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Presentation for Investors
May 2010
Agenda
2
1 The Sava Re Group as at 30 April 2010
2 Results 2009
3 Major result drivers in 2009 – Sava Re d.d.
4 Equity as at 31 Dec 2009 – Sava Re d.d.
5 Underwriting results - reinsurance
6 Underwriting results - insurance
7 Sava Re impacted by goodwill impairment
8 Sava Re performance on underserved markets
9 Technical provisions increased
10 Major events
11 Major goals for 2010
12 Appendix
1 The Sava Re Group as at 30 April 2010
3
Sava Re
Zavarovalnica MariborSlovenia
Sava osiguranjeSerbia
Sava TabakMacedonia
DukagjiniKosovo
Sava MontenegroMontenegro
Zavarovalnica TiliaSlovenia
Moja naložbaSlovenia
100,0%
66,7%
99,99%
20,0%
45,79%
99,71%
100,0%
20,0%
5,0%
Dukagjini LifeKosovo
100,0%
Velebit uslugeCroatia
Sava životno osiguranjeSerbia
Velebit životnoosiguranje
Croatia
Velebit osiguranjeCroatia
51,14%51,14%
99,99%
Associated Companies
Subsidiaries
100,0% Bro DilMacedonia
GoldmakMacedonia
100,0%
28,9%
100,0% Dukagjini HospitalKosovo
4,32%
4,44%
2 Results 2009
4
Sava Re d.d. 2009 2008 2007
Profit/loss after tax (EUR) -12.598.645 - 7.991.649 18.205.424
Equity as at 31 Dec (EUR) 149.995.279 153.740.161 145.637.435
Comprehensive income (EUR) -3.744.882 -28.411.525 n.p.
Net combined ratio1 105,5% 105,8% 98,3%
Book value of share as at 31 Dec (EUR)2 16,02 16,42 18,52
6. 5. 2010 31. 12. 2008 11. 6. 20083
Market value of share (EUR) 10,00 11,45 28,00
Market capitalisation (million EUR) 93,6 107,2 262,2
Sava Re Group 2009 2008 2007
Profit/loss after tax (EUR) -28.216.212 - 8.472.644 20.845.254
Comprehensive income (EUR) -17.691.584 -36.201.633 n.p.
Equity as at 31 Dec (EUR) 161.677.406 174.087.055 168.551.461
Net combined ratio1 103,2% 99,3% 95,8%
45% of the consolidated result
derived from the parent company
________________________________________________________________________________________________________________________________Notes: 1) (Net claims incurred + administrative costs + income/expenses from reinsurance commissions) / net premium earned 2) In 2008 the number of shares increased by 1.500.000. The book value of shares on the first balance sheet day after the capital increase on 30 June 2008 amounted to EUR19,38. 3) Initial listing
79.061.685 90.257.788
60.867.49017.960.535
0
20.000.000
40.000.000
60.000.000
80.000.000
100.000.000
120.000.000
140.000.000
160.000.000
2008 2009
EU
R
Net claims incurred Claims incurred - retrocession
3 Major result drivers in 2009 - Sava Re d.d.
5
2
5
2008 extreme loss events “once-in-a-century losses in Slovenia”
Storms impacted results
Summer storms in Slovenia 2008: EUR 55m gross claims (EUR 4,9m net claims) 2009: EUR 25m gross claims (EUR 5,8m net claims)
____________________________________________________________________________________________________________________________________________Notes: 1) Gross combined loss ratio = (gross claims + gross commission + current year gross claims outstanding – current year gross deferred acquisition costs + prior year gross deferred acquisition costs – prior year claims provision) / (gross premiums + prior year gross unearned premium – current year gross unearned premium) 2) Net combined loss ratio: all items adjusted for reinsurance
1 2
+14,2%
Strong impact of crop losses(storms with hail in NE Slovenia)
- Limited undewriting of crops in 2010
121,6%
102,5%
92,7%99,6%
102,7%
88,4%92,3%
132,2%
97,8%
130,1%
109,3%
99,9%95,8% 97,5%
92,9% 92,9%
99,6% 100,3%
70,0%
80,0%
90,0%
100,0%
110,0%
120,0%
130,0%
140,0%
150,0%
2001 2002 2003 2004 2005 2006 2007 2008 2009
Gross and net combined loss ratio
Gross combined loss ratio Net combined loss ratio 21
66
Investments expenses (million EUR) 2009
Mutual funds and shares 8,0
Corporate bonds (Lehman; Glitnir) 2,0
Structured products 1,3
Subordinated debt and taxes 1,7
Interest on other debt 0,3
Total 13,3
Negative result due to impairment losses and capital losses continue in 2009
Investment expenses (excl. strategic investments) in 2009 amounted EUR 13,3 million (realized capital losses and impairment losses)Impairment losses on investments in subsidiaries in 2009 amounted to EUR 5,7 million (change in methodology of goodwill test (different assumptions)
