Q3 results 2014 Investor presentation
29 October 2014
Facts about Protector
- A focused Norwegian non-life insurance company
- Established Jan.1, 2004. (Listed Oslo Stock Exchange May 2007)
- Entered the Swedish market in 2011 and Denmark 1 Jan. 2012
- Ownership; ODIN, Stenshagen Invest, Ojada, Alfred Berg Norge/Gambak, Handelsbanken, Nordea, DnB NOR SMB, employees etc.
- Strong results, average combined ratio 2004 2013, 89.5%
- GWP in 2013: MNOK 1.861
- Solvency capital of MNOK 1.515, investment portfolio ~ NOK 4,8 bn.
- Market cap. 27 October 2014, NOK 3,4bn. Protector share
• Vision: "The challenger"
- Main targets:
- Cost and quality leadership
- Profitable growth
- Being top three in Protector's defined business segments
Outlook 2014:
GWP up 27 % CR ~ 88 %
Dividend policy:
30 – 50% of profit after tax Target solvency margin > 250%
Highlights Q3 2014
26 % growth and strong result
• GWP up 26 %
- Scandinavian commercial and public lines 23 percentage points of total growth
- Growth in Sweden/Denmark 16 percentage points of total growth
- GWP up 29 % in local currencies
- Net combined ratio improved to 89.0% (93.4%)
- Gross cost ratio down to 8,4% (10,1%)
- Return on investments, NOK 27.9m (0.6%), down from NOK 75.6m (2.0%)
- Driven by lower bond and equity return
- Operating profit of NOK 75.3m (NOK 96.7m) impacted by lower investment income
- Guiding 2014
- 27 % growth and CR 88 %, ahead of schedule
- Return on investments down from NOK 290 m to NOK 240m due to the turmoil in the financial markets
Gross written premium Q3 2014
GWP up 26 %, from NOK 270,4m to NOK 341,8m
- GWP up 41 % within the Scandinavian commercial and public lines
- 23 percentage points of total growth
- GWP up 16 % within the Norwegian commercial and public lines of business
- High renewal rate, 99%, up from 90 % in Q3 2013.
- Very good access to quotations, hit-ratio improving in commercial sector
- GWP in Sweden and Denmark 160 % growth
- 16 percentage points of total growth
- High renewal rate, above 100 %
- Change of ownership insurance, 8 % growth
- Increased no. of policies sold (up 5 %) and increased real estate prices
- Next volume guiding will as usual be communicated to the market ultimo January 2015
GWP Q3 2010 – Q3 2014 (MNOK)
GWP Q1-Q3 2010 – Q1-Q3 2014 (MNOK)
Claims development Q3 2014
- Gross claims ratio 77.4%, down from 81.9 % in Q3 2013
- − All products in Norway are doing well
- − Satisfactory claims ratio both in Sweden and Denmark despite cloudburst claims
- − 1 large claim (> MSEK 5) in Sweden
- Net run-off-gains of 4,5% (stable reserves in Q3 2013)
- − Run-off-gains of MNOK 17 (MNOK 24 loss in Q2 14) within change of ownership insurance
- − Low level of paid claims decreases the reserves
- − Run-off-gains of 26 mill YTD (18 mill within commercial and public lines and 8 mill within COI)
- Net claims ratio 80.9%, down from 83.1%
- − Higher claims ratio than peers
Cost ratio Q3 2014
- Gross cost ratio 8.4 %, down from 10.1%
- Gross cost ratio including claims handling 12.6% down from 14.6 %
- Increased staffing in all 3 countries, but slowing down
- Average no of employees Q3 2014 177 up from 152 in Q3 2013
- Net cost ratio 8.1 %, down from 10.3%
- Driven by decreased gross costs
- Improved competitive position
Cost ratio Q1-Q3 2010 – Q1-Q3 2014
Highlights Q3 2014 – Norwegian Commercial/public lines
16% growth
- Volume up 16 %
- Strong renewal rate of 99 % (90%)
