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Transcript of Pozavarovalnica Sava, d. d. Roadshow Stockholm, May 2011 SAVA RE GROUP AND SAVA REINSURANCE COMPANY...
Pozavarovalnica Sava, d. d.
Roadshow Stockholm, May 2011
SAVA RE GROUP AND SAVA REINSURANCE COMPANY
RESULTS 2010
Pozavarovalnica Sava, d. d.
Roadshow Stockholm, May 2011
WHO WE ARE AND OUR PAST DEVELOPMENT
DEVELOPMENT THROUGHOUT TIME
1973 – Starts as reinsurance department of Sava Insurance
1977 – Spin-off from Sava Insurance and incorporation under the name Reinsurance Community Sava
1990 – Reorganises as a joint-stock company under the new Slovenian Companies Act
1991 – Slovenia declares independence from Yugoslavia; transition from socialist system to market economy
1991 – 2% of reinsurance premiums coming from international markets; decision to expand in international reinsurance markets
1998 – Acquisition of Zavarovalnica Tilia; entry into Slovenian direct insurance market
1999 – Starts to increase minority stake in Zavarovalnica Maribor to 45,79% as of today
2003 – Unallocated portion of share capital transferred to SOD, who becomes 99,9% owner
Consolidation of Sava Re’s position in Slovenia and crystallisation of
ownership structure
Beginnings during Yugoslav socialist period
1973 1991 2003
KEY STORY BEHIND
DEVELOPING REINSURANCE BUSINESS
INTERNATIONAL INWARDS PREMIUM FROM NIL IN 1973 TO NIL IN TIMES OF YUGOSLAV HYPERINFLATION TO 50,0% IN 2010 OF NON-CONSOLIDATED REINSURANCE PREMIUM INCOME
DEVELOPMENT & GROWTH IN TIME
4
DEVELOPMENT THROUGHOUT TIME
2004 – Acquisition of a minority stake in Osiguranje Helios in Croatia, 2006 – sale of entire stake in Osiguranje Helios when there was an indirect change in control in the majority shareholder
2006 – Acquisition of majority stakes in Dukagjini (now renamed Illyria) and Sava osiguranje; entry into Kosovan and Serbian non-life insurance markets
2007 – Acquisition of majority stakes in Sava Tabak and Sava Montenegro, entry into Macedonian and Montenegrin non-life insurance markets
Acquisition-driven expansion to insurance markets of former
Yugoslavia
2004 2008 2008
Expansion to life insurance business and return to Croatia
2008 – 100% owned greenfield Sava životno osiguranje a life insurance operation in Serbia
2008 – Now 100% owned greenfield Dukagjini Life (now renamed Illyria Life) in Kosovo
2009 – Acquisition of majority stakes in Velebit osiguranje and Velebit životno osiguranje; return to the Croatian non-life and life insurance market
KEY STORY BEHIND
DEVELOPING INSURANCE BUSINESS
STARTED AS A REINSURANCE COMPANY - NOW AN IMPORTANT REGIONAL INSURANCE GROUP
2010 PREMIUM(1) STRUCTURE:
- 47% REINSURANCE PREMIUM
- 48% NON LIFE INSURANCE PREMIUM
- 5% LIFE INSURANCE PREMIUM
2004 2008
__________________________________________________________________________________________________________________________________________________ Note: (1) Consolidated premium income,
DEVELOPMENT & GROWTH IN TIME
5
6
INTRODUCTION TO THE SAVA RE GROUP
Ljubljana
Maribor
Novo mesto
