Q1 results 2014 Investor presentation
9 May 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, Alfred Berg Norge/Gambak, Franklin Mutual, DnB NOR SMB, Nordea, Stenshagen Invest, Ojada employees etc.
- Strong results, average combined ratio 2004 2013, 89.5%
- GWP in 2013: MNOK 1.861
- Solvency capital of MNOK 1.462, investment portfolio ~ NOK 4.7 bn.
- Market cap. 30 April 2014, NOK 2,53 bn.
Outlook 2014:
GWP up 20 % CR ~ 88 %
Dividend policy:
30 – 50% of profit after tax Target solvency margin > 250%
- Vision: "The challenger"
- Main targets:
- Being top three in Protector's defined business segments
- Cost and quality leadership
- Being preferred by the brokers
Highlights Q1 2014
34 % growth and increased guiding
- GWP in NOK up 34%,
- Best ever growth quarter
- GWP up 30 % in local currencies
- Sweden and Denmark 382 mill (219 mill) in volume
- Gross cost ratio down to 8,1% (9,1%)
- Net combined ratio 79,9% (77,4%)
- Reinsurance commissions driving CR down in Q1 as always
- 1,9 % return on the investment portfolio (2,2%)
- Net return on investments NOK 83.8m (77.9m)
- Operating profit of NOK 162,4m (143m)
- Best ever quarterly profit
- Guiding 2014 increased
- Operating profit NOK 430m, up from previously guided NOK 330m
- CR 88%, down from 90%
- 20 % growth in GWP, up from 16%
Gross written premium Q1 2014
GWP up 34%, from NOK 904m to NOK 1.208,6m
- GWP up 16% within the Norwegian commercial and public lines of business
- Good renewal rate, 93%, down from 94% in Q1 2013
- Very good access to quotations, but hit-ratio slowing down in commercial sector
- GWP in Sweden and Denmark 92% growth
- 21 percentage points of total growth
- 75% growth in local currencies and 18 percentage points of the total growth
- Good renewal rates, 96%
- Change of ownership insurance, 22% growth
- No. of policies sold up 17 %
- Strong growth supported by a late Easter (Easter in Q1 the year earlier period)
GWP Q1 2010 – Q1 2014 (NOKm)
Claims development Q1 2014
- Gross claims ratio 88.9%, up from 87.4% in Q1 2013
- − Strong development within change of ownership insurance
- − Motor, other illness and accident in Norway behind schedule, all other products within the commercial and public lines of business in Norway doing well.
- − Sweden and Denmark behind schedule, two large claims (> MNOK 5) in Sweden
- Net run-off-gains of 6,3% (3% in Q1 2013), higher than in a normal first quarter
- − Run-off-gains of MNOK 14,4 within change of ownership insurance
- Net claims ratio 85.2%, slightly up from 85.0%. Higher claims ratio than peers.
Net claims ratio Q1 2010 - Q1 2014
Claims development Q1 2014 – 4 large claims
Helicopter accident, personal injury 5 busses on fire
Fire in garage Destroyed fire truck
Cost ratio Q1 2014
- Gross cost ratio 8,1 %, down from 9,1 %
- Increased staffing in all 3 countries
- Critical mass not reached in Sweden and Denmark
- Average no of employees Q1 2014 162, up from 131 in Q1 2013
- Cost program will reduce costs with 15 mill in 2014
- Net cost ratio 5,3 %, up from 7,6 %
- Negative costs due to high level of reinsurance commissions
- The relative share of reinsurance commissions down due to a higher retention rate
- Gross cost ratio will continue to decrease in 2014 and forwards
Net cost ratio Q1 2010 - Q1 2014
Highlights Q1 2014 – Norwegian Commercial/public lines
- Volume up 16 %
- 37 % growth in the public sector
- 5 large and 1 very large wins, 0 large non-renewals
- 2 % growth in the commercial sector
