Protector Forsikring

Quarterly Report • Feb 9, 2017

Preliminary year-end results 2016

Investor presentation

Facts about Protector

• Protector was established in 2004
• Listed on Oslo Stock Exchange May 2007
• Entered Swedish market in 2011, Denmark in 2012, Finland & UK in 2016
• Ownership: Robur, Stenshagen, ODIN, Ojada AS, CEO, Handelsbanken
• Average combined ratio 2005 2016: 88.3%
• GWP 2016: NOK 3.4bn.
• Investment portfolio ~ NOK 8.0bn.

2 086

1 587

Commercial Lines of Business (GWP MNOK)

Quarterly volume and share price end of quarter¹ 84 74 84 94 2010201120122013201420152016

Public Lines of Business (GWP MNOK)

610

829 730

Change of Ownership Insurance (GWP MNOK)

^{451 426 400}

^{526 509}

524

Long-term financial objectives:

GWP growth rate 2017-19	15%
Net combined ratio	92%
Solvency II capital ratio	125% - 160%
Return on equity*	>20%

* Shareholder's Equity includes security provisions reflecting changes in accounting principles from January 1st 2016

Our DNA

Vision The Challenger

Business Idea This will happen through unique relationships, best in class decision-making and cost effective solutions

Main targets Cost and quality leadership Profitable growth Top 3

Values Credible Open Bold Committed

Highlights 2016 results 21% growth, 21% ROE

• Operating profit of NOK 541m (NOK 536m)

• GWP growth +21% (17% local currency)
• GWP growth Q4 +20.6% (18.4% local currency)
• Net Combined ratio 97.0% (88.7%)
• Q4 109.4% (96.6%)
• Gross expense ratio 6.8% (7.5%)
• Q4 6.9% (9.6%)
• Very strong investment result
• Return NOK 499m, 7.0%
• ROE of 21.1%
• Dividend of NOK 2.25 per share suggested

Guiding 2017: CR 92%, growth 16% (18% local), cost ratio <7.0%

Operational summary

2016 highlights 2017 guiding

• Commercial and public line of business Norway
• Very profitable and single digit volume growth
• Change of ownership (COI)
• Unprofitable year, Q3-Q4 back on track
• Denmark
• Poor results in Denmark with Net CR 113.2%
• Sweden and Finland
• Very profitable and 57% volume growth
• UK
• Well prepared for a good 2017 with breakthrough in public sector
• Investments
• Strong underlying and actual performance

• Bond portfolio with avg. BBB+ rating at year end

• Commercial and public line of business Norway

• Good profitability and single digit volume growth
• Change of ownership (COI)
• Back on track, back in black 2017
• Single-digit growth
• Denmark
• Change of country manager
• Actions already taken with positive profitability impact in 2017 sized NOK 80-100m
• Sweden and Finland
• Good profitability and strong volume growth
• UK
• Strong growth primarily from public sector, but increasing opportunities in commercial sector
• Investments
• More conservative HY bond allocation
• Bond portfolio with avg. A- rating at end of Jan '17

Gross written premiums 2016

• Nordic growth leader

• GWP total NOK 3 439m, +21%

• Commercial sector Scandinavia +26%
• Norway +6%
• Sweden +57%
• Denmark +52%
• COI GWP level in line with 2015
• UK and Finland volume is minor in 2016*
• Continued geographical diversification
• New sales distributed more evenly between quarters in future
• Expected net growth of 16% in 2017
• NOK 100 million (5%) in Q1
• NOK 200 million (28%) in Q2
• NOK 150 million (36%) in Q3
• NOK 100 million (25%) in Q4

Protector Forsikring

• A history of profitable growth

• GWP has grown 3.7 times in period 2008-2016

• Avg. Return on Equity* in period 2005-2016 = 24.0%

* Return on Solvency Capital until 2016 when reflecting changes in accounting principles from Jan. 1st 2016 where Shareholder's Equity includes security provisions

Reduced product risk

• Short tail from 34% in 2008 to 55% in 2016
• Medium tail significantly reduced from 44% in 2008 to 24% in 2016
• Property and Auto from 26% of GWP in 2008 to 40% in 2016