3 Major result drivers in 2009 - Sava Re d.d.
(EUR) 2009 2008 Index
Expenses from investments in affiliates -5.687.798 -1.329.362 427,9
Investment expenses (total) -18.961.340 -25.059.828 75,7
3 Major result drivers in 2009 - Sava Re d.d.
77
(EUR) 2009 2008
Strategic shares 89.436.602 74.999.030
Corporate bonds 65.110.355 55.139.038
Government bonds 48.123.865 49.622.249
Deposits and CDs 41.632.018 38.207.923
Mutual funds 24.991.847 29.759.367
Shares 15.019.995 14.693.075
Structured products 1.563.830 10.225.740
Other 6.947.883 3.260.566
Total 292.826.395 275.906.987
Increase in strategic investments due to take-over of Croatian insurance operations (Velebit osiguranje and Velebit životno osiguranje)
Liability portfolio – better liquidity
More than 38% of assets supporting the Liability Fund are fixed income investments
No American exposure
More than 80% ALM according to currency
8
EUR million
8
Positive impact of EUR 8,9m on total
equity from fair value movements and
impairment losses
3 Major result drivers in 2009 - Sava Re d.d.EUR million
2009 (EUR) Profit/loss after tax
Comprehensive income after tax
Change in equity
Sava Re -12.598.645 -3.744.882 - 3.774.882
Sava Re Group -28.216.212 -17.691.584 - 12.409.649
Transfer of surplus to investment income
in the amount
of EUR 10,9m
Despite the large loss, the impact on the equity of Sava Re and the Groupremained small.
80,4
4 Equity as at 31 Dec 2009 - Sava Re d.d.
9
___________________________________________________________________________________________________________________________________________ Notes: 1) Solvency I minimal capital – capital calculated accourding to the Insurance Companies Act 2) RBC Model “risk base capital” – internally used capital allocation model
57,3
38,6
92,7
73,4
99,1
3,8
69,6
Legend
Equity & Subordinated
Debt
Allocated /required capital
Long term capital adequacy at A according
to S&P modelsets minimal capital at
EUR 76,6m
Internal allocation to reinsurance operations of
EUR 73,4m,and EUR 99,1m to insurance
operations
Required minimal caital amounts to EUR18,7m;
surplus over regulatory min capital of EUR 38,6m
(available capital =EUR 57,3m)
Value of equity and subordinated debt as at
31 Dec 2009
Estimated suplus capital over A rating requirement as per 31 Dec 2009.
5 Underwriting results - reinsurance
1010
(EUR) 2009 2008
Slovenia 85.450.863 81.821.496
Europe 39.315.695 35.184.540
Former Yugoslavia 9.511.760 8.368.397
Other 12.804.012 9.369.286
Total 147.082.330 134.743.719
(EUR) 2009 2008
Slovenia 71.469.870 85.747.041
Europe 18.357.908 19.390.993
Former Yugoslavia 4.787.120 4.769.657
Other 6.193.064 4.781.540
Total 100.807.961 114.689.231
The Group is decreasing its exposure in Slovenia.