- No large wins or non-renewals
- 39 % growth in the public sector (low volume quarter)
- 15 % growth in the commercial sector
- Single digit growth in Q4 expected
- Good access to quotations
- Reinsurance renewal season started
- Quota share contracts renewed on similar terms and conditions
- Improved terms and conditions expected on other contracts
- "Hunting" and renewal season started
- Good start on the renewals and good access to new business
- All time high relationship with leading brokers
- Rated no. 1 eight years in a row
Quality leader among insurance brokers eight years in a row
Protector receives the highest score when brokers are asked to rank insurance companies according to how satisfied they are with their service and offerings
Highlights Q3 2014 – Sweden and Denmark
GWP > 500 mill YTD, critical mass reached
- 160 % growth, 16 percentage points of total company growth
- 1 very large win in Sweden
- No large non-renewals
- Renewal rate above 100 %
- Well prepared for "hunting" and renewal season
- 22 on board in Sweden per 30.09, 20 on board in Denmark
- Minor increase in human capital in Q4
- Combined ratios above 100%
- Claims development behind schedule, but no significant profitability issues
- Cost ratios still high but will fall rapidly
- A combined ratio slightly above 100 % expected in 2014 (up from < 100%)
- Sweden and Denmark will support double digit growth on company level in 2015 and 2016
- Country number 4, analytical work started
GWP Q1-Q3 2010 – Q1-Q3 2014 (MNOK)
Highlights Q3 2014 – Change of ownership insurance
- Volume up 8%
- No. of policies sold up 5 %
- Real estate prices up 3.4 % relatively to Q3 2013.¹
- Hit-ratio stable on a high level, approx. 80 %
- Good profitability in Q3
- Run-off-gains of MNOK 17 (MNOK 24 in losses in Q2 14)
- High recovery level, up 12 %
- Increased claims handling capacity improves quality
- No. of lawsuits remains high but stable
- Continued good results in court supported by internal high technical competence
- Win draw losses: 62% 19% 19%
- «Mandatory» home sales report (technical survey)
- « Mandatory» from 1.1.2015
- Technical survey quality will be a challenge
- 10 % volume growth expected in 2014
GWP Q3 2010 – Q3 2014 (MNOK)
Results Q3 2014
| NOKm |
Q3 2014 |
Q3 2013 |
Q1-Q3 2014 |
Q1-Q3 2013 |
2013 |
| Premiums written gross |
341,8 |
270,4 |
2 092,6 |
1 622,9 |
1 860,6 |
| Premiums earned gross |
591,5 |
468,6 |
1 713,1 |
1 346,2 |
1 814,6 |
| Claims incurred gross |
(457,7) |
(384,0) |
(1 402,9) |
(1 088,2) |
(1 450,6) |
| Premiums earned for own account |
458,0 |
357,9 |
1 321,9 |
1 021,1 |
1 373,6 |
| Claims incurred for own account |
(370,6) |
(297,3) |
(1 101,8) |
(841,6) |
(1 133,5) |
| Operating costs for own account |
(36,9) |
(36,9) |
(22,9) |
(20,9) |
(56,9) |
| Other income/costs |
(3,1) |
(2,6) |
(8,2) |
(7,7) |
(9,5) |
| Net financial income |
27,9 |
75,6 |
223,3 |
172,9 |
256,7 |
| Profit before change in security provision etc. |
75,3 |
96,7 |
412,3 |
323,8 |
430,3 |
| Change in security provision etc. |
(12,5) |
(31,2) |
(53,3) |
(74,5) |
(54,8) |
| Profit after change in security provision etc. |
62,8 |
65,5 |
358,9 |
249,3 |
375,5 |
| Tax |
(17,7) |
(9,5) |
(78,9) |
(56,1) |
(88,5) |
| Profit before comprehensive income |
45,2 |
56,0 |
280,1 |
193,1 |
287,0 |
| Comprehensive income inc. tax |
(1,8) |
2,4 |
(9,1) |
7,2 |
5,7 |
| Profit for the period |
43,3 |
58,4 |
271,0 |
200,3 |
292,6 |
