Annual Report • Apr 9, 2014
Annual Report
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HIGHLIGHTS 2013
THIS IS PROTECTOR
KEY FIGURES
SHAREHOLDER INFORMATION
NORWAY: COMMERCIAL AND PUBLIC LINES OF BUSINESS
SWEDEN & DENMARK: COMMERCIAL AND PUBLIC LINES OF BUSINESS
NORWAY:CHANGE OF OWNERSHIP INSURANCE
DIRECTORS' REPORT
ACCOUNTS AND NOTES
DECLARATION BY THE MEMBERS OF THE BOARD AND THE CEO
AUDITOR'S REPORT
CONTROL COMMITTEE'S STATEMENT
BOARD OF REPRESENTATIVES' STATEMENT
BOARD OF REPRESENTATIVES, CONTROL COMMITTEE AND NOMINATION COMMITTEE
CORPORATE GOVERNANCE
In 2013, total premiums amounted to NOK 1.861 million compared to NOK 1.517 million in 2012, an increase of 23 %. The growth occurred within the Norwegian commercial and public lines of business (40 % of growth), within Sweden and Denmark (53 % of growth) and within change of ownership insurance (7 % of growth).
In 2013, the cost ratio increased somewhat. Gross cost ratio in 2013 was 13,8%, compared to 12,7% in 2012. The increase is due to a large increase in number of employees in all three countries to handle the company's growth.
The combined ratio was 86,7 % at the end of 2013 which is one of the best ratios among the Scandinavian non-life insurance companies.
The return on investments was 7 % compared to 8,9 % in 2012. Tightening of credit spreads and strong markets for equities contributed to the strong result.
The operating profit amounted to NOK 430,3 million compared to NOK 393,7 million in 2012.
The company expects that underlying profitability will continue to be good. Nevertheless, as a result of the company's expansion in Sweden & Denmark, there is an increase in uncertainty concerning claims development.
The Board proposes a dividend of NOK 1,75 per share for financial year 2013.
Protector shall be the challenger. This position will be achieved through unique relationships, good decision making and cost effective solutions.
Protector commenced business January 2004, and has since experienced rapid growth. The company is highly focused on risk selection and market adaptation. In May 2007, Protector was listed on the Oslo Stock Exchange, reaching a goal that was stated from the beginning.
The company's "scalable business model" will be used as a foundation for further growth. Growth will be achieved without significant accrual of costs due to the early investment in developing competence, routines and in-house developed IT-systems.
Protector shall be the challenger. This position will be achieved through unique relationships, good decision making and cost effective solutions.
Protector targets further profitable growth in the years ahead. Entering into Sweden and Denmark required somewhat more investments, however, combined with an increase in written premiums, the cost ratio is expected to remain stable in 2014 and decrease thereafter.
Protector has a distinct distribution strategy. All distribution is done through intermediaries. The commercial and public sector business is sold through insurance brokers. The same strategy applies for affinity programs. Change of ownership insurance is sold through selected real estate agents.
Protector operates in non-marine insurance. The company has clearly defined market segments:
Protector's chosen segment consists of companies with annual insurance premiums above NOK 100,000. Most of the clients have an annual insurance premium below NOK 3,000,000, however, Protector also targets larger companies. The largest companies have annual insurance premiums in the tens of millions. By year end 2013 the customer list included approximately 3,000 companies.
Protector has managed to establish itself as one of the three largest insurers in the Norwegian municipality sector. At the beginning of 2014 the customer list consisted of 228 Norwegian, 119 Swedish and 16 Danish municipalities. The insurance policies consist of both complete and single product coverage.
Change of ownership insurance covers the seller's responsibility for the estate's material defects as specified by the sale of property law ("Avhendingsloven"). Protector is the market leader within change of ownership insurance with more than 50 % market share. Protector has developed an effective value chain in change of ownership insurance and acquired the necessary critical mass to continue as a leading player in the years ahead.
Protector has established an operational presence in Stockholm & Copenhagen with 19 and 14 employees respectively by the end of 2013. The company expects that significant parts of future growth will stem from outside of Norway. The company's entrance in the Swedish and Danish markets follow the same business model as in Norway and is well perceived by the insurance brokers.
Protector has decided to have claims handling in-house and therefore have a substantial competence in this field. By using skills and competences across claims handling, underwriting and sales the company achieves high cost efficiency while maintaining high quality. Approximatley 60 employees were dedicated to claims handling at the end of 2013.
Protector has a strategy of in-house development of IT solutions. The systems have been developed with standardized tools and are accessible through web-based solutions. This facilitates the distribution of data and functions to partners and customers. Protector continuously seeks to utilise IT to increase daily work efficiency.