Kosovo
Overview
10 companies in reinsurance, non-life and life insurance business
Reinsurance relations with numerous players worldwide
Insurance operations in 6 markets of former Yugoslavia
Total consolidated GPW of EUR 259,1m(1)
Reinsurance (GPW: EUR 120,8m)
Largest locally-based non-captive reinsurer in CEE
No.1 reinsurer in Slovenia(2)
37 years of presence in Slovenia and internationally
181 reinsurance clients
Rated by S&P since 2005; current rating (November 2010) A- with a stable outlook
Direct insurance (GPW: EUR 138,3m)
Mostly non-life exposure, life insurance operated through Green-Fields
Operating in direct insurance market since 1998 through Tilia
Substantial long-term equity investment in 3rd largest Slovenian insurer, Maribor with GPW of EUR 259,6m(3)
Exposure to market potential in countries of former Yugoslavia through acquisition of 4 subsidiaries in 2006-2007, establishment of 2 life companies in 2008 and acquisition of 2 subsidiaries in 2009
__________________________________________________________________________________________________________________________________________________ Notes: (1) As per December 31, 2010
(2) Market share measured on reinsurance GWP in Slovenia (3) As per December 31, 2010
Ljubljana
Maribor
Novo mesto
Slovenia
Macedonia
Montenegro
Serbia
Kosovo
Croatia Bosnia
7
WHO WE ARE TODAY – 3 KEY SEGMENTS
REINSURANCE
SLOVENIA INTERNATIONAL
INSURANCE
SLOVENIA
INSURANCE
FORMER YU
OUR MARKETS
8
THE SAVA RE GROUP
REINSURANCE NON LIFE INSURANCE LIFE INSURANCE PREMIUM INCOME 2010
INDEX (10/09)
SLOVENIA Sava Re Tilia Insurance Company (Composite Insurer)
99,7% owned by Sava Re
Tilia Insurance Company (Composit Insurer)
R: EUR 120,8mNL: EUR 63,7mL: EUR 10,2m T: EUR 194,7m
+ 0,4%+ 2,8%- 1,5%+ 1,0%
CROATIA Velebit osiguranje56,35% owned by Sava Re
Velebit životno osiguranje53,35% owned by Sava Re
NL: EUR 8,5mL: EUR 1,3m T: EUR 9,8m
+ 20,3%- 8,0%
+ 17,3%
SERBIA Sava osiguranje99,99% owned by Sava Re
Sava životno osiguranje99,99% owned by Sava Re
NL: EUR 15,6mL: EUR 0,3m T: EUR 15,9m
+ 17,5%+ 936,8%
+ 19,7%
KOSOVO IllyriaWholly-owned by Sava Re
Illyria LifeWholly-owned by Sava Re
NL: EUR 13,1mL: EUR 0,8m T: EUR 13,9m
+ 9,8%+ 492,2%
+ 14,1%
MONTENEGRO Sava MontenegroWholly-owned by Sava Re
NL: EUR 9,7mT: EUR 9,7m
- 12,6%
MACEDONIA Sava Tabak66,7% owned by Sava Re
NL: EUR 15,2mT: EUR 15,2m
- 8,6%
- Greenfields
- Established Company COVERING MOST OF THE FORMER YUGOSLAV MARKETS
SLOVENIA – THE GROUP’S MOST IMPORTANT MARKET
LIFE OPERATIONS IN EARLY STAGES
R – reinsuranceNL – non-lifeL – lifeT – total
9
OWNERSHIP STRUCTURE OF SAVA RE
75% free float 3% foreign investors POSR (listed on the LJSE since 14 June 2008)
P/B1 = 0,48 P/E2 = 13,56 P/GPW3 = 0,29
1) P/B = price per share on 31 December 2010 / book value of shares on 31 December.20102) P/E = price per share on 31 December 2010 / earnings per share in 20103) P/GWP = price per share on 31 December 2010 / GPW 2010 per share4) ROE = net profit/loss / average equity
5.481 shareholders
Pozavarovalnica Sava, d. d.