5 Underwriting results - reinsurance
111111
____________________________________________________________________________________________________________________________________________Net incurred loss ratio = (net claims + change in net claims outstanding) / (net premiums + change in net unearned premiums)Net expense ratio = (net commisssion + change in net deferred acquisition costs) / (net premiums + change in net unearned premiums)Administrative expense ratio = operating expense / (net premiums + change in net unearned premiums)
2009 2008
Net incurred loss ratio 75,8% 72,7%
Net expense ratio 24,5% 27,1%
Administrative expense ratio 5,2% 6,2%
Net combined ratio 105,5% 106,0%
improved underwriting result on foreign markets improved expense ratios
78,8%
72,0%69,7%
76,9%
64,0%66,0%68,0%70,0%72,0%74,0%76,0%78,0%80,0%
Domestic Foreign
Net incurred loss ratio
2009 2008
24,6% 24,5%
27,2%26,9%
23,0%23,5%24,0%24,5%25,0%25,5%26,0%26,5%27,0%27,5%
Domestic Foreign
Net expense ratio
2009 2008
103,3%
96,5%96,9%
103,8%
92,0%
94,0%
96,0%
98,0%
100,0%
102,0%
104,0%
106,0%
Domestic Foreign
Net combined ratio
2009 2008
6 Underwriting results - insurance
12
- increased claims provision- bad debt write-downs- impairment losses on
investments
- greenfields (early years of operation usually
negative)
2009 2008 Index 2009 2008 Index 2009 2008 Index
Net earned premiums 87.151.884 74.115.969 117,6 11.217.545 10.938.510 102,6 217.427.839 194.113.773 112,0
Gross premiums written 119.665.563 106.452.791 112,4 11.407.225 10.874.387 104,9 251.416.588 229.606.926 109,5
Net claims incurred -55.939.199 -41.212.188 135,7 -1.621.249 -1.571.138 103,2 -147.818.236 -121.848.431 121,3
Gross claims paid less income from recourse receivables -61.376.186 -51.051.030 120,2 -1.617.844 -1.495.967 108,1 -149.390.360 -155.131.483 96,3
Change in the net provision for outstanding claims -10.732.205 -3.316.663 323,6 -3.761 -75.171 5,0 -30.122.280 -12.058.082 249,8
Operating expenses -42.117.528 -34.989.750 120,4 -5.558.258 -4.736.570 117,3 -81.250.387 -73.868.273 110,0
Technical result -8.666.527 848.844 -1.021,0 -4.859.155 3.972.226 -122,3 -21.375.126 -2.598.396 822,6
Investment income 4.630.836 4.718.878 98,1 5.374.801 984.107 546,2 22.182.898 28.007.027 79,2
Investment expenses -3.592.865 -2.595.928 138,4 -1.178.505 -5.898.101 20,0 -23.701.131 -33.239.644 71,3
Net investment income 1.037.971 2.122.950 48,9 4.196.296 -4.913.994 -85,4 -1.350.736 -3.882.351 34,8
Other income - expenses -5.695.201 -1.784.236 319,2 0 0 -5.619.585 -2.313.008 243,0
Profit/loss before tax -13.323.757 1.187.558 -1.121,9 -662.859 -941.768 70,4 -28.345.448 -8.793.754 322,3
Income tax expense -1.267.034 -1.174.995 107,8 -9.764 -2.285 427,3 129.235 321.110 40,2
Net profit/loss for the period -14.590.791 12.563 -116.141,0 -672.623 -944.053 71,2 -28.216.212 -8.472.644 333,0
(EUR) Non-life business Life business Consolidated
6 Underwriting results - insurance
13
Market shares 2009 2008 2007
Zavarovalnica Tilia (non-life) 4,3% 4,2% 3,8%
Zavarovalnica Tilia (life) 1,6% 1,7% 1,6%
Zavarovalnica Tilia (total) 3,5% 3,4% 3,1%
Sava osiguranje (Serbia) 2,7%1 2,4% 1,8%
Dukagjini (Kosovo) 23,7% 19,3% 18,7%
Sava Tabak (Macedonia) 17,4% 16,3% 15,1%
Sava Montenegro (Montenegro) 16,9% 19,0% 23,0%
Velebit osiguranje (Croatia) 0,75% 0,54% N.A.
Velebit životno osiguranje (Croatia) 0,4% 0,31% N.A.
Dukagjini Life (Kosovo) 100% N.A. N.A.
Sava životno osiguranje (Serbia) 0,04%2 N.A. N.A.
__________________________________________________________________________________________________________________________________________Notes: 1) Market share for the period January–September 2009 2) Market share for the period January–September 2009
141414
7 Sava Re impacted by goodwill impairment
14
DIFFICULT YEAR 2009 ON UNDERSERVED MARKETS
Croatia Serbia Macedonia Montenegro Kosovo
Nominal GDP change (%) estimate - 5,8% - 3,0% - 2,5% - 4,0% 3,8%
Change in life premium income (%) - 2,2% 24,2% 12,8% 4,9% n.a.
