2014-02-05 18:32:04 -
A.M. Best Europe – Rating Services Limited has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Pozavarovalnica Sava d.d. (Sava Re) (Slovenia). The outlook assigned to both ratings is stable.
In December 2013, the ratings of Sava Re were placed under review with negative implications following the group’s announcement of a EUR 27.6 million write-down of its subordinated bonds issued by domestic banks.
These investment losses were in addition to the EUR 5.4 million experienced as at the third quarter of 2013, due to the liquidation of two domestic banks. The additional write-downs in investments followed an external audit of the domestic financial sector undertaken by
the Slovenian government, which suggested that subordinated financial investment in Slovenian banks would be permanently impaired in return for the full bail-out of the banking system.
With the above-referenced investment losses, coupled with the integration of Zavarovalnica Maribor d.d. into Sava Re during 2013, A.M. Best became concerned with the combined impact of these events on Sava Re’s consolidated risk-adjusted capitalisation.
A.M. Best has reviewed Sava Re’s preliminary financial results for the full year 2013, and expects consolidated risk-adjusted capitalisation to be maintained at an appropriate level. Factors supporting Sava Re’s capital adequacy, as measured by A.M. Best’s capital model, include lower capital requirements (compared to original expectations) to support the group’s underwriting and investment risk exposure relative to its diminished capital position.
Although there remains uncertainty with regard to the stability of the Slovenian banking sector, A.M. Best considers there to be a sufficient margin within Sava Re’s consolidated risk-adjusted capitalisation to cushion against further impairments.
There are currently no upwards ratings pressure. Negative rating actions may occur if there is a decline in Sava Re’s risk-adjusted capitalisation to a level beyond A.M. Best’s expectations. Additionally, any further deterioration in the economic fundamentals of Slovenia could put negative pressure on the ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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