Combined ratio 2016

- Poor claims year, underwriting reality not a problem

• Gross claims ratio 92.5%, up from 81.8% in 2015
• Net run-off losses of 6.2%
• Run-off gains in commercial/public sector NO/SE
• Run-off losses in Workers Compensation DK
• Run-off losses in change of ownership
• Net claims ratio 95.2%, up from 85.5%
• Higher claims ratio than peers
• Q4 gross claims ratio 96.3% (88.3%)
• Q4 net claims ratio 101.3% (88.9%)
• Further run-off losses in DK and some reserve strengthening also in 2016 underwriting year
• Net cost ratio 2013 2016
• 2013 = 4.1%
• 2014 = 3.4%
• 2015 = 3.2%
• 2016 = 1.8%

Cost ratio 2016 - Cost leader in the Nordic insurance market

• Gross expense ratio 6.8%, down from 7.5%
• 6.9% in Q4 16, down from 9.6% Q4 15
• Underlying expense ratio slightly higher than 6.8%
• Net expense ratio 1.8%, down from 3.2%
• Cost on a normal, low level
• Higher cost due to UK and significant employee development investments in claims handling
• Relatively low incentive programme accrual due to slight share price fall in 2016

Cost level expected to be similar in 2017 as in 2016

Denmark results 2016

• Perfect storm as expected in Q4, but we will ComeBack '17

• Net combined ratio 113.2%

• Very poor WC result in 2016
• Q4 delivered very poor profitability (as expected)
  • Influenced by reserve strengthening in WC
  • Good claims result for other products
• Gross claims ratio 101.5%
• +52% GWP growth in 2016 (+39% in DKK)
• Renewal rate 94%
  • Strong Q4 renewal rate of 101%
• Small Q4 and negative volume growth, especially within Commercial/Affinity
• Quality setback among some brokers, still Top 3 on quality

Denmark operations

• Executing ComeBack '17

• Change of Country Manager

• Erik Sand appointed new country manager and will operate from Copenhagen office
• Flemming Conrad will continue in new role at least until end of 2017
• Recruitment of new country manager will start at once, will probably take 9 months
• Some other organizational changes done and fully implemented
• Profitability actions taken through 2016 will lead to profitability improvements sized approx.
• NOK 80-100m with effect from Jan. 1st 2017
• Price increases in affinity and commercial sector
• Customers and some affinity groups priced out
• Some other actions taken
• Reduced risk appetite in some segments leads to single-digit growth in 2017
• Strong sales season Jan. 1st in public sector, very close to nr. 1 position also in Denmark
• 95% of public business is short-tail only
• Task Force implemented in order to increase quality and business control
• Our Danish team is ready for a ComeBack

Finland and UK will be reported under Norway until further notice, as at December 31st 2016 not material * TNS Gallup Survey

Norwegian public and commercial line - Highlights 2016

• Volume +4.1%
• No wins top 10 tenders
• Renewal rate 88%
• Significant rate pressure on personal lines of business
• Rate increase started for 2017
• High level of large property claims
• Increased activity and volume in facilities
• Large potential in improving value chains
• Quality leader (9th year in a row* )

13

Change of ownership insurance (COI) - Highlights 2016

• Volume in 2016 in line with 2015
• Real-estate prices high (+8.3%)
• Lower turnover (-6.0%)
• Court results improved
• 45% 20% 35% (Win, Draw, Loss)
• Sales & services delivered to real estate brokers and clients still on a very good level
• Claim reduction on a very good level
• Recovery level behind schedule, good in Q4
• Strong Broker KPI results in line with earlier years*
• New technical report & IT solution based on NS3600 released in Q4
• Price increases expected to be higher than claims inflation in 2017

Change of ownership insurance (COI)

• Best ever Claims Handling in Q4 2016

• "Clean desk" project speeding up claims handling, all new claims handled within 48hours

