Sava Re Group

Sava Re Group
10 August 2011
The reinsurance sector, when compared to the primary insurance sector, has higher appetite for risk, and
requires more capital - hence it has fewer players. The period of 2009-2010 could be described as soft for
reinsurance markets, with declining price premiums and an excess capacity. However, the earthquake in
Japan in the beginning of 2011 seemed to halt the decline in prices. In the first six months of 2011, the
industry incurred ~$70bn in losses from natural disasters (including over $4bn from tornadoes and severe
weather in the US), according to Marsh & McLennan Cos. While it is still unclear whether there will be any
price increases for 2012 (normally dependant on the US hurricane season and the magnitude of typhoons
in the Western Pacific in September-November), the industry is not expected to soften any more.
In 2010, the global non-life reinsurance premium grew by 1.3% from 2009, driven by emerging Asia (up
17.7%), the Middle East (up 7.7%), and Africa (up 4.4%), while the Western Europe’s reinsurance
premium declined by 0.5%. The overall ROE in the global reinsurance sector was ~10% in 2010, down
from ~12% in 2009 as the markets continue to soften.
In Slovenia, there are two reinsurance companies: Sava Re, the #1 with a 54.3% market share, and
Triglav Re with a 45.7% market share. Sava Re’s management made a strategic decision to reduce its
share of business in Slovenia and focus more on the global markets. While the global reinsurance GWP
grew by 16% in 2010, the Slovenian-based reinsurance GWP was down 13%.
Sava Re’s strategy is to grow its global reinsurance premium faster than the Slovenian one. The main
growth engines in 2010 were Malaysia, South Korea, China, Sweden, and Japan. The company performs
extensive market research on geographies where it writes reinsurance to avoid entering softer markets
(which at present include Romania, Bulgaria, India and China). It also partners with other reinsurers that
have expertise in local markets.
Figure 14: Sava Re’s Reinsurance GWP in 2010
Source: Company Reports
The major reinsurance lines in 2010 were fire and CAT, property damage, MTPL, and Casco, which
contributed 36%, 18%, 16% and 15% to Sava Re’s reinsurance GWP respectively. While the company
writes all kinds of reinsurance products, proportionate reinsurance (quota-share) represented 83.7% of
the total premium in 2010, while non-proportionate lines (CAT excess of loss and Risk excess of loss)
added 14.1%, and the facultative insurance added 2.2%. The share of excess loss reinsurance was up
from 2009 due to gradual and anticipated decline in the usage of the proportionate reinsurance in
Slovenia.
Goods in transit
2%
General liability
3%
While the gross claim ratio (before retrocessions) was 55% in 2010, lower than 69% in 2009, there were
significant variances between different lines. As follows from the chart below, Motor Casco was the most
unprofitable line with a claim ratio of 77% (improved from 99% in 2009), followed by MTPL with a claim
ratio of 63% (deteriorated from 58% in 2009). The loss ratios for fire and CAT, and other property
businesses were much improved in 2010.
Other non-life
3%
MTPL
16%
Other property
damage
18%
Life total
0%
Motor casco
15%
Fire and natural
forces
36%
Accident
7%
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