- 6 large wins and 1 large and 1 very large non-renewals
- Personal lines of business , 66% of total volume
- 9 % growth in Q1
- 30 % growth other lines
- Renewal rate 93 % , up from 90 %
- Renewal rate above 100 % in the municipality sector
- Renewal rate in the commercial sector 86 %
- Profitability measures within claims handling started
- Loss prevention and recourse, yearly claims reduction of NOK 40 50 mill
- Full effect of the measures expected in 2016
- Slow start on Q2
- 2 large non-renewals
Highlights Q1 2014 – Sweden and Denmark
- 92% growth, 21 percentage points of total company growth
- 75 % growth in local currencies, 18 % points of total company growth
- 3 large wins and 1 very large win in Sweden, no large non-renewals
- 2 large wins in Denmark, no large non-renewals
- Strong renewal rates, 96%
- Combined ratios above 100%
- High cost ratios due to lack of critical mass
- Critical mass will gradually occur in 2014
- Very high level of Motor business in Sweden, less cost effective
- 2 large claims in Sweden in Q1, no significantly profitability issues
- Combined Ratio < 100% expected in 2014
- Will support double digit growth on company level in 2014 and 2015
- Very good start on Q2
- 2 very large and one large wins
GWP Q1 2011 – Q1 2014 (NOKm)
Highlights Q1 2014 - Change of ownership insurance
- Volume up 22%
- No. of policies sold up 17%
- Strong growth supported by a late Easter (in Q1 last year)
- Real estate prices in Q1 unchanged (up 0,1%) relatively to Q1 2013¹
- Good profitability
- Run-off-gains of MNOK 14,4
- Profitability measures yields results
- Cost ratio on a high level due to seasonality
- The recovery level remains high, but is slightly behind the very strong Q1 2013
- Very good court results, but no. of lawsuits remains on a very high level
- Win draw losses: 56% 21% 24%
- The real-estate prices are expected to flatten or slightly increase in 2014
- 4 % volume growth expected in 2014
Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014
Results Q1 2014
| NOKm |
Q1 2014 |
Q1 2013 |
2013 |
| Premiums written gross |
1 208,6 |
904,0 |
1 860,6 |
| Premiums earned gross |
530,7 |
400,2 |
1 814,6 |
| Claims incurred gross |
(472,0) |
(349,8) |
(1 450,6) |
| Premiums earned for own account |
403,2 |
300,4 |
1 373,6 |
| Claims incurred for own account |
(343,5) |
(255,5) |
(1 133,5) |
| Operating costs for own account |
21,3 |
23,0 |
(56,9) |
| Other income/costs |
(2,4) |
(2,8) |
(9,5) |
| Net financial income |
83,8 |
77,9 |
256,7 |
| Profit before change in security provision etc. |
162,4 |
143,0 |
430,3 |
| Change in security provision etc. |
(28,5) |
(40,9) |
(54,8) |
| Profit after change in security provision etc. |
133,9 |
102,1 |
375,5 |
| Tax |
(31,1) |
(20,4) |
(88,5) |
| Profit before comprehensive income |
102,8 |
81,8 |
287,0 |
| Comprehensive income inc. tax |
(4,4) |
2,5 |
5,7 |
| Profit for the period |
98,4 |
84,3 |
292,6 |
| Gross claims ratio |
88,9 % |
87,4 % |
79,9 % |
| Gross expense ratio |
8,1 % |
9,1 % |
8,8 % |
| Gross combined ratio |
97,0 % |
96,5 % |
88,7 % |
| Net claims ratio |
85,2 % |
85,0 % |
82,5 % |
| Net expense ratio |
-5,3 % |
-7,6 % |
4,1 % |
| Net combined ratio |
79,9 % |
77,4 % |
86,7 % |
| Retention rate |
76,0 % |
75,1 % |
75,7 % |
| Return on investment assets |
1,9 % |
2,2 % |
7,0 % |
| Earnings per share |
1,50 |
1,35 |
3,96 |
• GWP up 34% (35%)
• Best ever quarterly profit
• No. 1 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)/
