AMSTERDAM: AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Zavarovalnica Triglav d.d. (Triglav), the operating holding company of the Triglav group, and Pozavarovalnica Triglav Re, d.d. Ljubljana (Triglav Re), a wholly owned subsidiary of Triglav.

Both companies are domiciled in Slovenia. The outlook of these ratings remains stable.

The ratings reflect Triglav’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings of Triglav Re factor in its strategic importance to Triglav, together with its strong integration into the group.

Triglav’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), on both a standard and stressed basis.

This assessment also considers the group’s prudent reserving and good financial flexibility, with access to equity and debt markets, as evidenced by the recent issuance of a EUR 50 million subordinated bond. Offsetting factors continue to be the high average guarantees embedded within the group’s life portfolio, which, combined with material asset-liability mismatch, exposes earnings and shareholders’ funds to adverse interest rate movements.

Triglav’s operating performance continues to be strong, as evidenced by a solid five-year (2014-2018) weighted average return on equity and combined ratio of 11.5% and 91.2%, respectively (as calculated by AM Best).

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, and is supplemented by healthy investment income. The profitability of Triglav’s operations in the West Balkans has been under pressure due to intense competitive conditions and high operating costs.

Nonetheless, the group continues to demonstrate a modest improvement in earnings 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 35% market share, based on gross written premiums in 2018. The group is also a dominant player in the Adria region, with approximately 20% market share.

Triglav writes a well-diversified portfolio by both product and geography through its various operating entities. AM 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.

AM Best considers Triglav’s ERM to be developed and appropriate for the group’s risk profile and operational scope.

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