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Protector Forsikring

Quarterly Report Feb 12, 2015

3719_rns_2015-02-12_1d6d3b3c-1787-47a9-bb1c-cd2cc8e74dfd.pdf

Quarterly Report

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Interim report Q4 2014

(Unaudited)

Highlights 2014 and Q4

Best year ever – Sweden and Denmark in profit

2014 shows following development compared to 2013:

  • Gross premiums written NOK 2.374,5m, up 28% from NOK 1.860,6m
  • Net combined ratio improved to 84,5% (86,7%)
  • o Norway: Improved to 80,6% (81,2%)
  • o Sweden: Improved to 98,5% (120,7%)
  • o Denmark: Improved to 96,2% (123,4%)
  • Operating profit NOK 502,0m, up from NOK 430,3m
  • Return on investments NOK 236,8m (5,3%), down from NOK 256,7m (7,0%)
  • Gross expense ratio improved to 7,6% (8,8%)
  • o Norway: Improved to 5,3% (7,3%)
  • o Sweden: Improved to 16,5% (19,0%)
  • o Denmark: Improved to 14,3% (15,0%)

Q4 2014 shows following development compared to Q4 2013:

  • Gross premiums written NOK 281,8m, up 19% from NOK 237,7m
  • Net combined ratio 82,7% down from 93,0%
  • Operating profit NOK 89,8m, down from NOK 106,6m
  • Return on investments NOK 13,6m (0,3%), down from NOK 83,9m (2,2%)

Based on the company's dividend policy, strong results for the full year 2014 and strong financial position, the Board considers recommending a dividend of NOK 2,00 per share for 2014.

Financial highlights and key ratios

[1.000.000 NOK] Q4 2014 Q4 2013 FY 2014 FY 2013
Gross premiums w
ritten
281,8 237,7 2 374,5 1 860,6
Gross premiums earned 593,7 468,4 2 306,8 1 814,6
Gross claims incurred (451,6) (362,4) (1 854,5) (1 450,6)
Earned premiums, net of reinsurance 453,4 352,5 1 775,3 1 373,6
Claims incurred, net of reinsurance (337,7) (291,9) (1 439,5) (1 133,5)
Net commission income 4,5 9,6 98,4 94,3
Operating expenses (42,0) (45,6) (158,7) (151,3)
Other income/costs (2,0) (1,8) (10,2) (9,5)
Net financial income 13,6 83,9 236,8 256,7
Operating profit before security provision etc 89,8 106,6 502,0 430,3
Claims ratio, net of ceded business (1) 74,5 % 82,8 % 81,1 % 82,5 %
Expense ratio, net of ceded business (2) 8,3 % 10,2 % 3,4 % 4,1 %
Combined ratio, net of ceded business (3) 82,7 % 93,0 % 84,5 % 86,7 %
Gross claims ratio (4) 76,1 % 77,4 % 80,4 % 79,9 %
Gross expense ratio (5) 8,2 % 10,0 % 7,6 % 8,8 %
Gross combined ratio (6) 84,3 % 87,4 % 88,0 % 88,7 %
Retention rate (7) 76,4 % 75,3 % 77,0 % 75,7 %
Solvency capital (8) 1 575,9 1 335,3
Capital adequacy ratio (risk w
eighted)
(9) 18 % 20 %
Solvency margin (10) 296 % 315 %
Earnings per share (11) 1,24 1,14 4,63 3,47

(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) Equity + security provision etc

(9) Net primary capital (including net profit/loss for the period) in % of risk weighted assets.

(10) Solvency margin calculated according to regulations from the FSA of Norway (including net profit/loss for the period)

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

Protector's operations

Protector Forsikring ASA is a general insurance company (P&C) operating in Scandinavia. Protector started its business in Norway in 2004, and entered the Swedish insurance market in 2011 and the Danish insurance market in 2012. The company has two business areas: commercial and public lines of business, and affinity arrangements for private and commercial clients. Protector is listed on the Oslo Stock Exchange.