Balance Sheet Q1 2014
| NOKm |
31.03.2014 |
31.03.2013 |
31.12.2013 |
|
|
|
|
| Financial assets |
4 674,0 |
3 780,7 |
3 999,8 |
| Bank deposits |
214,0 |
130,4 |
153,3 |
| Other assets |
909,5 |
733,2 |
590,9 |
| Total assets |
5 797,5 |
4 644,2 |
4 744,1 |
| Total equity |
875,5 |
667,9 |
777,2 |
| Subordinated loan capital |
148,1 |
148,1 |
148,1 |
| Total reserves |
4 225,5 |
3 441,9 |
3 368,8 |
| Other liabilities |
548,4 |
386,3 |
450,0 |
| Total equity and liabilities |
5 797,5 |
4 644,2 |
4 744,1 |
|
|
|
|
| Solvency capital |
1 462,2 |
1 212,1 |
1 335,3 |
| Return on solvency capital, after tax |
9 % |
13 % |
28 % |
| Solvency capital per share, end of period |
17,7 |
14,7 |
16,2 |
| Solvency ratio |
159 % |
185 % |
93 % |
| Solvency margin |
348 % |
338 % |
315 % |
| Capital adequacy ratio (risk weighted) |
17 % |
19 % |
20 % |
| NAV |
1 303,8 |
1 065,2 |
1 184,6 |
| NAV per share, end of period |
15,8 |
12,9 |
14,3 |
• 24% growth in investment portfolio
• Solvency margin 348 %, NOK 771 mill above the minimum requirement
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 Q1 2014; Bonds 88,3% of portfolio, Norwegian equities 11,7%
- Increased exposure in equities
- DKK 50 mill invested in Danish equities in Q1
- Discretionary bond portfolio significantly reduced and re-allocated to funds
- Improved risk adjusted return
Money-weighted allocation of investments 31.12.2013
Portfolio structure and quality bond portfolio
- No currency risk
- Duration 0,76 years (0,86), average maturity is 3,45 years (3,23 years)
Bond portfolio 31 March 2014
Quality bond portfolio 31 March 2014
| Split of fixed income portfolio |
NOK mill |
% |
|
|
|
|
|
| Bonds |
424 |
10 % |
|
| Bond funds |
3 700 |
90 % |
|
| Bank deposits |
5 |
0 % |
|
| Total |
4 129 |
100 % |
|
|
|
|
|
| Rating including internal rating by Norwegian financial institutions |
|
|
|
| Investmentgrade |
2 789 |
68 % |
|
| BB |
25 |
1 % |
|
| B |
- |
0 % |
|
| Non rated (funds) |
1 314 |
32 % |
|
Investment performance Q1 2014
1,9% return on the investment portfolio
- Net investment result of NOK 83.8m, 1.9% return (NOK 77.9m, 2.2%)
- Equities, return of 2.9% (6.8%), OSEBX 2.4%, OSEFX 1.8%
- Bond portfolio, return of 1.8% (1.7%) - Yield end of Q1; 4,8 %
- Investment portfolio of NOK 4,674 m (NOK 3,781m), 24% growth
Shareholder matters 30 April 2014
| Shareholder |
No. shares |
Percent |
| ODIN NORDEN |
6 611 211 |
7,67 % |
| STENSHAGEN INVEST AS |
4 610 180 |
5,35 % |
| PROTECTOR FORSIKRING ASA |
3 570 661 |
4,14 % |
| OJADA AS |
3 563 116 |
4,14 % |
| HANSARD EUROPE LTD |
3 475 930 |
4,03 % |
MSF-MUTUAL FINANC
IAL SERVI FD |
3 261 596 |
3,79 % |
| TJONGSFJORD INVEST AS ¹ |
2 811 809 |
3,26 % |
| MP PENSJON PK |
2 375 706 |
2,76 % |
| AVANZA BANK AB |
2 347 538 |
2,72 % |
| VERDIPAPIRFONDET HANDELSBANKEN |
2 284 453 |
2,65 % |
| HANDELSBANKENS NORDISKA SMABOLAGSF |
1 900 000 |
2,21 % |
| ARTEL HOLDING A/S |
1 873 451 |
2,17 % |
| GABLER RÅDGIVNING AS ² |
1 702 751 |
1,98 % |
| VERDIPAPIRFONDET ALFRED BERG GAMBA |
1 689 791 |
1,96 % |
| FROGNES AS |
1 649 916 |
1,92 % |
| VARMA MUTUAL PENSION INSURANCE |
1 642 329 |
1,91 % |
| VPF NORDEA NORGE VERDI |
1 638 468 |
1,90 % |
| VERDIPAPIRFONDET ALFRED BERG NORGE |
1 451 944 |
1,69 % |
| JOHAN VINJE AS |
1 437 841 |
1,67 % |
| PETROSERVICE AS |
1 343 815 |
1,56 % |
| TOTAL 20 LARGEST |
51 242 506 |
59,48 % |
| OTHERS |
34 913 099 |
40,52 % |
| TOTAL SHARES |
86 155 605 |
100,00 % |
No. Shareholders 2.690
¹ CEO Sverre Bjerkeli