• Number of Open Claims on a very good level (historical low)
• Broker KPI survey 2016: Claims handling quality score historical high
• "Best ever" Claims Handling Q4 2016
• … but aiming higher "Next level" 2017

Sweden

- Highlights 2016

• Volume +57% (+47% in SEK)
• High hit-ratio in Q4, 39% on number
• Claims ratio net of 75.5% (75.7%)
• All segments and products are very good
• Low level of property claims
• Q4 net claims ratio of 94.5% (69.6%)
  • affected by one large claim
  • change of accounting principles related to one product leads to some Q4 changes. zero effect on long term profitability
• Cultural lead in Protector

• Strong start on new volume 2017

Claims service Sweden

• Solid foundation to reach Next Level

• Increased efficiency for all lines of business

• 38% of claims reported online
• Further digitalisation of value chains started
• All-time high on recourses and claims cost reductions

• In-house specialist competence in all lines of business

• Setting new quality standard for Sweden

• Quality leader (4th year in a row* )
• Best ever broker satisfaction survey score relative to competitors
• 25pts better than average and 12pts to closest competitor

High scores on internal quality measures

Finland - Open for business in all segments

• Low tender volume but good hit-ratio, 29%
• Few municipalities on public tender
• In-house claims service for Motor and WC
• 95% first response within 24h in Q4
• Claims online registration operational
• 24% of claims reported online in Q4
• Next step is further growth for critical mass

Operational update

Entering UK

UK – Public Sector Breakthrough

- Good start to 2017

• People and processes very good progression
• Good people on board in Manchester
  • Utilizing local product expertise and Scandinavian UW expertise

• Extensive database built bigger than Scandinavia

• Careful entry in 2016

• Poor hit-ratios, 11 clients won
• Learning quickly
• Very good start to 2017
• Very good initial hit-ratios, 14 clients won

UW process at level with Scandinavia

UK – Building relationships in Commercial sector

• First panel arrangement signed, opportunities increasing

• Manchester team building existing and new relationships

• Joining forces with Scandinavian resources
• Selected broker approach (5x20)
• Good market activity
• Approaching central and local management as well as brokers
• UW methodology aligned with Scandinavian practice
• Good progression in project
• Small databases from start, will increase quickly
• Pipeline of clients building up
• Waiting for increased activity
• Behind schedule on quotes and clients, but…
• Ahead of Sweden and Denmark at same time

4 clients on board

UK opportunity – Housing Associations

• £300m market with small existing margins and little competition

Cost leadership

Competitors: ~ 25 % (incl claims) Broker & PRF: < 20 % over time

• One direct insurer
• Other insurer(s) with «Agent» and broker in value chain

Fat competitive landscape, homogenous client base leads to efficiency over time

Profitable Growth

Market: ~ £300m, ~80 % loss ratio Broker & PRF: Risk selection and rate increase

• Small existing margins
• Risk selection on flood exposure and fire possible

Profitability measures possible, significant growth potential

Quality leadership

Market: Good claims handling, poor service Broker & PRF: Preferred partner for HA's from start?

• Claims handling specialized from all providers
• Large part of value chain delivered by «agent» & broker

Indications of lazy competitive landscape (excl claims handling)

Top 3

Market: 3 main competitors, one «monopolist» Broker & PRF: Top 3 within 18 months

• «Oligopoly» similar to Public sector
• Critical mass quickly obtained

A joint housing expert challenging #1 and #2

• Relationship established with professional partner
• Large dataset collected, good understanding established
• Potentially 10 % market share by 2019

UK – Insuring parts of London

• An example of traction in Public Sector UK

• Insurance London Consortium (ILC) 9 London Boroughs

• Camden, Croydon, Haringey, Harrow, Islington, Kingston upon Thames, Lambeth, Sutton and Tower Hamlets
• ~ 2,5 million inhabitants
• 3 year contract incepting 1st April 2017
• Property and liability (EL & PL)
• We expect more Boroughs to arrive
• Very good reference supporting credibility in UK market
• Insuring more than 1/3 of Greater London By 1st April 2017