Premiums

In 2014 gross premiums written increased by 28% to a total of NOK 2,374,5m. Gross premiums earned increased by NOK 492,2m to a total of NOK 2.306,8m. Premiums earned for own account totalled NOK 1.775,3m, an increase of 29,2 % compared to 2013. The retention rate for 2014 is 77,0%, increasing slightly from 75,7% at year end 2013.

Gross premiums written in Norway increased NOK 210,7m in 2014, a 13 % growth from 2013. Gross premiums written in Sweden increased MNOK 177,9m in 2014, a 121 % growth from 2013. Gross premiums written in Denmark increased MNOK 125,2m in 2014, a 89,0% growth from 2013. The growth is due to high level of new sales in both the commercial and public sector markets. In Norway change of ownership insurance contributed to the growth due to higher real estate prices and increased number of policies contributed sold.

In Q4, gross written premiums totalled NOK 281,8m, representing 19 % growth compared to Q4 2013. Gross premiums earned increased by NOK 125,3m to a total of NOK 593,7m. Premiums earned for own account were NOK 453,4m, an increase of 29 % compared to Q4 2013.

Gross premiums written in Norway during Q4 totalled NOK 211,5m, up 6 % compared to Q4 2013. Both Sweden and Denmark experienced material increases in gross premiums written. Gross written premium in Sweden was NOK 22m, a 47% growth compared to Q4 2013, whilst in Denmark it was NOK 48,3m up 102% from Q4 2013.

Results

In 2014, the operating profit before changes in security provision and tax totalled NOK 502,0m, compared to NOK 430,3m in 2013. Norway with NOK 480,3m (466,0m), Sweden NOK 14,5m (-15,4m) and Denmark NOK 7,2m (-20,3m). The strong result is primarily driven by increased volumes and stable claims ratios. Returns on investment shows a slight decrease, down 19,9m. The technical result before allocated return on investment and changes in security provisions was NOK 330.0m an increase of NOK 99,2m or 43% compared to 2013. Net profit for the year amounted to NOK 358,8m, compared to NOK 292,6m in 2013. The return on the company's average solvency capital was 28%, on par with 28% in 2013.

The company's accumulated security provisions was NOK 584,5m. The minimum requirement was NOK 404,8m, up from NOK 328,4m in 2013. The company has reduced its security provision in excess of the minimum requirement due to reduced uncertainty in Sweden and Denmark.

In Q4 2014, the operating result was NOK 89,8m, down 16,8m compared to NOK 106,6m in Q4 2013. The Q4 result is driven by stronger technical result, but weaker financial results.

In 2014, the net combined ratio was 84,5%, compared to 86,7% in 2013. Net claims ratio in 2014 was 81,1%, compared to 82,5% in 2013. Net run-off gains in 2014 amounted to NOK 91,3m (5,1 percentage points on the net claims ratio), against NOK 61,0m in 2013. Net cost ratios (excluding claims handling costs of 6,5 percentage points) was 3,4%, compared to 4,1% in 2013. The fall in cost ratio is in line with the company's expectations as it achieves critical mass in Sweden and Denmark.

In Q4, the combined net ratio was 82,7%, a 10,3 percentage points reduction from 2013. The net claims ratio for the period was 74,5% (including 7,1 percentage points in claims handling costs) compared to 82,8% (including 6,8 percentage points in claims handling costs) in Q4 2013.

Investment return

The investment portfolio amounted to a total of NOK 5bn at 31 December 2014, up 24 % compared to the portfolio end of 2013.

In full year 2014, the investment result was NOK 236,8m (5,3%) against NOK 256,7m (7,0%) full year 2013. Equities accounted for a NOK 130,8m gain (26,8%) against a NOK 62,8m gain (17,3%) in 2013. Return on the fixed income portfolio totalled NOK 106,0m or 2,6% against NOK 193,9m or 5,9% in 2013. End of Q4, 14,0% of Protector's financial assets were invested in equities.