Related parties shareholding
| • |
Management's direct and indirect shareholding totals 3,1m shares or 3,6%
of current outstanding shares |
| • |
Board members directly and indirectly own a total of 9,9m shares or 11,5% |
|
of current outstanding shares |
| • |
33 employees own directly a total of 4.8 m shares or 5.5% of current
outstanding shares (incl. management) |
| • |
Protector own 3.570.661 own shares or 4,14% of current outstanding
shares |
Notifications of trade in Q1
- Chairman of the Board Jostein Sørvoll has 20 March. through his company Gabler Rådgivning sold 800.000 shares in Protector at a price of NOK 29,00 per share
- Merete C Bernau, Dir. Change of Ownership Insurance, has 25 March sold 10,000 shares in Protector at a price of NOK 29,00 per share
- Jørgen Stang Heffermehl (member of the Board of Directors until 30 April) and his family have 26-27 March sold 238,818 shares in Protector at an average price of NOK 28,6317 per share
Outlook 2014
Guiding 26 February 2014 Guiding 9 May 2014
- GWP up 16% GWP up 20%
- Status per Q1, ahead of schedule
- Combined ratio 90% Combined ratio 88 %
- Status per Q1, ahead of schedule
- Gross claims ratio slightly behind schedule
- Gross cost ratio < 8 %, on schedule Gross cost ratio < 8 %
- Operating profit NOK 330m Operating profit NOK 430m
- Status per Q1, ahead of schedule
- Return on solvency capital 20% Return on solvency 24%
- Status per Q1, ahead of schedule
Outlook 2014, increased
|
Res
2013 |
Old
2014e |
New
2014e |
|
| Premium growth in NOK (%) |
23 |
16 |
20 |
|
| Investment Income (NOKm) |
257 |
190 |
250 |
|
| Operating profit (NOKm) |
430 |
330 |
430 |
|
| Gross cost ratio (%) |
8.8 |
< 8 |
< 8 |
|
Net combined
ratio (%) |
86.7 |
90 |
88 |
|
Change
in Security prov. (NOKm) |
54.8 |
N/A |
58 |
|
| Return on solvency capital (%) |
28 |
20 |
24 |
|
| Earnings per share (NOK) |
3,96 |
N/A |
4 |
|
| Return assumptions 2014¹: |
| Equity allocation approx. 12% (10%) |
| Return equities: 8% p.a. (8% p.a.) |
| Return bonds: 5,4% p.a. (4,0% p.a.) |
| Average inv. capital: NOK 4.400m (4.300'') |
| ¹Figures in brackets; Guiding 26 February 2014 |
CEO Summary, Risk outlook 2014
- Slightly reduced risk relatively to the risk outlook 26 Feb.
|
26 Feb. |
9 May |
| + Volume up in commercial & public sector Norway |
Risk
Low |
Risk
No |
| + Sweden and Denmark support double digit growth |
No |
No |
| + Balance sheet growing leads to increased financial income |
No |
No |
| + Cost ratio Gross & Net going down |
Low |
Low |
| 0 Unchanged volume in Change of Ownership sector |
Medium |
Low |
-
Price inflation lower than claims inflation in Change of Ownership |
High |
Medium |
-
Rate pressure driving claims ratio upwards |
Medium |
Medium |
-
One or two negative surprises will occur |
Medium |
Medium |
-
Sweden and/or Denmark develops worse than guided |
Low |
Low |
Summary Q1 2014
- GWP in NOK up 34%,
- Best ever growth quarter
- GWP up 30 % in local currencies
- Sweden and Denmark 382 mill (219 mill) in volume
- Gross cost ratio down to 8,1% (9,1%)
- Net combined ratio 79,9% (77,4%)
- Reinsurance commissions driving CR down in Q1 as always
- 1,9 % return on the investment portfolio (2,2%)
- Net return on investments NOK 83.8m (77.9m)
- Operating profit of NOK 162,4m (143m)
- Best ever quarterly profit
- Guiding 2014 increased
- Operating profit NOK 430m, up from previously guided NOK 330m
- CR 88%, down from 90%
- 20 % growth in GWP, up from 16%
- Strong Q2 expected