AM Best Confirms Ratings for Zavarovalnica Triglav Group

AM Best Affirms Credit Ratings of Triglav Group

AM Best has confirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of "a" (Excellent) for Zavarovalnica Triglav d.d. and its wholly owned subsidiary, Pozavarovalnica Triglav Re, d.d. The credit ratings, which reflect the solid foundational strength of the Triglav group, offer a stable outlook moving forward.

Understanding Triglav's Financial Strength

The affirmations by AM Best stem from the very strong balance sheet strength exhibited by Triglav, with their risk-adjusted capitalisation noted at the strongest level marked by the Best's Capital Adequacy Ratio (BCAR). The agency has regarded Triglav's profile as robust, supported by sound enterprise risk management (ERM) strategies as well as an operational performance marked by stability.

Investment and Performance Overview

Triglav has maintained good financial flexibility, substantiated by consistent access to equity and debt markets. Financial leverage ratios remain comfortably within AM Best’s measurements, promoting a stable operational environment. Notably, the group experienced a partial shift in balance sheet strength, moving away from earlier high average guarantees in their life portfolio after terminating products with guarantees in 2019. This transition coincided with a rise in investment returns, improving positively alongside increasing interest rates.

Challenges in Profitability

Despite bolstering its foundation, the company faced challenges impacting profitability in the latest period. Natural catastrophe events during the third quarter, plus a government-imposed price cap on supplementary health insurance, pressured the combined ratio to 102.6% under IFRS 17. In a historical context, the five-year weighted average combined ratio was significantly lower at 93.6%, leading to a pronounced decline in return on equity (ROE) which dipped to 1.8% from 11.3% year-on-year.

Strategic Growth Insights

Looking towards the future, Triglav has reported a notable profit before tax of EUR 89.5 million for the first half of 2024, alongside a combined ratio of 90.6%. Expectations are set for the full-year performance to reflect the historical resilience of the group, especially in the non-life segment, which is buoyed by its life and reinsurance arms, as well as asset management activities.

Market Leadership and Position

Holding a commanding position with a 40% market share in the domestic insurance market, Triglav's footprint extends notably into the Adria region where it commands approximately 22% market share. The diversification of its product portfolio across geographical regions remains a critical asset. It is worth noting that the recent cessation of supplementary health insurance could cause a marginal dip in growth, though AM Best projects that it will not undermine the significant market presence of Triglav.

Enterprise Risk Management Practices

AM Best commends Triglav’s developed ERM framework, which is well tailored to the company's operational and risk profile. These practices play a vital role in navigating the evolving landscape of the insurance industry while promoting confident stakeholder and market interactions.

Frequently Asked Questions

What are the credit ratings affirmed by AM Best for Triglav?

AM Best affirmed the Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Ratings of “a” (Excellent) for Triglav and Triglav Re.

How does Triglav's market position affect its ratings?

Triglav's leading market share of 40% in its domestic market helps to underpin its financial stability and strong operating performance, contributing positively to its credit ratings.

What are the challenges faced by Triglav recently?

Triglav experienced adverse impacts from natural catastrophe events and government-imposed price caps on health insurance, leading to increased combined ratios and lower return on equity.

What is Triglav's profitability outlook for 2024?

The group is anticipated to maintain profitability consistent with its historical records, highlighting robust non-life profitability supported by life and reinsurance operations.

How does AM Best view Triglav's risk management?

AM Best considers Triglav's enterprise risk management practices to be well-developed, aligning with the company's operational scope and risk profile effectively.

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