Protector's organization is based on highly qualified and experienced employees, whom counted 163 people at the end of 2013. The majority have long experience from the insurance industry. In addition to the development of claims handling, large resources have been invested to increase the capacity in the areas of underwriting, analysis, sales and service.
Clearly defined goals have been established for all employees, and these goals are linked to performance contracts. On all levels of the organization, a structure has been created for regular employee appraisals. Protector has defined four core values, which are part of the criteria on which employees are assessed in this process: Trustworthy, Accommodative, Brave and Enthusiastic.
In addition, Protector utilises a 270˚ and a 360˚process where all employees have an opportunity to give feedback on the compliance with the company's values. The process has been positively recieved and contributed to the further development of the company's performance-oriented culture. It also triggered further fine-tuning of the values in order to tailor them to our everyday life.
Protector started a new leadership development program called "the Dream Team Leader" for the company's management and key personnel with management responsibility in 2013. The program contained specific development goals for each participant, and a strengthening of the company's management teams. The objective is to develop a congruent leadership in Protector. This involves understanding the company's basic core-value based philosophy for leadership, both for management and for the rest of the organization.
In addition, there has been a program for employees, "Dream Team Employee", where 32 co-workers, divided into 4 groups have contributed with suggestions and projects to improve our work environment and culture. The groups have focused on the following areas:
By creating awareness amongst all co-workers concerning the company's basic core values and beliefs, our ambitions and our business, Protectors vigour and ability to realize the company's objectives will be strengthened.
Chief Financial Offi cer. Mr Vanay holds an MSc in Economics and Business Administration from the Norwegian School of Management. He has more than 15 years of experience from the insurance and IT sectors, amongst others fi nance and business controlling in Storebrand, If and Tinde.
| [1.000 NOK] | 2013 | 2012 | 2011 | |
|---|---|---|---|---|
| Gross premiums written | 1 860 617 | 1 517 017 | 1 202 479 | |
| Gross premiums earned | 1 814 626 | 1 464 244 | 1 176 965 | |
| Gross claims incurred | (1 450 587) | (1 170 976) | (898 796) | |
| Premiums earned for own account | 1 373 555 | 1 107 433 | 903 478 | |
| Claims incurred for own account | (1 133 527) | (940 094) | (729 843) | |
| Net commission income | 94 338 | 90 269 | 50 527 | |
| Operating expenses | (151 279) | (104 481) | (91 541) | |
| Other insurance income/costs | 386 | (127) | (1 409) | |
| Net fi nancial income | 256 729 | 245 571 | (51 388) | |
| Other income/costs | (9 885) | (4 904) | 3 111 | |
| Operating profi t before security provision | 430 316 | 393 668 | 82 935 | |
| Change in security provision | (54 839) | (146 531) | (49 921) | |
| Profi t before tax | 375 477 | 247 137 | 33 014 | |
| Profi t before other comprehensive income | 286 973 | 198 772 | (7 573) | |
| Profi t for the year | 292 624 | 207 679 | (7 573) | |
| Gross claims ratio | (1) | 79,9 % | 80,0 % | 76,4 % |
| Gross cost ratio | (2) | 8,8 % | 7,7 % | 10,0 % |
| Gross combined ratio | (3) | 88,7 % | 87,7 % | 86,3 % |
| Claims ratio for own account | (4) | 82,5 % | 84,9 % | 80,8 % |
| Cost ratio for own account | (5) | 4,1 % | 1,3 % | 4,5 % |
| Combined ratio for own account | (6) | 86,7 % | 86,2 % | 85,3 % |
| Retention rate | (7) | 75,7 % | 75,6 % | 76,8 % |
| Solvency capital | (8) | 1 335 313 | 1 086 448 | 741 288 |
| Solvency margin | (9) | 315 % | 304 % | 219 % |
| Capital adequacy ratio (risk weighted) | (10) | 20 % | 20 % | 19 % |
| Operating profi t before security provision etc per share | (11) | 5,21 | 4,77 | 1,00 |
| Net profi t after tax per share | (12) | 3,47 | 2,41 | (0,09) |
(1) Gross claims incurred in % of gross premiums earned
(2) Gross operating expenses in % of gross premiums earned
(3) Gross claims ratio + gross cost ratio
(4) Claims incurred for own account in % of premiums earned for own account
(5) Total operating expenses for own account in % of premiums earned for own account
(6) Claims ratio for own account + cost ratio for own account
(7) Premiums earned for own account in % of gross premiums earned
(8) Equity + security provision
(9) solvency margin is calculated according to the regulations of the Financial Supervisory Authority of Norway
(10) Net primary capital in % of risk weighted assets
(11) Operating profi t before security provision divided by weighted number of shares
(12) Net profi t after tax divided by weighted number of shares
In 2013, Protector's share price increased by 52,2 % including dividends and 43,3% excluding dividends. The Oslo Benchmark increased by 23,6 % during the same period. In 2012, Protector's share price increased 24,1 %, while the Oslo Benchmark index increased by 15,4 %. No dividends were paid in 2012 for the fiscal year 2011.