Volume estimates UK

Volume full year 2016 Estimate 2017 Preliminary estimate 2018

Volume 25 MNOK 150 - 200 MNOK 400 – 500 MNOK

Profit & loss 2016 - Best "profit ever", but poor technical result

[1.000.000 NOK]		Q4 2016	Q4 2015	FY 2016	FY 2015
Gross premiums written		392,3	325,3	3 439,0	2 843,4	GWP growth 21% in 2016, 21% in Q4 2016
Gross premiums earned		768,6	698,7	3 250,4	2 791,1
Gross claims incurred		(740,3)	(617,0)	(3 005,0)	(2 283,6)
Earned premiums, net of reinsurance		624,7	535,1	2 669,0	2 176,0
Claims incurred, net of reinsurance		(632,6)	(475,7)	(2 540,4)	(1 861,0)
Net commission income		(9,7)	15,6	118,5	112,9
Operating expenses		(41,1)	(56,9)	(167,0)	(182,0)
Other income/costs		(20,8)	(4,4)	(38,3)	(13,5)
Net financial income		149,9	152,8	499,3	303,8	Strong investment result of 7.0% in 2016
Profit before tax		70,5	166,5	541,1	536,1	Best full-year operating profit ever
Tax		(1,4)	(16,4)	(88,4)	(71,9)
Profit before components of comprehensive income		69,1	150,1	452,7	464,2
Claims ratio, net of ceded business	(1)	101,3 %	88,9 %	95,2 %	85,5 %
Expense ratio, net of ceded business	(2)	8,1 %	7,7 %	1,8 %	3,2 %
Combined ratio, net of ceded business	(3)	109,4 %	96,6 %	97,0 %	88,7 %	Very poor
Gross claims ratio	(4)	96,3 %	88,3 %	92,5 %	81,8 %
Gross expense ratio	(5)	6,9 %	9,6 %	6,8 %	7,5 %	Satisfactory development
Gross combined ratio	(6)	103,3 %	97,9 %	99,2 %	89,4 %	Some reinsurance contributions in 2016
Retention rate	(7)	81,3 %	76,6 %	82,1 %	78,0 %
Earnings per share	(8)	0,80	1,74	5,25	5,48

(1) Claims incurred, net of reinsurance in % of earned premiums, net of reinsurance

(2) Operating expenses in % of earned premiums, net of reinsurance

(3) Net claims ratio + net expense ratio

(4) Gross claims incurred in % of gross premiums earned

(5) Sales and administration costs in % of gross premiums earned

(6) Gross claims ratio + gross expense ratio

(7) Earned premiums, net of reinsurance in % of gross earned premiums

(8) Profit before other comprehensive income divided by weighted number of shares

Investments

- Asset allocation

Priority 1 is to never allow any risk for solvency issues or fire sale

Bond portfolio allocation

• Reduced risk in Fixed Income portfolio

• Reduced High-Yield exposure in 2016 and beginning of 2017

• Sale of Nordea Global HY
• Average total bond portfolio rating from BBB at Q2 2016 to A- in Q1 2017
• Bond portfolio yield expectation of roughly 3.0% in 2017

Portfolio statistics

- In-house managed equity portfolio vs. OSEBX year-end 2016

Key Figures	In-house Managed Portfolio	OSEBX
Performance	116 %	25 %
Dividend yield	1.8 %	3.6%
P/E NTM*	17.5	16.7
3 yr sales CAGR	24 %	-2 %
3 yr EPS CAGR	30 %	-19 %

*Factset estimates except for one company not listed where own estimates are used

• Extreme outperformance in period
• Cannot, and will not expect similar outperformance in the future
• Comfortable with periods of underperformance as long as underlying performance is good
• Goal to beat market over time

Investment performance evaluated over the long term

Portfolio statistics

- In-house managed portfolio vs. benchmark year-end 2016*

Portfolio data 31.12.2016
Size MNOK	4 781
Yield	3.2
Duration	0.4
Credit duration	2.8
Average rating	BBB+

• Significant outperformance in the period
• Cannot, and will not expect similar outperformance in the future
• Goal to beat benchmark over time