Change in non-life premium income (%) - 3,0% - 0,4% - 4,4% 6,1% 20,2%
Change in total premium income (%) - 2,8% 2,6% - 3,7% 6,0% 20,2%
Premium per capita 2008 (EUR) 302 89 51 96 26
Premium per capita 2009 (EUR) 290 91 48 102 29
MAIN POINTS Financial crisis and its recovery hits underserved markets with a delay On most markets insurance premium is still considered a cost Crisis followed by increase in receivables – cash flow difficulties and insurance fraud
151515
8 Sava Re performance on underserved markets
Velebit osig. and Velebit
životno osig.
Sava osiguranje and Sava životno
osig.Sava Tabak Sava Montenegro
Dukagjini and Dukagjini Life
Market growth/decrease in life premium
- 2,2% 24,2% 12,8% 4,9% n/a
Life premium 2008
(TEUR)1.085 0 - - 0
Life premium 2009
(TEUR)1.356 35 - - 143
Growth/decrease 25% - - - -
Market growth/decrease in non-life premium
- 3,0% - 0,4% - 4,4% 6,1% 20,2%
Non-life premium 2008
(TEUR)5.252 12.251 16.343 11.544 7.304
Non-life premium 2009
(TEUR)7.092 14.031 16.729 11.089 10.261
Growth/decrease 35% 15% 2% - 4% 40%
Portfolio cleaning and change in Serbian Law
Insurance represents 36% of total premium
income
Developing greenfield
businesses
DINAR devaluation; growth in RSD 24%
Decreasing reliance on one
insured
MAIN GROWTH
FEATURES
161616
9 Technical provisions increased
Increasing financial stability – Non-life
Velebit osiguranje
Sava osiguranje
Sava TabakSava
MontenegroDukagjini
Gross provisions for outstanding claims 2008 (TEUR)
1.132 5.509 6.772 4.985 3.479
Gross provisions for outstanding claims 2009 (TEUR)
3.569 9.497 7.228 8.281 3.996
Growth 215% 72% 7% 66% 15%
Total technical provisions 2008 3.627 10.962 11.795 11.184 6.726
Total technical provisions 2009 7.184 16.217 12.407 13.546 7.202
Growth 98% 48% 5% 21% 7%
171717
10 Major events
17
BEGINNING 2010 New corporate design
ENTRY INTO CROATIAN MARKET Acquisition of 100% of Velebit usluge, who is the 51,14% owner of Velebit osiguranje and
Velebit životno osiguranje
HAIL STORMS IN SLOVENIA Net impact on result of EUR 5,8m
STANDARD AND POOR’S Reaffirmed long-term credit and financial strength rating of A- with stable outlook
ELECTION OF CHAIRMAN OF THE SUPERVISORY BOARD
Branko Tomažič was elected new Chairman of the Supervisory Board and Mateja Lovšin Herič new Deputy Chairperson
EVENTS UNTIL 31 Dec 2009
EVENTS AFTER 31 Dec 2009
GENERAL MEETING Ellection of new Supervisory Board members, presentation of the annual report 2008 and
announcment of challenging action
PARTICIPATION IN THE PRE-EMPTION OFFERING BY THE ZAVAROVALNICA
MARIBOR
Sava Reinsurance Company participated in the pre-emption offering with the amount it was entitled to under its pre-emptive rights
ACQUISITION OF 49% SHARE Sava Reinsurance Company started the procedure for acquiring the remaining 49% share
of Dukagjini and Dukagjini Life, Kosovo
LIQUIDATION OF SAVA INVEST Liquidation of Macedonian fund management company
LIQUIDATION OF SLOREST Liquidation of Macedonian company Slorest
TRANSFER OF SHARES Transfer of the acquired shares of the Kosovan companies Dukagjini and Dukagjini Life to
Sava Reinsurance Company
181818
11 Main goals for 2010
ROE 4,0% Net profit/loss for the period: EUR 6,1m
CAPITAL ADEQUACY Maintaining capital adequacy (above A according to S&P model)
HIGHER INVESTMENT RETURN Investment return of 3,5% (5% including fair value reserve)
COST CONTROL Cost ratio below 5% of gross premium
MAINTAINING CURRENT RATING To keep long-term credit and financial strength rating of A- according to S&P
ZAVAROVALNICA MARIBOR Decision regarding capital participation in Zavarovalnica Maribor