The average trading volume of Protector's shares on the Oslo Stock Exchange was 66,189 shares in 2013, relative to 39,698 shares in 2012.
At the end of 2013, Protector's share price was traded at NOK 19.20. The market value of total outstanding shares was NOK 1.654,2 million.
Protector's shareholders shall over time achieve competitive returns on their investment through a combination of cash dividends and an increase in the share price.
The company's goal is to maintain a solvency margin (calculated according to the regulations of the Financial Supervisory Authority of Norway) of at least 250 %. Unless the need for capital suggests otherwise, it is the board's target to distribute 30-50 % of the annual after-tax profit in a form of dividend. When the dividend is finalized, the decision will take into account the company's results and capital requirement including adequate financial buffers and the necessary flexibility for growth and development.
Protector's board normally proposes a dividend per share in connection with the publication of Protector's preliminary annual results in February. The General Meeting then considers the proposition in April or May, and the approved dividend payout to shareholders takes place in
April or May. For shareholders not domiciled in Norway, tax may be withheld from dividend payments in accordance with applicable regulations.
The board proposes dividend of NOK 1,75 per share for the fiscal year 2013, totaling NOK 144,5 million. The board considers the size of the dividend to be in line with the company's financial position and the position in the market. Dividends of NOK 1,20 per share, totaling NOK 99,1 million were distributed in 2013 for the fiscal year of 2012.
The company has issued a total of 86.155.605 shares consisting of only one class of shares with equal rights for all shareholders. A list of Protector's shareholders is provided in note 10 in this report.
The Annual General Meeting of Protector Forsikring ASA will be held at the company's premises at Filipstad Brygge 1, Oslo, on Wednesday 30 April. The notice will be sent to all shareholders and to the Oslo Stock Exchange. The notice to the Annual General Meeting will also be published on the company's website www.protectorforsikring.no.
30. APRIL Annual General Meeting 9. MAY Q1 results 2014 11. JULY Q2 results 2014 29. OCTOBER Q3 results 2014
| 17.12.2013 | Financial calendar 2014 - Protector Forsikring ASA |
|---|---|
| 15.11.2013 | Protector Forsikring achieved full victory in the West Tank case |
| 31.10.2013 | Result Q3 2013: Continued profitable growth, increased guiding |
| 28.10.2013 | Presentation of Results Q3 2013 |
| 17.10.2013 | Interest rate adjustment |
| 18.09.2013 | Notification of trade |
| 22.08.2013 | Notification of trade |
| 15.08.2013 | Notification |
| 17.07.2013 | Interest rate adjustment |
| 12.07.2013 | Result Q2 2013: 13 % growth, increased margins and increased guiding |
| 09.07.2013 | Presentation of results Q2 2013 |
| 14.05.2013 | Q1 result: 35 % growth, good results, increased gross claims ratio |
| 08.05.2013 | Presentation of results Q1 2013 |
| 26.04.2013 | Protector Forsikring ASA – Ex dividend NOK 1,20 today |
| 25.04.2013 | Annual General Meeting held |
| 17.04.2013 | Interest rate adjustment |
| 04.04.2013 | Notice of Annual General Meeting |
| 08.03.2013 | Protector Forsikring ASA – Proposed dividend |
| 28.02.2013 | Best year ever – 26 % growth and CR 86,2 % |
| 22.02.2013 | Presentation of Results Q4 2012 |
| 24.01.2013 | Protector Forsikring ASA, 18 % growth in 2013 |
| 17.01.2013 | Interest rate adjustment |
| case | |
|---|---|
| iding | |
| sed guiding | |
| s ratio | |
At the start of 2013 we were relatively up-beat. We guided the market on 18 % top-line growth, a combined ratio of 91 % and a stable cost ratio. The result: 23 % growth, a CR of 86,7 %, and a gross cost ratio of 13,8 %. In addition, we had a very strong financial result with 7 % return.
Our markets and our competitors have performed as expected. The real estate market is still functioning well, and despite some adjustments to the price level during autumn 2013, we expect a stable development in volume in 2014. We continuously win new customers and increase market share in the commercial segment – Protector now has Scandinavia as its home market, and growth outside of Norway will be the driving force in the coming years.