Performance – In house managed portfolio vs. benchmark* (31.03.2015 – 31.12.2016)

Investment performance evaluated over the long term

*Benchmark bond portfolio made up by basket of cross-over funds: Storebrand Rente +, Arctic Return Class I, Carnegie Corp. Bond, Handelsbanken Høyrente, Holberg Kreditt, Pareto Høyrente, Alfred Berg Income, Eika Kreditt, Landkreditt Høyrente, Skagen Høyrente

Investment performance 2016

• Very strong investment result

• 7.0% return on investment portfolio, net investment result of 499 MNOK

• 2.0% Q4 result, net investment result of 150 MNOK
• Equities 14.3% (OSEBX 12.1%)
• Q4 return of 4.8% (OSEBX 9.8%)
• Bond portfolio; return of 5.1% (benchmark¹ 3.9%)
• Q4 return of 1.2% (benchmark¹ 1.6%)

Shareholder matters 31.12.2016

Shareholder	No. Shares	Percent
SWEDBANK ROBUR NORDEN AND EUROPA	7 898 936	9.17 %
STENSHAGEN INVEST AS	6 500 000	7.54 %
ODIN NORGE AND NORDEN	5 917 058	6.73 %
OJADA AS	3 563 116	4.14 %
TJONGSFJORD INVEST AS1	2 811 809	3.26 %
VERDIPAPIRFONDET HANDELSBANKEN	2 800 000	3.25 %
ARTEL HOLDING A/S	1 873 451	2.17 %
MP PENSJON PK	1 845 379	2.14 %
FROGNES AS	1 649 916	1.92 %
VEVLEN GÅRD AS	1 550 000	1.80 %
GENERALI PANEUROPE LTD	1 492 250	1.73 %
JOHAN VINJE AS	1 437 841	1.67 %
AVANZA BANK AB	1 333 727	1.55 %
VERDIPAPIRFONDET ALFRED BERG GAMBA	1 324 220	1.54 %
PETROSERVICE AS	1 283 815	1.49 %
NORDNET BANK AB	1 125 872	1.31 %
DYVI INVEST AS	1 030 933	1.20 %
AAT INVEST AS	1 005 000	1.17 %
ALSØY INVEST AS2	1 002 751	1.16 %
NORE-INVEST AS	930 637	1.08 %
20 LARGEST	47 676 711	55.34 %
OTHERS	38 478 894	44.66 %
TOTAL SHARES	86 155 605	100.00 %
1 CEO, Sverre Bjerkeli
2 Chairman of the Board, Jostein Sørvoll

Related parties shareholding

• Management's direct and indirect shareholding totals 3.0m shares or 3.5% of current outstanding shares
• Board members directly and indirectly own a total of 11.4m shares or 13.3% of current outstanding shares
• 30 employees own directly a total of 3.4m shares or 3.9% of current outstanding shares (incl. management)
• Protector owns zero own shares or zero % of current outstanding shares

Long-term financial objectives

Long term financial objectives

2014 86,9% 2012 2016 89,8% 2013 89,5% 2010 86,7% 90,2% 2009 86,5% 79,9% 90,9% 2011 2015 Target <92%

* Return on Solvency Capital until 2016 when reflecting changes in accounting principles from Jan. 1st 2016 where Shareholder's Equity includes security provisions

Balance sheet Q4 2016

• Strong & growing fast

[1.000.000 NOK]	31.12.2016	31.12.2015
Owner-occupied property	13,7	13,6
Financial assets	8 537,6	6 623,1
Financial derivatives*	990,7	252,6
Bank deposits	204,3	144,0
Other assets	1 091,7	924,4
Total assets	9 847,4	7 705,1
Total equity	2 259,4	2 012,7
Subordinated loan capital	645,9	148,1
Total reserves	5 148,0	4 306,5
Other liabilities*	1 794,2	1 237,7
Total equity and liabilities	9 847,4	7 705,1

Strong capital position:

• SCR coverage ratio stable at 154 % pr. 31.12
• Planed further strengthening of solvency through issuance of subordinated debt
• SCR fully covered by Tier 1 capital only
• Dividend of NOK 2.25 per share suggested