HOSPITAL IN KOSOVO Examination of Dukagjini Hospital project
DIVESTING OF OPERATIONS NEITHER CORE BUSINESS NOR
SUPPORT FUNCTION Liquidation of Sava Invest and Slorest; sale of Goldmak – associate of Sava Tabak
11 Main goals for 2010
19
DIVERSIFICATION AND GROWTH OF REINSURANCE PORTFOLIO
7% decrease in premiums (8% growth in foreign-sourced premiums; 17,7% decrease in premiums from Slovenia)
IMPROVED PROFITABILITY OF REINSURANCE PORTFOLIO
Improve the combined ratio (before admin. exp.) to 94% (from 102%)
GROWTH STRATEGY FOR FOREIGN MARKETS
Prepare the basis and activities for further profitable growth in foreign markets
COST CONTROL Decrease the net expense ratio by 2,4 percentage points
EFFICIENT INSURANCE OPERATIONS
Reduce the expense ratios
UPGRAD RISK MANAGEMENT Optimisation of business processes, tools (for reinsurance pricing; dynamic financial analysis) and corporate culture relating to risk management
DEVELOPMENT OF IT SYSTEMS Implement existing IT solutions for life and non-life business
LONG-TERM GOAL: TO CREATE SHAREHOLDER VALUE
DEVELOPMENT OF DISTRIBUTION NETWORKS
Training of agents and setting up branch offices
Primary insurance
Reinsurance
IMPROVED UNDERWRITING PROCESS
Improve the quality of underwriting
12 Appendix – Sava Re d.d. Statement of Fiancial Position
20
(EUR) 31 Dec 2009 31 Dec 2008
ASSETS 404.105.057 399.152.651
Intangible assets 181.818 189.498
Property and equipment 1.808.628 1.852.158
Deferred tax assets 2.112.682 5.383.818
Investment property 1.244.886 1.262.310
Financial investments in Group companies and in associates 89.436.601 74.999.029
Financial investments 207.913.774 204.952.584
Reinsurers' share of technical provisions 25.148.351 37.690.671
Receivables 65.638.369 56.451.138
Deferred acquisition costs 10.263.816 9.652.159
Other assets 225.689 6.707.831
Cash and cash equivalents 130.442 11.454
EQUITY AND LIABILITIES 404.105.057 399.152.651
Equity 149.995.279 153.740.161
Subordinated liabilities 31.135.777 31.139.605
Technical provisions 169.726.846 159.309.009
Other provisions 170.448 226.667
Deferred tax liabilities 323.814 0
Other financial liabilities 2.900.613 160
Liabilities from operating activities 37.345.543 42.528.378
Diverse liabilities 12.506.736 12.208.671
12 Appendix – Sava Re d.d. Income Statement
21
(EUR) 2009 2008
Net earned premiums 119.096.865 109.098.508
Investment income 12.566.933 22.519.176
Other technical income 5.539.068 2.898.066
Other income 67.558 1.314
Net claims incurred - 90.257.788 - 79.061.685
Change in other technical provisions - 949.348 - 182.999
Operating expenses - 39.876.086 - 39.127.544
Expenses from financial assets and liabilities - 18.961.340 - 25.059.828
Other technical expenses - 1.230.757 - 573.706
Other expenses -663 - 1.370
Profit/loss before tax - 14.005.559 - 9.490.069
Income tax expense 1.406.914 1.498.420
Net profit/loss for the period - 12.598.645 - 7.991.649
Earnings/loss per share - 1,35 - 0,91
12 Appendix – Key financial ratios
22
Sava Re d.d. 2009 2008 2007 2006
Retention ratio1 82,7% 84,5% 82,0% 82,9%
Net loss ratio2 75,8% 72,5% 67,3% 66,8%
Net expense ratio3 29,8% 33,3% 31,0% 31,8%
Net combined ratio4 105,5% 105,8% 98,3% 98,6%
Investment profitability5 - 2,3% - 1,0% 8,8% 5,2%
Return on equity (ROE)6 - 8,3% - 5,3% 13,8% 8,5%
____________________________________________________________________________________________________________________________________________ Ratios: 1) Net premium written / gross premium written 2) Net claims incurred / net premiums earned 3) Administrative costs (incl. reinsurance commission income/expenses) / net premiums earned 4) Net loss ratio + net expense ratio 5) Net investment income / average investment value 6) Result for the period / average value of equity
Sava Re Group 2009 2008 2007 2006