Roadshow Stockholm, May 2011
WHERE WE ARE GOING
CAGR 2008 – 2010
To balance international and domestic portfolio
Greenfield in Croatia, high growth rates on all markets, developing health in Kosovo
11
GPW million EUR (consolidated)
Slovenia 62,3
Slovenia 63,7
Slovenia 55,2
International 50,0
International 56,6
International 65,8
2008
2009
2010
Slovenia 57,4
Slovenia 61,9
Slovenia 63,7
International 49,1
International 57,8
International 62,1
2008
2009
2010
10,9
11,4
12,5
2008
2009
2010
Reinsurance
14,8%
Non-lifeinsurance
12,5%
Lifeinsurance
Greenfields in Serbia, Kosovo and Croatia
7,4%
PERMANENT GROWTH
OUR INVESTMENT STORY
12
REINSURANCE GROWTH ON FOREIGN MARKETS
98%
136%
111%
85%
105%
83%
65%
104%
96% 94%
40%
60%
80%
100%
120%
140%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
CR foreign business
CR foreign business
Asian markets will be the source of our future growth
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
(mill
ion
EUR)
SLOVENIA WESTERN BALKANS ASIA MIDDLE EAST CIS EUROPE AFRICA OTHER
Underwriting year(mio EUR)
2009 2010Estimation
2011
Asia 9,2 15,6 19,6 China, South Korea, Maleysia, Japan, India, Singapore
Middle East 2,6 3,7 4,8 Israel, United Emirates, Saudi Arabia, Oman
CIS countries 3,6 3,7 4,5 Russia, Armenia, Kazakhstan, Ukraine, Georgia, Moldova
Africa 1,3 1,5 2,0Nigeria, Tunisia, Ivory coast, Algeria, Togo, Madagascar, Morocco,
South African Republic
OUR INVESTMENT STORY
13
THE WESTERN BALKANS HAVE GROWTH POTENTIAL
THE SAVA RE GROUP
OUR MARKET SHARES MARKET PENETRATION & VOLUME 2010
CROATIA 2010: NL 0,92%; L 0,39%2009: NL 0,75%; L 0,40%2008: NL 0,54%; L 0,31%
TOTAL PREMIUM: EUR 1,2bn PENETRATION IN GDP: 2,8%PREMIUM/CAPITA: EUR 284
SERBIA 2010: NL 3,35%; L 0,37%2009: NL 2,95%; L 0,04%2008: NL 2,37%; L 0,00%
TOTAL PREMIUM: EUR 550m PENETRATION IN GDP: 1,9%
PREMIUM/CAPITA: EUR 74
KOSOVO 2010: NL 21,8%; L 100 %2009: NL 23,7%; L 100 %2008: NL 19,3%; L 0,00%
TOTAL PREMIUM: EUR 72m PENETRATION IN GDP: 1,7%
PREMIUM/CAPITA: EUR 33
MONTENEGRO 2010: NL 15,1% 2009: NL 16,6%
2008: NL 18,7%
TOTAL PREMIUM: EUR 63m PENETRATION IN GDP: 2,0%PREMIUM/CAPITA: EUR 105
MACEDONIA 2010: NL 14,4% 2009: NL 16,6%
2008: NL 15,6%
TOTAL PREMIUM: EUR 105m PENETRATION IN GDP: 1,5%
PREMIUM/CAPITA: EUR 53
INSURANCE
FORMER YU
Sava Re has cleaned the balance sheets & portfolios of its subsidiaries to prepare for future opportunities on these markets
22,3%
35,6%43,1% 45,9%
50,2%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0,020,040,060,080,0
100,0120,0140,0160,0
2006 2007 2008 2009 2010
(mill
ion
EUR)
Consolidated GPW
Slovenia International International premium as % of total GPW
OUR INVESTMENT STORY
14
REGIONAL FOCUS ON THE SLOVENIAN DIRECT MARKET
INSURANCE
SLOVENIATHE SAVA RE GROUP
OUR MARKET SHARES MARKET PENETRATION & VOLUME 2010
SLOVENIA 2010: NL 4,4%; L 1,6%2009: NL 4,3%; L 1,6%2008: NL 4,2%; L 1,7%
TOTAL PREMIUM: EUR 2,1bn PENETRATION IN GDP: 5,8%
PREMIUM/CAPITA: EUR 1.047
Increase market share & focus on portfolio profitabilityWe will try to stabilise our presence on the Slovenian market
SAVA RE AFFILIATE:Insurance Company Maribor;
3rd biggest on Slovenian market;
GPW EUR 259,6mSava Re share 45,7%
Pozavarovalnica Sava, d. d.