| Gross claims ratio |
77,4 % |
81,9 % |
81,9 % |
80,8 % |
79,9 % |
| Gross expense ratio |
8,4 % |
10,1 % |
7,4 % |
8,3 % |
8,8 % |
| Gross combined ratio |
85,7 % |
92,0 % |
89,3 % |
89,1 % |
88,7 % |
| Net claims ratio |
80,9 % |
83,1 % |
83,4 % |
82,4 % |
82,5 % |
| Net expense ratio |
8,1 % |
10,3 % |
1,7 % |
2,0 % |
4,1 % |
| Net combined ratio |
89,0 % |
93,4 % |
85,1 % |
84,5 % |
86,7 % |
| Retention rate |
77,4 % |
76,4 % |
77,2 % |
75,8 % |
75,7 % |
| Return on investment assets |
0,6 % |
2,0 % |
4,1 % |
4,7 % |
7,0 % |
| Earnings per share |
0,7 |
1,0 |
3,9 |
3,0 |
4,0 |
• GWP up 29% YTD - No. 1 Nordic
• CR YTD 85,1% - Top 3 Nordic
Note:
Retention rate = NPE in % of GPE
Earnings per share = (Profit before comp. income + Change in security provision - 27% tax on Change in security provision)/
(No. of outstanding shares - own shares)
Balance Sheet Q3 2014
| NOKm |
30.09.2014 |
30.09.2013 |
31.12.2013 |
|
|
|
|
| Financial assets |
4 834,8 |
3 943,4 |
3 999,8 |
| Bank deposits |
138,1 |
92,1 |
153,3 |
| Other assets |
899,4 |
651,7 |
590,9 |
| Total assets |
5 872,4 |
4 687,3 |
4 744,1 |
| Total equity |
903,7 |
684,9 |
777,2 |
| Subordinated loan capital |
148,1 |
148,1 |
148,1 |
| Total reserves |
4 290,6 |
3 501,1 |
3 368,8 |
| Other liabilities |
530,0 |
353,1 |
450,0 |
| Total equity and liabilities |
5 872,4 |
4 687,3 |
4 744,1 |
|
|
|
|
| Solvency capital |
1 515,1 |
1 262,7 |
1 335,3 |
| Return on solvency capital, after tax |
23 % |
23 % |
28 % |
| Solvency capital per share, end of period |
18,3 |
15,3 |
16,2 |
| Solvency ratio |
94 % |
103 % |
93 % |
| Solvency margin |
373 % |
353 % |
315 % |
| Capital adequacy ratio (risk weighted) |
18 % |
21 % |
20 % |
| NAV |
1 350,0 |
1 106,7 |
1 184,6 |
| NAV per share, end of period |
16,3 |
13,4 |
14,3 |
• 23% growth in investment portfolio
• Implementation of Solvency II
- The Norwegian FSA has sent a letter¹ to the Norwegian Dep. of Finance discussing some country specific topics related to the implementation of Solvency II. Most important for Protector are the potential tax implications. The topics are not new and it's to early to predict the outcome of the discussions.
• Solvency margin 373 %,
Note:
Solvency Capital = shareholder's funds + security provision etc.
Return on solvency capital: Operating profit after tax /average solvency capital
Solvency ratio = solvency capital / NPW
Solvency margin calculated according to regulations from the FSA of Norway.
NAV = total equity pluss 73% of the total security provision etc.
No. of shares = total outstanding shares ex own shares
Asset allocation
- End of Q3 2014; Fixed income 92,2% of portfolio, Nordic equities 7,8%
- Duration bond portfolio 0.7 years (1.2), average maturity is 3.4 years (3.5)
- Further decreased exposure in equities ultimo August
- NOK 100 mill re-allocated from Norwegian equities to fixed income funds
- Discretionary fixed income portfolio allocated to funds
- Improved risk adjusted return
- Discretionary equity portfolio established early October
- Limited exposure to the oil and oil-service sector
Total financial assets end of Q3 2014; NOK 4.835m Total financial assets end year; NOK 3.999m
Investment performance Q3 2014
0,6% return on the investment portfolio
• Net investment result of NOK 27,9m, 0,6% return (NOK 75,6m, 2,0%) - Q1-Q3; Net investment result of NOK 223,3m, 4,9% return (NOK 172,9m, 4,7%)
- Equities, return of -1,7% (6,2%), OSEBX -1,4%, OSEFX -1,2%
