Zavarovalnica Triglav dd : Rating Upgraded to “A”, Premium Growth and Profit Above the Budgeted Level

Profit of the Triglav Group above the budgeted level.

According to unaudited data, profit before tax of the Triglav Group stood at EUR 95 million (planned at between EUR 80 million and EUR 90 million), while net profit was EUR 82 million. The parent company ended 2016 with a profit before tax of EUR 83 million and generated a net profit of EUR 75 million. Return on equity of the Group reached 11.4%, whilst that of the parent company was 13.8%. The performance of the Triglav Group in 2016 was in line with its strategic guidelines, which are based on profitability, safety and maintaining financial stability. The business results of the Group above the budgeted level were mainly the result of a very successful performance in the insurance business, whilst the unfavourable situation in financial markets and the consequent fall in returns on financial investment had a negative impact on return on investment.

Sound performance of the Group's insurance business.

In 2016, the Group operated in a slightly more favourable macroeconomic environment both in Slovenia and the wider region, which, however, will affect the insurance business even more in the coming years. As expected, the challenging and highly competitive conditions on insurance markets continued. According to unaudited data, the Triglav Group recorded a total of EUR 936 million in consolidated gross insurance and co-insurance premium (planned at approximately EUR 900 million) in the reporting period. Premium growth was observed for the second year in a row. In 2015, premium growth was 3%, whereas in 2016 it stood at 2%, or 3% if the sale of the Czech insurer in 2015 is taken into account. The results show sound performance of the planned activities, especially of consistent client-oriented sales activities of all insurance subsidiaries of the Group, the high standard of all services, increased efficiency, the development of both internal and external sales networks, and the active marketing strategy.

In terms of premium segments, non-life insurance premium, which accounted for 65% of consolidated written premium, was up by 2%, or 4% considering the sale of the Czech insurer. Despite the high sums paid out on the maturity of insurance policies, life insurance premium remained at the 2015 level, whilst health insurance premium was up 5%.

Premium growth recorded in all insurance markets of the Group.

The Group charged 2% more written premium in the Slovene insurance market, which was above the 1.5% market growth. All three insurers of the Triglav Group, i.e. the parent company, Triglav, Zdravstvena zavarovalnica and Skupna pokojninska družba, active on the Slovene market experienced premium growth of 1%, 6% and 3% respectively. Compared to the preceding year, the average premium growth of the Triglav Group on markets outside Slovenia was 2% or 9% if the sale of the Czech subsidiary is taken into account. The highest premium growth was recorded in Serbia (22%), Croatia (8%) in Macedonia and Montenegro (2%) and in Bosnia and Herzegovina (8%). In accordance with the strategic guideline, the share of gross insurance and co-insurance written premium in the markets outside Slovenia slightly increased to 17.3%.

Claims and expenses.

A higher extent of mass loss events (flood, hail, storm) was planned compared to the multi-annual average, excluding 2015, which was exceptionally favourable as the result of their non-occurrence. In the reporting year, mass loss events of the Group totalled EUR 19 million, the largest being the summer storms with hail and the April frost and local flooding in Slovenia. According to unaudited data, gross claims paid by the Group equalled EUR 606 million or 2% more than the year before, whilst those by the parent company amounted to EUR 391 million, which was the same as in 2015. Gross operating expenses incurred by the Triglav Group and the parent company in the insurance activity were 2% higher over 2015, primarily due to higher acquisition costs.

Combined ratio better than planned.

Solid performance in the core business of non-life and health insurance is reflected in the 92.9% (planned at round 95%) combined ratio of the Triglav Group and the 87.9% combined ratio of the parent company.

According to unaudited data, return on financial investments of the Group (excluding return on unit-linked life insurance) decreased by 27% compared to 2015, primarily as the result of lower net gains on the sale of financial assets, whilst the positive effect originated from revaluation of financial assets. The Triglav Group's investment policy in 2016 was based on ensuring adequate levels of investment security and liquidity, followed by the criterion of profitability. According to the situation, the Group adapted the individual shares of investment grades so as to maintain a somewhat conservative investment structure, primarily consisting of prime government bonds.

Credit rating upgraded, planned financial stability achieved.

The Triglav Group maintained its strong financial stability, high capital adequacy and high profitability, as confirmed by the two rating agencies S&P Global Ratings in A.M. Best, which upgraded the Group's rating from 'A-' to 'A' in 2016. Both ratings have a stable medium-term outlook. The high level of financial stability is also reflected in a 6% increase of total equity capital amounting to EUR 744 million and 2% higher gross insurance technical provisions of the Group totalling EUR 2,661 million. Both categories are the guarantee and the basis for balanced operations and ensure the long-term safety of insured parties.

The leading position in Slovenia and the Adria region.

With its three insurance companies, the Triglav Group maintained its leading position on the Slovene insurance market, having increased its market share by 0.2 percentage point to 36.2%. The Group held a 44% share of the Slovene non-life insurance market, a 35% share of the life insurance market and a 23.5% share of the health insurance market.

The Triglav Group strengthened its market position in both Serbia and Croatia, whereas in Bosnia and Herzegovina, Macedonia and Montenegro its market share fell by less than 1%; in the latter two countries, the Group nevertheless continues to hold the leading market position.

Andrej Slapar,President of the Management Board of Zavarovalnica Triglav, said: 'We are pleased with the performance in 2016 as we have improved the ratings and and achieved the business results even above the planned level.The impact of negative factors, particularly lower returns on financial investments, was slightly lower than expected. At the same time, we have managed to achieve a relatively high premium growth.We have strengthened our market share on our major markets and increased the share of insurance premium in the markets outside of Slovenia, which is consistent with our strategic guidelines of growth and development of the Group.In 2017, the Group's operations will continue to be financially sound and profitable.This year marks the beginning of the new four-year strategy period of the Triglav Group, and the projects aimed towards the achievement of the set strategic objectives are already well underway.'

Financial highlights of the Triglav Group

*Unaudited data

Financial highlights of Zavarovalnica Triglav

*Unaudited data