Roadshow Stockholm, May 2011
2010 WAS A GOOD YEAR
2010 – YEAR OF POSITIVE TURNAROUND
SAVA RE GROUP
- Increase in gross premiums in all business segments
- Adjusting reserving levels to Group policy
- Strengthening of agency networks
- Restructuring of investment portfolio led to positive investment return
- Implementation of systematic risk management approach and tools
SAVA REINSURANCE COMPANY
- Achieved strategic goal of balance between international and domestic portfolio
- Largest growth of foreign reinsurance premium achieved on Asian market
- Light loss year 2010 with improved combined ratio
- Long-term credit and financial strength rating of A- with a stable outlook reaffirmed
- Allocation of capital to subsidiaries to support further development & growth
- Positive investment return and restructuring of investment portfolio towards reducing market risks
16
17
2010 – YEAR OF POSITIVE TURNAROUND
Gross Premium Written = GPW
(1) Calendar-year basis
112,3 120,3 120,8
106,4119,7 125,8
10,911,4 12,5
0,0
50,0
100,0
150,0
200,0
250,0
300,0
2008 2009 2010
(mill
ion
EUR)
Consolidated GPW by operating segment
Reinsurance business Non - life business Life business
251,4 259,1229,6
18
( EUR ) Sava Re Group Sava Reinsurance Company2009 2010 2009 2010
Gross premiums written 251.416.588 259.103.050 147.082.330 142.861.784Year-on-year change 9,5% 3,1% 9,2% -2,9%International premium as % of total GPW 45,9% 50,2% 41,9% 50,0% Net incurred loss ratio1 68,0% 60,4% 75,8% 66,2%Net expense ratio2 35,2% 35,7% 29,8% 30,1%Net combined ratio33 103,2% 96,1% 105,5% 96,3% Realised investment return -1,4% 3,6% -2,3% 0,8% Profit/loss for the period -28.216.212 5.520.670 -12.598.645 7.193.724Comprehensive income -17.691.584 4.113.237 -3.744.882 6.143.048Net earnings / loss per share -3,01 0,59 -1,35 0,77 Total assets 560.711.611 578.385.408 404.105.057 418.350.613Change on 31 December previous year 4,7% 3,2% 1,2% 3,5% Shareholders’ equity 161.677.406 154.684.609 149.995.279 156.138.328Change on 31 December previous year -7,1% -4,3% -2,4% 4,1% Net technical provisions 277.337.473 307.179.072 144.578.495 156.415.674Change on 31 December previous year 22,2% 10,8% 18,9% 8,2% ROE (Net profit/loss to average equity) -16,8% 3,5% -8,3% 4,7% Share price at 31 December 13,83 8,00
Book value of shares 17,27 16,52 16,02 16,68
Market capitalisation 129.483.638 74.900.152
2010 – YEAR OF POSITIVE TURNAROUND
1) Net incurred loss ratio = net claims incurred / net premiums earned 2) Net expense ratio = (net aquisition cost + administrative costs) / net premiums earned3) Net combined ratio= (net claims incurred + net aquisition costs + administrative costs) / net premiums earned
Pozavarovalnica Sava, d. d.