Retention ratio1 88,4% 89,7% 87,5% 87,3%
Net loss ratio2 68,0% 62,8% 62,0% 65,3%
Net expense ratio3 35,2% 36,5% 33,8% 32,5%
Net combined ratio4 103,2% 99,3% 95,8% 97,8%
Investment profitability5 - 1,4% 0,3% 9,0% 6,2%
Return on equity (ROE)6 - 16,8% - 4,9% 13,5% 10,1%
12 Appendix – Consolidated Statement of Fiancial Position
23
(EUR) 31 Dec 2009 31 Dec 2008ASSETS 560.711.611 535.346.611
Intangible assets 23.846.535 24.794.625
Property and equipment 24.830.829 22.232.413
Deferred tax assets 2.368.845 5.860.267
Investment property 5.773.564 5.243.407
Financial investments in associated companies 37.646.479 31.580.978
Financial investments 298.131.559 271.602.919
Funds for the benefit of policyholders who bear the investment risk
17.861.634 10.577.672
Reinsurers' share of technical provisions 28.899.410 40.141.021
Receivables 96.209.971 84.896.822
Deferred acquisition costs 17.404.467 15.746.647
Other assets 1.130.971 7.344.421
Cash and cash equivalents 5.617.457 14.128.967
Non-current assets held for sale 989.887 1.196.451
EQUITY AND LIABILITIES 560.711.611 535.346.611
Equity 161.677.406 174.087.055
Subordinated liabilities 31.135.777 31.139.605
Technical provisions 288.282.904 256.307.515
Technical provisions for the benefit of life insurance policyholders who bear the investment risk
17.953.979 10.748.184
Other provisions 872.101 777.616
Deferred tax liabilities 385.659 60.746
Other financial liabilities 3.173.918 600.160
Liabilities from operating activities 40.176.908 45.842.801
Other liabilities 17.052.958 15.782.930
12 Appendix – Consolidated Income Statement
24
(EUR) 2009 2008
Net earned premiums 217.427.839 194.113.774
Income from investments in affiliates 167.497 1.350.266
Investment income 22.182.898 28.007.027
Other technical income 7.801.858 4.157.752
Other income 822.509 1.345.365
Net claims incurred - 147.818.236 - 121.848.431
Change in other technical provisions - 3.367.476 - 726.586
Change in the technical provision for policyholders who bear the investment risk
- 7.205.795 - 436.745
Expenses fro bonuses and rebates - 675.655 - 594.472
Operating expenses - 81.250.387 - 73.868.273
Expenses from investments in affiliates - 254.281 0
Expenses from financial assets and liabilities - 23.446.850 - 33.239.644
Other technical expenses - 6.962.929 - 3.989.886
Other expenses - 5.766.439 - 3.063.901
Profit/loss before tax - 28.345.446 - 8.793.754
Income tax expense 129.235 321.110
Net profit/loss for the period - 28.216.212 - 8.472.644
12 Appendix – Important dates 2010
25
Date1
Unaudited financial statements of Sava Re d.d. for 2009 8. 4. 2010
Audited annual report for Sava Re d.d. & Sava Re Group for 2009 30. 4. 2010
Declaration of compliance with the Corporate Governance Code 30. 4. 2010
Unaudited interim report for Sava Re d.d. for the period January–March 2010
31. 5. 2010
Annual document – list of all information published by Sava Re d.d. over the past 12 months
11. 6. 2009
Notice of Annual General Meeting 28. 5. 2010
Annual General Meeting of Sava Re d.d. 30. 6. 2010
AGM resolutions published 1. 7. 2010
Unaudited interim report for Sava Re d. d. & Sava Re Group for the period January–June 2010
31. 8. 2010
Unaudited interim report for Sava Re d. d. for the period January–September 2010
30. 11. 2010
____________________________________________________________________________________________________________________________________________ Note: 1) Stock Exchange publications are made after 13:30 hrs on the date of publication
