable risk in a stable economic environment, while Slovenia, Sava Re's home country, accounted for 12.5% of the portfolio. Investments in non-EU issuers accounted for 12%, ensuring a balanced geographical risk distribution. To further emphasise Sava Re's conservative approach, fixed-income investments rated “A” or better accounted for 71% of the total fixed-income portfolio in FY 23 (FY 22: 67%). This increase in high-quality investments highlights Sava Re's continuous efforts to improve the credit quality of its portfolio and thereby strengthen its financial resilience.

Fixed-income investments composition (FY 23)
Source: Sava Re
Fixed-income investments by issuer credit rating (FY 22&23)
Source: Sava Re

Attractive shareholder distributions...

Sava Re aims for stable annual dividend growth and has a dividend policy with a payout set in range between 35% and 45% of the Group's net profit. With the exception of 2020, when the dividend distribution from the 2019 net profit was suspended following the recommendation of the Slovenian Insurance Supervision Agency, dividends were distributed regularly, usually with payment carried out in June. The company does not have an existing share buyback programme and, given the actual free float, we do not believe it makes much sense to use this instrument as a means of returning capital to investors. The dividend policy is also linked to a sound capitalisation level (Solvency II ratio) and, as we explain later, the company is in a comfortable capitalisation position. While industry peers offer higher payouts, averaging around 60%, the company is accumulating capital that could very likely be used to pursue M&A opportunities. In the long term, however, we believe that an increase in distributions in line with the industry average is likely.

Sava Re's dividend history
Source: Sava Re, Bloomberg

We have taken a closer look at the company's competitors, from Western European multi-line insurers such as Allianz, AXA and Generali to CEE specialists like PZU, UNIQA, Triglav and VIG as well as global reinsurance players like Munich RE, Hannover RE and Swiss RE. When analysing recent historical dividend yields, Sava's capital returns of around 6% p.a. are similar to its multi-line insurance peers (between 5% and 7% p.a. on average) and above the dividend yields of its reinsurance peers (approx. 5%). Please note that we computed the dividend yield as DPS/share price EoY.

Select peers dividend yield (%, 2020-2023)*
Source: Company information, Bloomberg

...are supported by solid capitalisation

In recent years, Sava Re has maintained a solid level of capitalisation (at Group level), with a reported Solvency II (SII) ratio of between 170% and 200%. The SII ratio was 191% at YE 23, which is the optimal capitalisation level according to internal rules and slightly below the average of 229% of Western European and CEE peers. However, when comparing only Sava's reinsurance business with its European reinsurance peers, the company remained slightly above the peers with an SII ratio of 289% compared to the peer average of 277%. We think that the current level of capitalisation supports Sava's dividend policy with attractive dividend yields of over 5% and provides some leeway when considering M&A, depending of course on the size of the potential target company.

SII ratio and internal rules
Source: Sava Re

The broader insurance sector has started 2024 with peak capitalisation levels thanks to higher interest rates in 2022 and 2023 as well as capital generation from robust operating result. In recent years, insurers have reduced their interest rate sensitivity through active capital management by utilising the higher interest rate environment for their asset-liability management. The assumed 50 bps interest rates cut in 2024 should correspond to a decline in SII ratios of around 10-15%p. We therefore believe insurers are well positioned to manage a gradual decline in interest rates in 2024 and beyond.

The ongoing review of Solvency II, which began in February 2019, is entering a decisive phase with negotiations between the European Commission, Council and Parliament aiming to implement changes by June 2025. Insurance companies' SII ratios are expected to improve due to potential capital release from a lower risk margin and other adjustments. The expected adjustments include technical provisions, the Solvency Capital Requirement (SCR) and the Own Risk and Solvency Assessment (ORSA) with the aim of encouraging improved asset-liability management and potentially freeing up capital and technical provisions to stimulate European economic growth.

Insurers solvency ratios
Source: Company information
Reinsurers SII ratios*
*Swiss Solvency Test (SST) data used for Swiss RE. SST and Solvency II differ in their treatment of taxes: SST is pre-tax, while Solvency II is post-tax
Source: Company information

While low indebtedness...

Sava Re has a very debt-light balance sheet, with a debt ratio of 2.9% and a debt to equity ratio of 12.9% as of YE 23. This gives the company sufficient room for manoeuvre when pursuing M&A opportunities. Total debt of EUR 75.7 mn consists almost entirely of callable subordinated bonds with a relatively low fixed interest rate of 3.75%.

In October 2019, the company issued subordinated bonds maturing in 2039, with ISIN code XS2063427574 and an early recall option on November 7, 2029. The total issue size is EUR 75 mn. The bond has a fixed annual interest rate of 3.75% until the early recall date, with annual coupon payments. If the early recall option is not exercised, the interest rate will be 4.683% over the three-month Euribor, with quarterly coupon payments. The bond is traded on the Luxembourg Stock Exchange. As of 31 December 2023, the bond's market price was 77.717%, with a market value of EUR 58.7 mn. The bond's book value was EUR 75 mn and the effective interest rate, calculated from the early recall option, is 3.86%.

Other financial liabilities relate to a loan in amount of c. EUR 0.7 mn payable to a subsidiary in Serbia with a maturity of up to one year.

