ANNUAL Finding a REPORT of the Sava balanced Insurance Group and Sava Re d.d. life, for together 2019 #NeverAlone We are building a customer-centric, modern, digital, community-minded and sustainability-oriented INSURANCE GROUP. We are constantly enhancing the user experience We are working to make it easier for policyholders to open up new to take out and manage insurance and to file claims, which also includes adapting our paths and ensure services to the needs and the flow of wishes of our clients. information. By continuously searching for new technological solutions, By renewing, updating and we are adapting to the implementing new technological solutions, we are developing a contemporary adaptive environment to ensure user ecosystem. that our flow always finds a way. We continue to create new tributaries We intend to continue with acquisitions in that can the fields and on the markets where we are already active, and at the same time search for take us even growth opportunities in the insurance industry further. beyond our borders. CAGR: Operating revenue of the Sava Insurance Group 11.6% Return on revenue of the Sava Insurance Group 600 10% 9% 500 8% 400 7% 6% 300 5% 4% 200 3% 100 2% 1% 0 0% € million 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 CAGR: Profit, net of tax, of the Sava Insurance Group 36.9% Return on equity of the Sava Insurance Group 50 16% 14% 40 12% 30 10% 8% 20 6% 4% 10 2% 0 0% € million 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 S&P A (stable) BBB (stable) 2019 Shares 2005 29.7% 37.2% 37.7% 39.9% 34.2% 32.4% 3.50 3.00 3.22 2.50 2.76 2.00 2.02 2.08 2.00 1.50 1.82 1.00 0.95 1.05 0.80 0.80 0.80 0.50 0.55 AM Best 0 € 2014 2015 2016 2017 2018 2019 A (stable) Dividend per share paid Consolidated net earnings Dividend as % of (distribution in next year) per share consolidated profit A- (stable) 2019 2012 Declaration of the management board To the best of our knowledge and in accordance with the International Financial Reporting Standards, the consolidated and separate financial statements give a true and fair view of the financial position and profit or loss of the Sava Insurance Group and Sava Re d.d. The business report gives a fair view of the development and performance of the Group and the Company, and their financial position, including a description of the principal risks to which the consolidated companies are exposed. Jošt Dolničar Marko Jazbec Polona Pirš Srečko Čebron Ljubljana, 20 March 2020 Member of the Chairman of the Zupančič Member of the Management Board Management Board Member of the Management Board Management Board ANNUAL REPORT 2019 9 Polona Pirš Zupančič Marko Jazbec Jošt Dolničar Srečko Čebron Member of the Management Board Chairman of the Management Board Member of the Management Board Member of the Management Board ANNUAL REPORT 2019 10 Key financials EUR, except percentages Sava Insurance Group EUR, except percentages Sava Insurance Group 2019 2018 2019 2018 Total of all operating segments Reinsurance + non-life Operating revenue 584,178,117 531,343,205 Gross premiums written 508,530,894 457,228,348 Year-on-year change 9.9% 9.7% Year-on-year change 11.2% 7.0% Profit or loss before tax 60,744,015 55,260,572 Net incurred loss ratio* 61.7% 57.0% Year-on-year change 9.9% 38.6% Net expense ratio 32.3% 34.2% Profit or loss, net of tax 50,194,588 43,011,849 Net combined ratio* 93.8% 92.9% Year-on-year change 16.7% 38.3% Profit or loss before tax 40,460,026 40,837,674 Comprehensive income 59,589,361 36,448,443 Year-on-year change -0.9% 42.5% Year-on-year change 63.5% 11.2% Life business Return on revenue* 8.6% 8.1% Gross premiums written 87,668,880 86,852,148 Net expense ratio* 31.3% 32.8% Year-on-year change 0.9% -1.3% Net expense ratio 28.9% 27.9% Return on equity 13.8% 13.1% Profit or loss before tax 16,593,299 12,355,948 Earnings or loss per share 3.22 2.76 Year-on-year change 34.4% 13.8% Return on the investment portfolio* 1.9% 1.7% Notes: Total of all operating segments 31 Dec 2019 31 Dec 2018 * Excluding the effect of exchange differences. The return on the investment portfolio does not include the cost of the subordi- Total assets 1,885,953,003 1,706,023,490 nated debt. ** For details on the calculation of ratios and net investment income, see the glossary in Appendix C2. Change on 31 Dec of prior year 10.5% -0.1% Shareholders’ equity 384,776,847 340,175,455 Change on 31 Dec of prior year 13.1% 7.6% Net technical provisions 1,115,945,868 1,103,231,374 Change on 31 Dec of prior year 1.2% -2.1% Book value per share 24.83 21.95 Number of employees (full-time equivalent basis) 2,723.3 2,416.7 Solvency ratio under