In Q4, investment activities yielded a total return of NOK 13,6m or 0,3% compared to a return of 83,9m or 2,2% in Q4 2013. Equities accounted for a gain of NOK 73,9m (14,6%) against a NOK 20,0m gain (4,8%) in Q4 2013. The return on the fixed income portfolio was negative NOK 60,3m (-1,6%) in Q4 2014 compared to a return of NOK 63,9m (1,9%) in Q4 2013.

Capital and shareholder issues

The solvency capital, defined as the total equity and total security provision, has in Q4 increased by NOK 60,8m to NOK 1.576m. In 2014, the solvency capital has increased by NOK 240,6m.

End of 2014 the capital adequacy ratio result was 14%, against a minimum requirement of 8%. Including the periods result, the capital adequacy ratio was 18%.

Excess coverage above the required solvency margin capital amounted to NOK 754.9m by the end of 2014, corresponding to 296 % of the legal requirement.

Based on the company's dividend policy, strong results for the full year 2014 and strong financial position, the Board considers recommending a dividend of NOK 2.00 per share for 2014.

Prospects

Protector expects continued strong growth in 2015, despite strong competition in all markets. The expected growth is based on a very good start in 2015 in all three geographic markets and continued good access to profitable business.

The company's underlying profitability is expected to be maintained.

Claims development and substantial changes in capital markets are regarded as the most important risk factors that could affect the company's profit in 2015.

Oslo, 11 February 2015 The Board of Directors of Protector Forsikring ASA

Income statement

[1.000.000 NOK] Q4 2014 Q4 2013 FY 2014 FY 2013
Premium income
Gross w
ritten premiums
281,8 237,7 2.374,5 1.860,6
Ceded insurance premiums (32,2) (36,7) (510,5) (432,1)
Change in provisions for unearned premiums 311,9 230,7 (67,7) (46,0)
Change in reinsurers' share of provisions for unearned premiums (108,1) (79,2) (20,9) (9,0)
Earned premiums, net of reinsurance 453,4 352,5 1.775,3 1.373,6
Allocated return on investment transferred from non-technical account 12,5 13,7 55,3 47,4
Other income 1,2 1,4 3,7 3,4
Claims incurred
Claims paid (353,1) (244,3) (1.243,0) (940,3)
Reinsurers' share of paid claims 99,7 61,7 307,4 215,4
Change in provisions for claims (98,5) (118,2) (611,5) (510,2)
Change in reinsurers' share of claims provisions 14,2 8,8 107,6 101,7
Claims incurred, net of reinsurance (337,7) (291,9) (1.439,5) (1.133,5)
Operating expenses
Sales costs (6,7) (1,5) (17,4) (7,5)
Administration costs (42,0) (45,6) (158,7) (151,3)
Commission from reinsurers 11,2 11,0 115,8 101,9
Total operating expenses, net of reinsurance (37,5) (36,0) (60,3) (56,9)
Other expenses (1,2) (0,9) (4,5) (3,0)
Technical result before changes in security provision etc. 90,7 38,7 330,0 230,8
Changes in security provision etc. 27,0 19,6 (26,3) (54,8)
Technical result 117,7 58,3 303,7 176,0
Net income from financial assets 13,6 83,9 236,8 256,7
Allocated return on investment transferred to technical account (12,5) (13,7) (55,3) (47,4)
Other income 1,0 0,7 2,3 2,2
Other costs (3,0) (3,1) (11,8) (12,1)
Non-technical result (0,9) 67,8 172,0 199,5
Profit before tax 116,8 126,2 475,7 375,5
Tax (14,1) (32,4) (93,0) (88,5)
Profit before components of comprehensive income 102,7 93,8 382,8 287,0
Actuarial gain and loss from defined benefit pension plans- benefits to employees (4,9) (7,1) (11,3) (7,1)
Currency changes from foreign enterprise (15,6) 5,1 (21,7) 15,1
Taxes on components of comprehensive income 5,5 0,5 9,0 (2,3)
Profit for the period 87,8 92,3 358,8 292,6
Earnings per share 1,24 1,14 4,63 3,47
Earnings per share, diluted 1,24 1,14 4,63 3,47