Solvency II

Composition of SCR:

• Net insurance risk 57 %
• Net market risk 36 %
• Other risks 7 %

Available SII capital:

• Assumed suggested dividend for 2016
• Guarantee provision subtracted from own funds

CEO summary of risk outlook 2016

	Risk	Result
+ Sweden/Denmark deliver better than guided volume	Medium	✓
+ Upside volume UK relative to guiding	Low	✓
+ Balance sheet growing leads to increased financial income	No	✓
+ Cost ratio Gross & Net going down	No	✓
- Rate pressure driving claims ratio above guiding	Low	✓
- Volume downside in Norway relative to guiding	Medium	✓
- Profitability behind guiding in Sweden	Low	✓
- Profitability behind guiding in Denmark	Medium	Worse
- Start up in UK creates profitability problems	Low	✓
- Reserve challenges COI Norway	(New)	Worse

CEO summary of risk outlook 2017

• Slightly reduced risk due to a more diversified portfolio and reserve strengthening in 2016

	Risk
1. Volume (GWP up 16% (18 local)
• Upside and downside in UK	Medium
• Downside in Denmark	Low
2. Cost (gross cost ratio <7.0%)
• Cost outside guiding	No
3. Profitability (Net Combined Ratio 92%)
• Behind guiding in Norway, Sweden and Finland commercial segment (67% of volume)	Low
• Behind guiding for COI (15% of volume)	Low
• Behind guiding in Denmark (15% of volume)	Medium
• Profitability issues in UK (3% of volume)	Medium
4. Investments (No guiding)
• Investment volatility	Of course
Four levels of defense; Competent investment team, Mandate given by board
FSA stress tests, Even stronger internal stress tests

Result 2016 and guiding 2017

Guiding for full year 2016	Result 2016	Guiding 2017
Volume up 22 %	21 %	16 % (18 % local)
Gross expense ratio < 7.5 %	6.8 %	< 7.0 %
Net Combined ratio 90 %	97 %	92 %

No guiding will be given on investment income

ROE 2016 is 21.1 % > LT ROE target of 20.0%

Profitable growth expected also in 2017

Combined ratio guiding 2017 – 92%

• 2016 underwriting year with combined ratio 91%

Summary 2016 21% growth, 21% ROE

• Operating profit of NOK 541m (NOK 536m)
• GWP growth +21% (17% local currency)
• Net Combined ratio 97.0% (88.7%), underlying reality is 91% (UW year 2016)
• Gross expense ratio 6.8% (7.5%)
• Very strong investment result of NOK 499m, 7.0%
• ROE of 21.1%
• Dividend of NOK 2.25 per share suggested
• Our Nordic home market will perform very well in 2017
• UK breakthrough expected
• Profitable growth story continues

Guiding 2017: CR 92%, growth 16% (18% local), cost ratio <7.0%

Preliminary year-end result 2016

Q&A

Key ratio description

Ratio

• (1) Claims ratio, net of ceded business
• (2) Expense ratio, net of ceded business
• (3) Combined ratio, net of ceded business
• (4) Gross claims ratio
• (5) Gross expense ratio
• (6) Gross combined ratio
• (7) Retention rate
• (8) Earnings per share
• (9) Return on Equity (ROE)
• (10) Return on Solvency Capital

Ratio calculation

• (1) Claims incurred, net of reinsurance in % of earned premiums, net of reinsurance
• (2) Operating expenses in % of earned premiums, net of reinsurance
• (3) Net claims ratio + net expense ratio
• (4) Gross claims incurred in % of gross premiums earned
• (5) Sales and administration costs in % of gross premiums earned
• (6) Gross claims ratio + gross expense ratio
• (7) Earned premiums, net of reinsurance in % of gross earned premiums
• (8) Profit before other comprehensive income divided by weighted number of shares
• (9) Profit before other comprehensive income divided by average shareholder's equity
• (10) Profit before changes in security provisions less tax divided by sum of average shareholder's equity and security reserves