Pursuant to the rules of the Ljubljana Stock Exchange d.d., Ljubljana, and the Market in Financial Instruments Act, Sava Re d.d., Dunajska 56, 1000 Ljubljana, makes the following announcement:

Strategy for 2023–2027

The Sava Insurance Group has achieved all its key objectives in the 2020–2022 strategy period. Through organic growth and the acquisition of Vita, the Group has increased revenue by 23% to EUR 720 million during the three years and achieved an average return on equity of over 13%. This outstanding performance reflects the Group’s significant progress on its key priorities for the strategy period, in particular by improving the customer experience through the digital transformation, by putting the customer at the centre, and by tailoring services to the wishes and needs of customers.

For the period 2023–2027, the Group has adopted a new strategy that will drive the Group forward on three key priorities:

The Group will take its customer-centric approach to the next level by ensuring that customers, their wishes and their needs are central to the way business is done. To this end, the Group has set itself three objectives. The integration of all communication channels through a centralised customer relationship management system will help the Group achieve the goal of personalised communication. The second objective is to establish a hybrid sales model that will enable the sales network to focus on more complex types of insurance and on advising customers. The third objective is to set up self-care digital solutions, such as customer portals, websites and mobile applications, which will improve the sales process, claims handling and other customer services.

The Group has two key objectives in optimising its business processes: to speed up and to simplify customer service as well as internal processes. This will also help achieve cost efficiency, which will play a more important role in the next strategy period than in the past, given the changed macroeconomic environment. To achieve this strategic priority, the Group will run a comprehensive review of its processes to identify opportunities for improvement. Processes will then be redesigned, making any other necessary changes to align the organisation with these new processes.

The Group will pursue sustainability in all key areas: environment, society and governance. It will continue its support for global sustainability trends and focus on goals related to climate change and care for the health and well-being of its customers, employees, and the wider community.

Regarding growth and profitability, the Sava Insurance Group has the following strategic targets for the period of 2023–2027:

The Group’s operating revenue (gross premiums written plus other operating revenue) is planned to grow at an average annual rate of at least 4%, reaching more than EUR 900 million in 2027. The primary goal of the Group will remain maintaining appropriate profitability as measured by combined ratios, which are envisaged to remain under 95% for the insurance and reinsurance business. In doing so, the Group will keep an eye on cost efficiency, which in the coming period is expected to come under pressure from inflation and capital expenditures needed to realise the key business goals. The Group will reduce the ratio of non-IT fixed costs to income by growing revenue and optimising processes. Target return on equity is set at between 9.5% and 10.5%, already taking into account the new accounting standard, IFRS 17, which will enter into force on 1 January 2023. The transition to the new accounting standard will not change the business model, long-term profitability or cash flow generation capacity, although the outputs of financial reporting are expected to change. Management also expects a slight increase in equity.

The main objectives of the investment policy continue to be maintaining a safe structure and strong rating profile of the investment portfolio, ensuring the Group has sufficient assets to meet its liabilities under insurance contracts, and making sure that financial market volatility has only a limited impact on the profit for the year. Given the current state of the financial markets, the rise in interest rates will positively impact investment income and consequently profit growth. Over the strategy period, the return on the investment portfolio is expected to rise to 2.2% in 2027.

The Group plans to ensure a high level of financial security, aiming at a solvency ratio in the range of 170–210%, which is the optimal level of capitalisation for the risk appetite set in the new strategy period. The dividend policy remains consistent with that of the current strategy period and, to support a policy of stable dividend growth, envisages a dividend between 35% and 45% of the Group’s net profit.

Business plan for 2023

Activities in 2023 will be aligned with key strategic priorities. In 2023, the Group plans to generate more than EUR 800 million in operating revenue (gross premiums written plus other operating revenue), representing a 4% growth compared to 2022, with growth planned across all markets where the Group is present. The target combined ratio is expected to remain below 95%, and the return on the investment portfolio is planned at more than 1.5%. The Group expects to achieve a net profit of at least EUR 53 million, which translates into a return on equity of at least 9.5%; importantly, this takes into account both the new international accounting standards IFRS 17 and IFRS 9. The solvency ratio is planned in the same range as set for the full strategy period.

IFRS 17 and IFRS 9

The Group’s financial targets are based on the new accounting standard IFRS 17 “Insurance Contracts” and IFRS 9 “Financial Instruments”, which both come into force on 1 January 2023. The two standards are not expected to have a material impact on reported profit as 60% of the Group’s current operating revenue is accounted for using the “simplified method”, which is very similar to the current approach. Under the current circumstances, the impact on the investment result is expected to be minor due to the high quality of the investment portfolio. A presentation of the novelties introduced by the new accounting standards has been posted on the Company’s website, at https://www.sava-re.si/en-si/investor-relations/calendar-events-presentations/.

In addition to the attached documents – a presentation of the strategy for 2023–2027 and a short overview of the business plan for 2023 – the chairman of the management board’s video presentation of the strategy is posted on the Company’s website, at https://www.sava-re.si/en-si/investor-relations/strategy/.