Balance Sheet

[1.000.000 NOK] 31.12.2014 31.12.2013
Assets
Intangible fixed assets
Other intangible fixed assets 13,3 11,2
Total intangible fixed assets 13,3 11,2
Financial assets
Shares 693,9 529,0
Securities, bonds etc 3.754,7 3.422,9
Financial derivatives 60,1 -
Other financial assets 449,3 47,9
Total financial assets 4.957,9 3.999,8
Reinsurers share of gross technical provisions
Reinsurers share of gross premium provisions 91,2 81,4
Reinsurers share of gross claims provisions 438,1 324,5
Total reinsurers share of gross technical provisions 529,3 405,9
Receivables
Policyholders 33,2 39,5
Intermediaries 58,1 44,4
Other receivables 18,0 18,7
Total receivables 109,3 102,6
Other assets
Tangible fixed assets 8,2 8,5
Cash and bank deposits 207,9 153,3
Deferred tax benefit 20,1 -
Total other assets 236,2 161,8
Total prepaid expenses 106,7 62,8
Total assets 5.952,7 4.744,1
[1.000.000 NOK] 31.12.2014 31.12.2013
Equity and liabilities
Shareholders' equity
Share capital [86.155.605 shares] 86,2 86,2
Ow
n shares
(3,6) (3,6)
Other paid-in equity 4,8 4,8
Total paid-in equity 87,4 87,4
Earned equity
Natural perils fund 16,7 15,4
Guarantee scheme 70,5 61,6
Other equity 816,9 612,7
Total earned equity 904,0 689,7
Total equity 991,4 777,2
Subordinated loan capital 148,1 148,1
Technical provisions
Provisions for unearned premiums 352,4 275,5
Provisions for claims 3.176,5 2.535,1
Security provision etc. 584,4 558,1
Total technical provisions 4.113,3 3.368,8
Provisions for other risks and liabilities
Pension liabilities 19,0 8,6
Deferred tax liability - 21,8
Total provisions for other risks and liabilities 19,0 30,4
Liabilities
Liabilities in connection w
ith insurance
15,3 17,3
Liabilities in connection w
ith reinsurance
197,4 182,4
Financial derivatives 63,9 -
Other liabilities 174,9 112,0
Total liabilities 451,5 311,7
Incurred expenses and prepaid income
Other incurred expenses and prepaid income 229,4 107,9
Total incurred expenses and prepaid income 229,4 107,9
Total equity and liabilities 5.952,7 4.744,1

Segment information

Norway Sweden Denmark
[1.000.000 NOK] FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013
Gross premiums w
ritten
1 783,2 1 572,5 325,4 147,4 265,9 140,7
Gross premiums earned 1 770,1 1 549,5 298,9 137,3 237,8 127,9
Gross claims incurred (1 449,4) (1 179,3) (233,8) (129,7) (171,4) (141,5)
Earned premiums, net of reinsurance 1 369,4 1 188,4 229,7 96,6 176,1 88,6
Claims incurred, net of reinsurance (1 104,2) (933,6) (188,7) (99,6) (146,7) (100,3)
Net commission income 91,1 79,1 (3,8) 5,0 11,1 10,2
Operating expenses (91,1) (110,1) (33,7) (22,0) (33,9) (19,2)
Other income/costs (10,0) (9,8) (0,6) 0,1 0,4 0,2
Net financial income 225,0 252,0 11,6 4,5 0,3 0,3
Operating profit before security provision etc 480,3 466,0 14,5 (15,4) 7,2 (20,3)
Claims ratio, net of ceded business (1) 80,6 % 78,6 % 82,1 % 103,2 % 83,3 % 113,2 %
Expense ratio, net of ceded business (2) 0,0 % 2,6 % 16,3 % 17,6 % 13,0 % 10,2 %
Combined ratio, net of ceded business (3) 80,6 % 81,2 % 98,5 % 120,7 % 96,2 % 123,4 %
Gross claims ratio (4) 81,9 % 76,1 % 78,2 % 94,5 % 72,0 % 110,7 %
Gross expense ratio (5) 5,3 % 7,3 % 16,5 % 19,0 % 14,3 % 15,0 %
Gross combined ratio (6) 87,1 % 83,4 % 94,7 % 113,5 % 86,3 % 125,7 %