- Fixed income portfolio, return of 0,8% (1,5%)
- Yield end of Q3; 4,9 %
- Investment portfolio of NOK 4.835 m (NOK 3.943m), 23% growth
Shareholder matters 21 October 2014
| Shareholder |
No. shares |
Percent |
| ODIN NORDEN |
6 611 211 |
7,67 % |
| STENSHAGEN INVEST AS |
5 000 000 |
5,80 % |
| PROTECTOR FORSIKRING ASA |
3 570 661 |
4,14 % |
| OJADA AS |
3 563 116 |
4,14 % |
| HANSARD EUROPE LTD |
3 393 835 |
3,94 % |
| AVANZA BANK AB |
3 368 957 |
3,91 % |
| TJONGSFJORD INVEST AS |
2 811 809 |
3,26 % |
| VERDIPAPIRFONDET HANDELSBANKEN |
2 375 706 |
2,76 % |
| MP PENSJON PK |
2 300 000 |
2,67 % |
| JP MORGAN CHASE BANK, NA |
1 900 000 |
2,21 % |
| ARTEL HOLDING A/S |
1 873 451 |
2,17 % |
| NORDNET BANK AB |
1 815 118 |
2,11 % |
| GABLER RÅDGIVNING AS |
1 702 751 |
1,98 % |
| FROGNES AS |
1 649 916 |
1,92 % |
| VARMA MUTUAL PENSION INSURANCE |
1 642 329 |
1,91 % |
| JOHAN VINJE AS |
1 437 841 |
1,67 % |
| PETROSERVICE AS |
1 343 815 |
1,56 % |
NORDEA NORDIC
SMALL CAP FUND |
1 303 467 |
1,51 % |
| VERDIPAPIRFONDET ALFRED BERG NORGE |
1 295 092 |
1,50 % |
| VEVLEN GÅRD AS |
1 279 569 |
1,49 % |
| TOTAL 20 LARGEST |
50 238 644 |
58,31 % |
| OTHERS |
35 916 961 |
41,69 % |
| TOTAL SHARES |
86 155 605 |
100,00 % |
No. Shareholders 3.190
¹ CEO Sverre Bjerkeli
² Chairman of the Board, Jostein Sørvoll
Related parties shareholding
| • |
Management's direct and indirect shareholding totals 3,2m shares or 3,7%
of current outstanding shares |
| • |
Board members directly and indirectly own a total of 10,3m shares or 11,9% |
|
of current outstanding shares |
| • |
32 employees own directly a total of 3,4m shares or 3,.9% of current
outstanding shares (incl. management) |
| • |
Protector own 3.570.661 own shares or 4,14% of current outstanding
shares |
Outlook 2014
Guiding 11 July 2014 Guiding 29 Oct 2014
- GWP up 27% GWP up 27%
- Status per Q3, ahead of schedule
- Combined ratio 88% Combined ratio 88 %
- Status per Q3, ahead of schedule
- Gross claims ratio slightly behind schedule
- Gross cost ratio < 8 %, on schedule Gross cost ratio < 8 %
- Operating profit NOK 490m Operating profit NOK 440m
- Status per Q3, behind schedule
- Return on solvency capital 28% Return on solvency 25%
- Status per Q3, behind schedule
Outlook 2014, changed
|
Res
2013 |
26 Feb
2014e |
9 May
2014e |
11 July
2014e |
New
2014e |
|
Premium growth in NOK
(%) |
23 |
16 |
20 |
27 |
27 |
|
Investment Income
(NOKm) |
257 |
190 |
250 |
290 |
240 |
|
| Operating profit (NOKm) |
430 |
330 |
430 |
490 |
440 |
|
| Gross cost ratio (%) |
8.8 |
< 8 |
< 8 |
< 8 |
< 8 |
|
Net combined
ratio (%) |
86.7 |
90 |
88 |
88 |
88 |
|
Change
in Security prov.
(NOKm) |
54.8 |
N/A |
58 |
73 |
68 |
|
Return on solvency
capital (%) |
28 |
20 |
24 |
28 |
25 |
|
| Earnings per share (NOK) |
3,96 |
N/A |
4 |
4,6 |
4,1 |
|
| Return assumptions Q4 2014: |
|
|
| Equity allocation approx. 8% |
|
|
| Return equities: 0% |
|
|
| Return bonds: 0,4 % |
|
|
| Average inv. capital: NOK 4.900m |
|
|
Summary Q3 2014
- GWP up 26 %
- Net combined ratio improved to 89.0% (93.4%)
- Gross cost ratio down to 8,4% (10,1%)
- Return on investments, NOK 27.9m (0.6%), down from NOK 75.6m (2.0%)
- Operating profit of NOK 75.3m (NOK 96.7m) impacted by lower investment income
- Guiding 2014
- 27 % growth and CR 88 %, ahead of schedule
- Return on investments down from NOK 290 m to NOK 240m due to the turmoil in the financial markets