Solvency II rules - 218.0% ANNUAL REPORT 2019 11 Contents Declaration of the management board 8 5.4 Financial reporting: internal 11.3 Material risks of the Sava 17.5 Standards and interpretations Key financials 10 controls and risk management 46 Insurance Group 105 issued but not yet effective, and 5.5 External audit 46 12 Internal audit activities in new standards and interpretations 169 BUSINESS REPORT OF THE SAVA 5.6 Details pursuant to article 70(6) the Sava Insurance Group 106 17.6 Risk management 173 INSURANCE GROUP AND SAVA RE 12 of the Companies Act ZGD-1 47 13 Sustainable development in the 17.7 Notes to the financial statements 1 Letter from the chairman of the 5.7 Governance of Sava Insurance Sava Insurance Group 107 – statement of financial position 200 management board 13 Group members 48 13.1 Sustainability as part of the 17.8 Notes to the financial statements 2 Profile of Sava Re and the Sava 6 Mission, vision, strategic focus strategy 108 – income statement 239 Insurance Group 16 and goals 49 13.3 Economic aspect 112 17.9 Contingent receivables 2.1 Sava Re company profile 16 6.1 Mission and vision 49 13.4 Social aspect 116 and liabilities 261 2.2 Significant events in 2019 17 6.2 Goals achieved in 2019 50 13.5 Responsibility to the community 122 17.10 Related party 2.3 Significant events after the 6.3 Strategic focus of the Sava 13.6 Environmental aspect 127 disclosures 261 reporting date 19 Insurance Group 51 13.7 Key sustainable development 17.11 Correction of prior-period errors 265 2.4 Sava Re rating profile 21 6.4 Plans of the Sava Insurance Group guidelines and objectives 129 18 Significant events after the 2.5 Profile of the Sava Insurance concerning the financial year 2020 52 14 Business processes and IT support 130 reporting date 266 Group 21 7 Business environment 53 2.6 Composition of the Sava Insurance 8 Review of operations of the Sava Group 22 Insurance Group and Sava Re 61 FINANCIAL STATEMENTS OF THE APPENDICES 269 2.7 General information on Group 8.1 Sava Insurance Group 61 SAVA INSURANCE GROUP AND Appendix A – Sava Re performance companies as at 8.2 Sava Re 79 SAVA RE WITH NOTES 131 indicators 270 31 December 2019 24 9 Financial position of the Sava 15 Auditor’s report 132 Appendix B – Financial statements of 2.8 Changes to the organisatioin 28 Insurance Group and Sava Re 84 16 Financial statements 136 the Sava Insurance Group 3 Shareholders and share trading 29 9.1 Sava Insurance Group 84 16.1 Statement of financial position 136 pursuant to requirements of 3.1 Capital market developments and 9.2 Sava Re 88 16.2 Income statement 138 the Insurance Supervision impacts on the POSR share price 29 10 Human resources management 92 16.3 Statement of comprehensive Agency 275 3.2 General information on the share 30 10.1 Strategic guidelines for human income 139 Appendix C – Financial statements 3.3 Responsibility to investors 32 resources management 92 16.4 C ash flow statement 140 of Sava Re pursuant 4 Report of the supervisory board 33 10.2 Key activities in human resources 16.5 Statement of changes in equity to requirements of the 5 Corporate governance statement management 92 for 2019 142 Insurance Supervision pursuant to article 70 of the 10.3 Recruitment and staffing levels 92 16.6 Statement of changes in equity for Agency 284 Companies Act (ZGD-1) 39 10.4 Employee training and 2018 143 Appendix C2 – Glossary of selected terms 5.1 Corporate governance policy 39 development 96 17 Notes to the financial statements 144 and calculation methods 5.2 Statement of compliance with the 10.5 Management and motivation 98 17.1 Basic details 144 for indicators 292 Corporate Governance Code for 11 Risk management 100 17.2 Business combinations and Appendix D – GRI index 295 Listed Companies 39 11.1 Risk management system 100 overview of Group companies 145 5.3 Bodies of Save Re 39 11.2 Capital management 105 17.3 Consolidation principles 149 17.4 Significant accounting policies 149 LETNO POROČILO 2019 12 Business report of the Sava Insurance Group and Sava Re 1 Letter from the chairman of the management board1 1 GRI 102-14 1 GRI 102-14 ANNUAL REPORT 2019 14 Organic growth and sound acquisitions drove Growth in gross insurance premiums written and € Group growth and operating profitability increased loss experience in insurance business In 2019, the Sava Insurance Group increased The Group generated a net profit of EUR in Croatia and in reinsurance its operating revenues by nearly 10%, which 50.2 million in 2019, up 16.7% year-on- Gross premiums written by the Sava Insur- Gross reinsurance premiums written rose was driven both by higher gross premiums year.