TRIGLAV Group's profitability improved despite the negative impact of higher claims
The following information were provided by the Group in a press release:
For the third consecutive year, the TRIGLAV Group recorded premium growth, 7% in the reporting year, and booked EUR 1 billion in gross written premium from insurance and co-insurance contracts (exceeding the planned around EUR 930 million). The performance of the Group in 2017 was affected by extraordinary weather events, resulting in claims of EUR 33.5 million, which is 59% above the five-year average. The unfavorable claims experience was effectively compensated with high premium growth and higher cost efficiency. Returns on investment declined less than expected. The combined ratio of the Group remained strong at 93.9%. In 2017, both credit rating agencies, i.e. S&P Global Ratings and A.M. Best, reassigned the TRIGLAV Group high "A" credit ratings with a stable medium-term outlook.
Profit above the budgeted level
According to unaudited data, TRIGLAV Group generated profit before tax of EUR 84.4 million (planned at between EUR 70-80 million). The parent company ended 2017 with profit before tax of EUR 73.8 million. Return on equity of the Group stood at 9.3%, whilst that of the parent company was 11.0%.
Impact of extreme weather events
On a global scale, 2017 was unprecedented in terms of catastrophic loss events. Hail storms, frost, the Irma hurricane, floods and stormy winds resulted in claims of EUR 33.5 million, which is 59% above the Group"s five-year average (22% above the ten-year average). Gross claims paid were 6% higher than the year before, as the result of which the claims ratio deteriorated by two percentage points. The unfavorable claims experience was effectively compensated with high premium growth and higher cost efficiency. Apart from that, returns on investment, which declined less than expected, also had an impact.
Total written premium reached EUR 1 billion
For the third consecutive year TRIGLAV Group recorded premium growth; in 2015 and 2016 it reached 3% and 2%, respectively, whereas in 2017 it was as much as 7%. According to unaudited data, consolidated gross insurance, co-insurance and reinsurance premiums totaled EUR 1 billion (planned at approximately EUR 930 million). Premium growth was recorded in all three insurance segments. In non-life insurance, the largest insurance segment, premium growth reached 7%. A high 13% premium growth was recorded in health insurance, while life insurance premium increased by 3% despite the impact of the high maturity of insurance policies.
Performance by insurance markets
In 2017, TRIGLAV Group operated in a more favorable macroeconomic environment both in Slovenia and the wider region. Despite the signs of recovery in insurance markets where the Group operates, the conditions remain challenging due to fierce competition. All 13 insurance companies of the Group provided consistent, client-focused and comprehensive services of a high standard, developed their internal and external sales networks and implemented strategic development activities.
In accordance with its strategic guidelines of growth and development, TRIGLAV Group is gradually increasing the share of premium written in the markets outside Slovenia. In 2017, its share grew by 0.4 percentage point to 17.7%. A total of 76.8% of premium was charged in the Slovene insurance market, while global reinsurance premium accounted for 5.5% of total premium. Premium growth was recorded in all major markets of the Group. The average growth on the Slovene market was 6%, the same as the market growth. Premium growth was recorded in all Slovene insurance subsidiaries of the Group. In the markets outside Slovenia, the average premium growth was as much as 10%. The highest premium growth was recorded in Serbia (27%), followed by Croatia (9%) and Bosnia and Herzegovina (7%). In contrast, premium growth in Montenegro remained approximately at the same level as the year before, whereas in Macedonia, where it accounts for 2% of total premium of the Group, premium decreased by 1%.
Returns on investment declined but still better than expected
According to unaudited data, returns on investments of TRIGLAV Group (excluding return on unit-linked life insurance) declined by 4% compared to 2016. The decrease was lower than expected, with some impact resulting from specific one-off events such as realized capital gains. The investment policy of the Group remained unchanged in 2017. The Group actively adapted the shares of individual investment grades, but the structure of the investment classes did not significantly change.
Higher cost efficiency
Compared to 2016, total gross operating expenses of TRIGLAV Group fell by 1%. Intensified marketing and sales efforts combined with strategic development activities resulted in higher operating expenses of the insurance business, however their growth lagged behind premium growth. The share of expenses in written premium dropped by 0.5 percentage point to 24.8%.
A favourable combined ratio
The deterioration of the claims ratio was mitigated with the improved expense ratio, resulting in the favorable combined ratio of 93.9%. It was planned at around 95%, which is also its long-term target average value.
Financial stability and strong credit ratings
TRIGLAV Group"s leading market position in Slovenia and the region, its profitable and safe operations and financial stability were again confirmed by both rating agencies, S&P Global Ratings and A.M. Best, by reassigning TRIGLAV Group strong "A" credit ratings with a stable medium-term outlook. A high level of financial stability of the Group is also reflected in a 2% increase in total equity capital (EUR 756.6 million) and 3% higher gross insurance technical provisions (EUR 2,732.2 million). Both categories are the guarantee and the basis for balanced operations as well as ensuring the long-term safety of the policyholders.
The leading position in Slovenia and the Adria region
TRIGLAV Group firmly remains the leader in Adria region (20% share), and maintains the leading position in Slovenia, its largest market (36% share). In 2017, the Group improved its position on Croatian and Serbian markets, while on other markets it largely maintained its position or market share from the year before. The strategic focus of the Group will continue to be on its existing markets, which are being actively developed. Its position is strengthened through organic growth, however potential takeovers are not ruled out should an appropriate opportunity present itself. In 2017, the Group entered the Macedonian life insurance market by establishing a new life insurer, while in Bosnia and Herzegovina it was the first to offer voluntary pension insurance. By co-founding Trigal, a regional platform for alternative investments was established.
Development highlights in 2017 in terms of the strategy up to 2020
In its Strategy for the 2017-2020 period, TRIGLAV Group has set out on a path to become a modern, innovative and dynamic insurance/financial group, firmly remaining the leader both in Slovenia and the wider region. In the first strategy year, the Group actively pursued all five strategic guidelines. These include comprehensive client relationships, digitization and internal redesigning of operations, efficient asset management, development of a modern corporate culture and committed employees, maintaining profitable operations and greater value of the Group.
Clients are in the very center of all its activities. In 2017, the insurance subsidiaries of the Group launched new and improved products, upgraded with assistance services. By using the omni-channel sales approach, alternative sales channels were appropriately strengthened in all markets, such as selling via banks, leasing companies and travel agencies, online and mobile selling. With regard to loss adjustment, new technological and process improvements are being developed as a result of ever-greater digitalisation and mobile service launches. At the Group level, large-scale activities were launched to establish an advanced, computerized and innovative business environment in the Group. In relation to development activities, TRIGLAV Group cooperates with startups and accelerators and introduces new forms of partnerships.
Andrej Slapar, President of the Management Board of Zavarovalnica TRIGLAV, said: "In 2017 we achieved good results and higher profit than planned. High premium growth, higher cost efficiency and a smaller decline in returns on investment than expected had a positive impact on our performance in the year marked by an especially high number of claims. The Group maintained its leading market position in the region and strong financial stability, as confirmed by the assigned strong "A" credit ratings with a stable medium-term outlook. The past year was the first year of the new strategy, the aim of which is to effectively adapt the Group, which has 118 years of tradition, to future challenges. We began to actively pursue all development activities, outlined in the five strategic guidelines. Tangible results were achieved in some areas, whereas in relation to more extensive projects quality foundations for further work were laid. We are a team of over five thousand co-workers in six countries, sharing the same values, vision, mission and objectives. Through joint efforts, we will continue to strive to achieve them."