Slovenia Insurance Report Q2 2010

This report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much more comprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing the data (in practice, almost always the national insurance regulator or the national insurance trade association). In Slovenia, for instance, the three largest non-life companies in the first half of 2009 – in terms of gross written premiums – were Triglav, Vzajemna and Adriatic Slovenica, whose market shares were 39%, 16% and 15.5% respectively. In the life segment, the leaders in the first half of 2009 were Triglav, KAD and Maribor, whose market shares were 34.7%, 22.6% and 11% respectively. Over time, we hope to derive insights from observing how market shares change. We emphasise though, that a decline in share of gross written premiums is not automatically a bad thing and is often the result of a deliberate corporate decision to focus on more profitable business lines.

In this report, we also provide a breakdown of the insurance sector by line from the point of view of the regulator or the trade association. In Slovenia, for instance, the largest non-life lines in 2008 were health, compulsory motor third party liability (CMTPL) and land vehicles voluntary insurance (CASCO). These accounted for 26%, 23% and 16.7%, respectively, of total non-life premiums. Over time, we should be able to use this information to bring greater sophistication to our forecasting process.

Writing in January 2010 we have been able to ensure that the report includes actual data for 2008. We have generally been able to use data that has been published over the course of 2009 to adjust our forecasts for the year as a whole. We have also extended the forecasts out to 2014. We estimate total premiums in 2009 of EUR2,214mn. This includes non-life premiums of EUR1,543mn and life premiums of EUR671mn. In 2014, the corresponding figures are forecast to be EUR2,981mn, EUR2,088mn and EUR894mn. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to rise from 4.30% in 2009 to 4.60% in 2014, and for life density to rise from US$430 to US$532. Our proprietary Insurance Business Environment Rating for Slovenia is 59.4 out of 100.

This quarter, we include a discussion of developments within regional markets on the basis of results published by major cross-border companies in relation to Q209 or Q309 and the latest information provided by regulators and/or trade associations. Non-life segment gross written premiums are expected to slip slightly from EUR542.1mn in 2008 to EUR529.5mn in 2009. Trends in life insurance varied markedly from country to country across the region. Official figures showed small falls in Slovenia.

Slovenia’s Insurance Sector In Q210 Slovenia’s insurance sector was one of the strongest and most stable in Central and Eastern Europe during 2009. Figures published by the SZZ, the insurance trade association, indicated that, in the first nine months of last year, non-life premiums rose by 5% to EUR1,124mn, while life premiums fell by 4% to EUR467mn. It is therefore fair to say that the non-life segment is among the fastest growing in the region and that the life segment has escaped the trauma suffered by its peers elsewhere. Only Turkey – where the life insurance segment is developing rapidly as a result of lower overall levels of financial risk – and Croatia and the Czech Republic – where life premiums increased by 3-4% during the first half of last year – outperformed Slovenia in terms of growth in the sector.

Slovenia’s well-developed life segment is unusual in a regional context in that it is dominated by unitlinked products, which accounted for EUR279mn out of the EUR467mn in life premiums written in the first nine months of last year. Impressively, given the volatility in financial markets during 2008, unitlinked premiums remained virtually unchanged.

Among the various non-life lines, CMTPL stood out for the fall in gross premiums – from EUR277mn in the first three quarters of 2008 to EUR256mn in the first nine months of 2009. In most other non-life lines, premiums increased – in some instances by a significant margin. Health insurance premiums, for instance grew from EUR290mn to EUR311mn. CASCO rose from EUR170mn to EUR189mn.

The SZZ’s figures for the 11 months to the end of November 2009 indicate that there have been only minor changes to market shares. In the non-life segment, the share of former state-owned monopoly Triglav has fallen slightly to 37%, while that of Maribor has slipped to just over 14%. The shares of Adriatic Slovenica and Vzajemna have risen slightly to about 17%. Triglav and Maribor appear to have lost ground slightly in the life sector too (where they have 34% and 11% of gross premiums respectively).