Our market share is now over 20 % in the market for land-based, brokered, insurance. We are strengthening our number 3 position in this market. When we now also have established robust & effective organizations in Sweden & Denmark, we are positioned well for strong growth in 2014. We expect a continued profitable growth and increased market share in Norway, Sweden and Denmark in 2014. At the same time our risk increases somewhat because it takes some time to ensure a profitable expansion in Sweden and Denmark as well as the continued rate pressure in the Norwegian market, especially in the personnel insurance sector.
We are at the same time reinforcing our position as both a quality and cost leader in our chosen segments. This translates to decent prices for brokers and end-customers as well as profitability for Protector. A true win-win-win situation.
our position was strengthened through an impressive growth whilst still earning money. The municipality segment has the largest growth due to focused underwriting and good relationships with the brokers, in addition to a larger volume on tender. The two segments together grew 14 % and we pass the billion mark with NOK 1.122 billion in revenue. As in 2012, the flow of tenders received from the large and medium insurance brokers has been strong. We have also managed to win several larger customers in 2013 despite fierce competition in pricing. Our customers now include approximately 211 large/ medium customers in the commercial segment, in addition to 228 municipalities.
In sum 2014 has begun on a strong footing. We are guiding single digit growth, but still continued good profitability.
In 2013 our position in Sweden is strengthened and the volume is increasing rapidly. We are growing within all insurance products, with the auto sector as our driving force. We have far more insured cars in Sweden than in Norway. We win customers both in municipality sector and in the market for big/medium sized companies. The second quality survey is carried out among Swedish insurance brokers, and Protector is increasing its quality leadership. Our team now consists of 20 people and they desserve praise for their impressive effort.
Protector got its first 6 municipalities on the client list in 2012. Since then, Denmark has developed quickly – Denmark is growing at a faster rate than both Sweden & Norway did 1,5 years after the start of operations. In total we have a large number of commercial clients and 16 municipality's on the client list in Denmark.
Our first impression of the brokers wishing us a warm welcome is confirmed by our first quality survey amongst the brokers, where Protector scored 76 out of 100 possible points – whilst the industry average is much lower. Our team now consists of 14 people and will grow further in the coming year. The effort in Denmark has also been very good.
As in Sweden, the cost ratio is high as a result of the manning coming somewhat ahead of the volume. The cost ratio will decrease dramatically in 2014 and will continue rapidly downwards in 2015.
Sweden & Denmark will drive double -digit growth at a company level over the next 2-3 years. We are looking forward to that!
we have maintained a market share somewhat above 50 %. Volume for 2013 was NOK 451 million, The increase is due to higher real estate prices, somewhat increased turnover rate, adjustment of our premium structure, in addition to our real estate agents winning market share. Volume is expected to be stable in 2014, as the real estate market is slowing down somewhat.
The number of claims is stable, but high at approximately 4,500 annually, and we still experience a very high number of law suits and 5.2 warnings – 500. We continue to achieve good results in the court where wins, draws, and losses are distributed at 46%, 24% and 30% respectively. Claims handling quality is
very good, and the focus on claim mitigation and recourse has yielded further good results. Our better result within change of ownership insurance is attributable to this job. In 2014 our margins are expected to decrease somewhat, as claims inflation is expected to be higher than price inflation (a negative price development within residential property is probable). Our perception is that our counterparties and partners experience us as constructive and professional, and that our reputation in the market is further strengthened.
Market surveys show, as in previous years, that our customers – and in particular those who have experienced a claim – are extraordinarily pleased with our quality. On a scale of 0-100 we receive an impressive 94 which is "all time high"- again. Our partners the real estate brokers also give us "thumbs up" in similar surveys. To this we are extremely grateful and we start on a new year with a boost of energy and enthusiasm.
Finally, I want to take an opportunity to address my appreciation to all those whom have contributed to our success. First, I would like to thank our cooperating insurance brokers and real estate brokers. We will work even harder in 2014 to make sure that your customers are satisfied. Thanks to our strong team of 163 motivated employees in Oslo, Stockholm, and Copenhagen. I feel that we have been able to grow quickly- both as an organization and in the marketplace – whilst at the same time, new employees and brokers meet an organization where the winning culture has taken new strides. Our "leading star", Larvik Håndballklubb, are not the only ones who are going to play in the Champions League.
Sverre Bjerkeli CEO
Chief Executive Officer. He has worked for Protector since 2004 and as CEO since 2006. Bjerkeli has more than 15 years of experience from the finance and insurance industry where he among other positions was director of private and business insurance in Storebrand/If. He was central in establishing Storebrand Bank as well as being the executive manager and has international experience through CEO positions in Torrino and Ementor Norge.