SAVA RE GROUP
1) Net incurred loss ratio = net claims incurred / net premiums earned 2) Net expense ratio = (net aquisition cost + administrative costs) / net premiums earned3) Net combined ratio= (net claims incurred + net aquisition costs + administrative costs) / net premiums earned
20
2010 – YEAR OF POSITIVE TURNAROUND
22,3%
35,6%43,1% 45,9%
50,2%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0,020,040,060,080,0
100,0120,0140,0160,0
2006 2007 2008 2009 2010
(mill
ion
EUR)
Consolidated GPW
Slovenia International International premium as % of total GPW
67,5%64,8% 63,1%
69,5%
61,1%
26,6%
33,8%36,5% 35,2% 35,7%
94,1%
98,6% 99,6%
104,7%
96,8%
92,0%
94,0%
96,0%
98,0%
100,0%
102,0%
104,0%
106,0%
25,0%
35,0%
45,0%
55,0%
65,0%
2006 2007 2008 2009 2010
Net ratios - Sava Re Group
Net incurred loss ratio Net expense ratio Net combined ratio
Net CRNet ERNet LR
INVESTMENT STRUCTURE - SAVA RE GROUP21
(EUR) 31 Dec 2008 31 Dec 2009 31 Dec 2010
Deposits and CDs 73.288.273 90.825.019 129.563.385
Government bonds 71.243.900 78.650.190 75.678.951
Corporate bonds 57.775.899 70.736.066 73.928.404
Shares 17.171.723 17.052.682 11.482.158
Mutual funds 35.299.560 30.627.902 24.158.534
Strategic shares 32.773.009 37.646.480 42.322.366
Other 16.760.036 10.244.391 6.915.298
Total 304.312.400 335.782.730 364.049.096
24,1% 27,0%35,6%
23,4%23,4%
20,8%
19,0%21,1%
20,3%5,6%
5,1%3,2%11,6%
9,1% 6,6%10,8% 11,2% 11,6%5,5% 3,1% 1,9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
31 Dec 2008 31 Dec 2009 31 Dec 2010
Deposits and CDs Government bonds Corporate bonds Shares
Mutual funds Strategic shares Other
EUR 304,3m EUR 335,8m EUR 364,0m
INVESTMENT RETURN OF SAVA RE GROUP
(EUR) 2008 2009 2010
Investment income 29.357.293 22.350.395 24.950.660
Investment expenses 33.239.644 23.701.131 10.235.493
Net investment income -3.882.351 -1.350.736 14.715.167
22
304,3
335,8
364,0
0,3%
-1,4%
3,6%
-2,0%
-1,0%
0,0%
1,0%
2,0%
3,0%
4,0%
270,0
280,0
290,0
300,0
310,0
320,0
330,0
340,0
350,0
360,0
370,0
31 Dec 2008 31 Dec 2009 31 Dec 2010
(mill
ion
EUR)
Invested assets Investment return
Pozavarovalnica Sava, d. d.
PLANS 2011
Roadshow Stockholm, May 2011
KEY ACTIONS IN 2011
Reinsurance
Diversifying and growing the reinsurance portfolio
Profitability of reinsurance portfolio
Capital adequacy(Solvency II)
Cost control
Upgrading risk control systems
Insurance
Profitability of insurance portfolio
Improving the underwriting process
Developing IT systems
Strengthening sales networks
24
STRATEGIC ORIENTATION
Reinsurance
Annual average growth on international markets
> 8%
Decreasing premium from Slovenia to mitigate
double exposure
Combined ratio of 95%
Insurance Slovenia
Tilia to achieve 5%-market share
Accelerated growth in life business
Seeking better governance solutions for ZM for both
strategic shareholders
Insurance W Balkan
Growth of non-life insurance business (organic growth)
Taking advantage of high growth potential in life
business
Focus on small and medium size risks
(consistent system of concluding treaties)
25
PLAN 2011
3,4% decrease in premium; Double investment return and expected improvement of loss
ratios (2010 better than long-term average)
Premium growth of 2,8%(non-life premium growth of 4,8%, life premium growth of over 40%,
decrease in reinsurance premium of 3,6%)
26
1) Net incurred loss ratio = net claims incurred / net premiums earned 2) Net expense ratio = (net aquisition cost + administrative costs) / net premiums earned3) Net acquisition cost = acquisition costs + change in diferred acquisition cost
Sava Re Group Sava Reinsurance Company
(EUR) 2010 Plan 2011 2010 Plan 2011
Net earned premiums 231.874.029 244.239.929 123.497.230 121.411.427
Gross premiums written 259.103.050 266.984.900 142.861.784 138.093.827
Net incurred loss ratio 60,4% 62,3% 66,2% 71,4%
Net expence ratio 35,7% 32,7% 30,1% 27,7%
Net combined ratio 96,1% 95,0% 96,3% 99,1%
Realised investment return 3,6% 3,9% 0,8% 1,5%
ROE (Net profit/loss to average equity) 3,5% 5,4% 4,7% 3,1%
MID TERM ROE
TARGET 8-10%