...paves the path for growth through M&A

Management has set growing through acquisitions as one of key strategic priorities for 2023-2027. The SEE insurance market is relatively unconsolidated, and while larger targets may not be digestible for Sava Re, we believe there is ample opportunity to expand market share through mergers and acquisitions (M&A), particularly in Croatia, North Macedonia and Serbia.

M&A expertise is in Sava Re's DNA

The first acquisition of Sava Re dates back to 1998, when the local Slovenian competitor Tilia was taken over, followed by the acquisition of Zavarovalnica Maribor a year later. The acquisition of Dukagjini (now Illyria) in 2006 marked the beginning of a remarkable expansion outside Slovenia into ex-Yu markets. In 2009, majority stakes in Velebit osiguranje (non-life and life insurance companies) were acquired, marking Sava's return to the Croatian market after a brief period in the country a few years earlier (Sava held a significant minority stake in Osiguranje Helios). In 2019, Sava RE also acquired two ERGO insurers based in Croatia (life and non-life). The last and perhaps most important acquisition is the life insurance company Vita, which was acquired from the Slovenian bank NLB in 2020. These milestones are clear evidence of Sava's proven M&A expertise and its ability to successfully integrate the acquired companies into the Group.

Goodwill only accounts for a small portion of the BV

Unlike some other CEE insurance peers that have grown through M&A in the region, Sava appears to have taken a very prudent approach to pricing its M&A targets, resulting in a very low reported goodwill amount. Goodwill as a percentage of total assets was just over 1% in FY 22 and FY 23. Despite several acquisitions in the past, the last of which was completed in 2020, the tangible book value is almost equal to the total book value (BV), as goodwill amounted to around 5.5% of the total BV at YE 23. We consider this fact to be particularly important as it does not significantly distort the meaningfulness of the BV when used for valuation purposes.

Goodwill to equity comparison
Source: Company information, LSEG Refinitiv
Treasury shares as a supplementary source of funds

At the 28th General meeting of shareholders on April 23, 2014, the management board of Sava Re was authorised to acquire up to 1.7 mn treasury shares, which corresponds to roughly 10% of the company's issued shares. These shares can be used to exchange for minority interests in subsidiaries, equity holdings in other companies, to sell to a strategic partner, or to support the listing on another securities market.

In April 2016, Sava Re repurchased 0.8 mn shares on the over-the-counter (OTC) market. Prior to this purchase, the company held c. 0.9 mn treasury shares (5.1% of issued shares). After the purchase, the total reached 1.7 mn shares, which equals to 10% less one share of the issued shares. No further treasury share purchases have been made on the regulated market since April 2016. Treasury shares do not carry voting or dividend rights.

FY 24 guidance and Q1 results

FY 24 guidance

Earlier in April, the company presented its key performance targets for 2024. Sava is targeting overall business volume growth of >5% and aims to achieve a business volume of >EUR 925 mn (FY 23: EUR 910 mn). In terms of individual business lines, non-life EU business volume is expected to grow by >6%, non-life non-EU by >8%, life EU by >2%, life non-EU by >10%, reinsurance by >1% and asset management business volume by >5%. The target for FY 24 is a net profit of more than EUR 70 mn (FY 23: EUR 64.7 mn) with a ROE of >10.5%. Furthermore, the company aims to keep the COR (non-life + reinsurance) below 95%, the SII ratio in the optimal capitalisation range of 170% to 210% and the return on the investment portfolio at 2.2%.

Q1 24 results comment

Sava Re delivered a strong result in the first three months of the year. Total insurance revenues increased by 21.6% yoy to EUR 186.2 mn, mainly due to price hikes and organic growth in sales volume in the non-life segment, which increased by 23.3% yoy. The reinsurance segment also recorded strong growth of 20% yoy, both in proportional and non-proportional reinsurance. The insurance service result jumped 48.1% to EUR 35.3 mn, thanks to a favourable claims development, price increases in non-life insurance and organic growth. This led to a significant improvement in the combined ratio, which fell by 5.1 percentage points to a very healthy 83.8%. The financial result also improved by 45.5% to EUR 5.1 mn, mainly attributable to higher interest rates effects. Moreover, the reinvestment yield in Q1 24 was around 3.4%. This led to a net profit of EUR 29.8 mn (+48.3% yoy). With an estimated SII ratio of between 193% and 199% at the end of Q1 24 (YE 23: 191%), the company maintained an optimal capitalisation position.

Sava Re Q1 24 results
Source: Sava Re

ESG scoring

ESG Score Overall
Pie chart illustrates the industry specific weights for each subcategory within our methodology
Source: RBI/Raiffeisen Research
ESG Score Industry
Source: RBI/Raiffeisen Research
ESG Score Country
Source: RBI/Raiffeisen Research
ESG Score Global
Source: RBI/Raiffeisen Research

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Rok joined RBI’s Institutional Equity Research team in 2022 and is responsible for the coverage of companies in insurance and technology sectors. He has previously worked as a M&A Associate and participated in several landmark M&A cross-border transactions and potential IPOs in the Central and Eastern Europe (CEE) region in the following sectors: construction materials, consumer goods, healthcare, information and communication technology, oil&gas, renewables. Rok has a master’s degree in business administration from University of Ljubljana and is a CFA charterholder.