Cash flow statement

[1.000.000 NOK] Q4 2014 Q4 2013 FY 2014 FY 2013
Cash flow from operations
Paid in premiums 397,2 279,9 2 434,2 1 853,7
Paid claims (348,5) (301,4) (1 234,6) (928,8)
Paid reinsurance 4,4 (0,5) (101,3) (89,6)
Paid operating expenses including commissions (39,6) 51,1 (208,7) (120,3)
Interest / dividend income 38,9 85,8 61,7 111,0
Payments in from financial instruments 3 503,4 2 567,4 6 040,7 1 916,9
Payments out from financial instruments (2 989,5) (2 592,4) (6 289,5) (2 592,4)
Payable tax (44,1) 14,6 (78,5) (34,4)
Net cash flow from operations 522,1 104,5 623,9 116,0
Cash flow from investment activities
Invested in inventory (0,6) (0,6) (3,1) (2,2)
Invested in intangible assets (3,2) (7,8) (8,7) (7,8)
Net cash flow from investment activities (3,8) (8,4) (11,7) (9,9)
Cash flow from financial activities
Dividend paid - - (144,5) (99,1)
Interest payments on subordinated loan (2,9) (3,0) (11,7) (12,0)
Net cash flow from financial activities (2,9) (3,0) (156,2) (111,1)
Net cash flow for the period 515,4 93,1 456,0 (5,0)
Net change in cash and cash equivalents 515,4 93,1 456,0 (5,0)
Cash and cash equivalents opening balance 141,8 108,1 201,2 206,2
Cash and cash equivalents closing balance 657,2 201,2 657,2 201,2

Statement of changes in equity Ow n

[1.000.000 NOK] Share
Capital
shares Other paid
in equity
Natural
perils fund
Guarantee
scheme
Other equity Total
Equity at 31.12.2012 86,2 (3,6) 4,8 21,2 53,2 421,8 583,7
Profit for the period 3,0 2,0 79,3 84,3
Equity at 31.03.2013 86,2 (3,6) 4,8 24,2 55,2 501,1 667,9
Dividend pay out (99,1) (99,1)
Profit for the period (3,9) 2,4 59,1 57,6
Equity at 30.06.2013 86,2 (3,6) 4,8 20,4 57,6 461,1 626,5
Profit for the period 3,7 2,2 52,5 58,4
Equity at 30.09.2013 86,2 (3,6) 4,8 24,1 59,8 513,6 684,9
Profit for the period (8,6) 1,8 99,1 92,3
Equity at 31.12.2013 86,2 (3,6) 4,8 15,4 61,6 612,7 777,2
Profit for the period 0,2 2,1 96,1 98,4
Equity at 31.03.2014 86,2 (3,6) 4,8 15,6 63,7 708,8 875,5
Dividend pay out (144,5) (144,5)
Profit for the period 3,6 2,3 123,4 129,3
Equity at 30.06.2014 86,2 (3,6) 4,8 19,2 66,0 687,7 860,3
Profit for the period 2,9 2,3 38,1 43,3
Equity at 30.09.2014 86,2 (3,6) 4,8 22,1 68,4 725,8 903,7
Profit for the period (5,5) 2,1 91,1 87,8
Equity at 31.12.2014 86,2 (3,6) 4,8 16,7 70,5 816,9 991,4

Accounting principles

These interim accounts have been prepared in accordance with IAS 34 and in line with the accounting principles described in the annual report for 2013. The company's financial statements are prepared in accordance with the Norwegian Accounting Act, financial statement regulations for insurance companies and generally accepted accounting principles. For further information, please see the 2013 annual report.

Financial assets, fair value estimation

Financial assets, fair value estimation
F
inancial assets thro
ugh pro
fit o
r lo
ss [1.000.000 N
OK]
C
urrency
Level 1 Level 2 Level 3 T
o
tal
Shares NOK 515 179 - 694
Bonds and other fixed income securities NOK 880 2.874 0 3.755
Bank deposits NOK 449 - - 449
Other NOK 0 60 0 60
Total assets Q4 2014 1.844 3.113 0 4.958
Total assets Q4 2013 1.309 2.686 5 4.000

Fair value of financial assets traded in active markets are based on market value on the accounting day. A market is considered active if the market rates are easily and regularly available from a stock exchange, distributor, broker, industrial classification, price-setting service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm's length. The market price applied to financial assets is the existing bid price. These instruments are included in level 1.

Fair value of financial instruments not traded in an active market are determined by using valuation methods. These valuation methods maximise the use of observable data where available, and are based as little as possible on own estimates. The instrument is included in level 2 if all essential data are based on observable market data.

The instrument is included in level 3 if one or more essential data are not based on observable market data.

Quarterly outline

[1.000.000 NOK] Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
Gross premiums written 281,8 341,8 542,2 1.208,6 237,7 270,4 448,5 904,0 198,2
Gross premiums earned 593,7 591,5 590,9 530,7 468,4 468,6 477,4 400,2 375,6
Gross claims incurred (451,6) (457,7) (473,2) (472,0) (362,4) (384,0) (354,4) (349,8) (327,1)
Earned premiums, net of reinsurance 453,4 458,0 460,7 403,2 352,5 357,9 362,8 300,4 279,5
Claims incurred, net of reinsurance (337,7) (370,6) (387,8) (343,5) (291,9) (297,3) (288,8) (255,5) (259,3)
Total operating expenses, net of reinsurance (37,5) (36,9) (7,3) 21,3 (36,0) (36,9) (7,0) 23,0 (24,0)
Other income/costs (2,0) (3,1) (2,7) (2,4) (1,8) (2,6) (2,3) (2,8) (0,7)
Net income from financial assets 13,6 27,9 111,6 83,8 83,9 75,6 19,4 77,9 61,2
Operating profit before changes in security provision 89,8 75,3 174,5 162,4 106,6 96,7 84,1 143,0 56,7
Changes in security provision etc. 27,0 (12,5) (12,3) (28,5) 19,6 (31,2) (2,4) (40,9) (96,7)
Profit before tax 116,8 62,8 162,2 133,9 126,2 65,5 81,7 102,1 (40,0)
Tax (14,1) (17,7) (30,1) (31,1) (32,4) (9,5) (26,3) (20,4) 13,6
Profit before components of comprehensive income 102,7 45,2 132,1 102,8 93,8 56,0 55,4 81,8 (26,4)
Components of comprehensive income (20,4) (2,5) (4,0) (6,0) (2,0) 3,4 3,1 3,5 12,4
Taxes on components of comprehensive income 5,5 0,7 1,1 1,6 0,5 (1,0) (0,9) (1,0) (3,5)
Profit for the period 87,8 43,3 129,3 98,4 92,3 58,4 57,6 84,3 (17,5)
Key ratios
Claims ratio, net of ceded business 74,5 % 80,9 % 84,2 % 85,2 % 82,8 % 83,1 % 79,6 % 85,0 % 92,8 %
Expense ratio, net of ceded business 8,3 % 8,1 % 1,6 % -5,3 % 10,2 % 10,3 % 1,9 % -7,6 % 8,6 %
Combined ratio, net of ceded business 82,7 % 89,0 % 85,8 % 79,9 % 93,0 % 93,4 % 81,5 % 77,4 % 101,3 %
Gross expense ratio 8,2 % 8,4 % 6,0 % 8,1 % 10,0 % 10,1 % 5,9 % 9,1 % 10,0 %

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