Gross premiums written amounted to NOK 1.122 million in 2013 compared to NOK 985 million in 2012, a growth of 14 %. The company has experienced strongest growth within public sector as a result of increased volume in the market and the company's competitiveness in the tender process. The growth was observed within all product lines, but was strongest within personnel insurance where new sales were especially good. Renewal rate was 93% in 2013, slightly down from 2012, nevertheless, in accordance with set goals.
The company maintained its cost leadership in 2013 & achieved a good level of profi tability. This gives more room
KJERSTI K. MYKING (48) – DIRECTOR OF MARKETING Employee since 01.04.2013. Diploma in Marketing & Economics from Norwegian School of Marketing. Experience as marketing director in Storebran and Microsoft. Comes from position as client director in Carat Norge.
Protector off ers all types of insurance to the commercial and public sector, with the exception of pension insurance.
for competitive pricing and better opportunities for winning new contracts as well as renewing the existing ones.
DIRECTOR OF COMMERCIAL AND PUBLIC LINES OF BUSINESS Employee since 01.07.2007. MSc in Finance & BSC in Economics from University of Colorado in Boulder, USA. Høye comes from the position as Director Public sector and has been responsible for the building of Protector's public sector initiative. 2011
Protector cooperates extensively with the insurance brokers in the Norwegian market and has access to all relevant tenders through the year. A substantial share of tenders is channeled through the "Top 5" fi rms. In a survey conducted in the autumn of 2013 the brokers rated Protector as their most preferred insurance company for the seventh consecutive year.
Protector's strategy of price diff erentiation and selective risk-taking on individual customers stands. It will ensure that
the company can combine profi table growth both through sales and renewals. The intensity of market competition varies according to segments, and is strongest where we historically have experienced the thinnest economic margins. Protector's low cost level is the key to acquire profi table business in these segments. However, the key driver of profi table growth in 2013 has been the company's renewal rate and ability to win new large customers.
Protector continues its focus on increasing the competence of every employee and leader. The commercial and public lines of business have strengthened its leadership capacity during 2013 and are now equipped for further growth in its portfolio. This focus has also lead to a high level of operational and technical expertise in both the leadership and other amongst co-workers.
In 2013 the commercial department in Norway supported Protector's growth in Sweden and Denmark with core skills and resources. Increasingly, the focus now is on the transferring og expertise between our three geographical locations.
Own routines and processes were developed further in 2013 with an improved follow-up on claims handling as the main measure. Work yielded signifi cant results with respect to culture, however, further work is being focused on tapping potential for improvements in eff ectiveness and quality. Brokers score Protector's claims handling at the top quality wise in the 2013 release of the company's established survey. We are proud of this, but we will continue to improve us further. Protector's high level of quality within sales, underwriting, service off erings and claims handling is documented through internal as well as external surveys.
Gross written premiums in Sweden and Denmark was NOK 288 million in 2013, an increase of NOK 182 million from 2012 (174%). Sweden & Denmark are approximately the same size with regards to volume, with gross written premiums of NOK 147 million in Sweden & NOK 141 million in Denmark. Both countries have built signifi cant portfolios within the commercial and public sectors. At the onset of 2014, Sweden had 119 municipalities, 7 counties and approximately 100 middle sized companies in the client list. Large clients in Sweden include Nibe, Nobina, PostNord, Bring & Securitas. Denmark had 16 municipalities and several hundred companies on the client list. Among the largest clients are Dansk Cater, Tedebus, FTZ, Berendsen, G4S and Tvillum, in addition to Danske Maskinstationer & Entreprenører og Danske Restauranter within the affi nity segment.
Protector follows the same business model in Sweden and Denmark as in Norway. In both countries Protector has been well received by the brokers. In our Swedish & Danish quality survey in 2013, the brokers evaluated Protector ahead of all our competitors on quality both in Sweden & Denmark. In Sweden, a similar surcey was carried out in 2012, where Protector was ranked as number one by the brokers. In Denmark the survey was carried out for the fi rst time in 2013. In spite of somewhat few respondents in the survey, we are very pleased with achieving the number one spot in Denmark as well.
Staffi ng in Sweden & Denmark increased signifi cantly in 2013 to support the strong growth. In Sweden the staff has increased with 11 employees (from 8 employees in 2012) and in Denmark the staff has increased by 8 employees (from 6 employees in 2012). The increased staffi ng in both countries has for the most part been within underwriting and claims handling. In the start-up phase, Sweden & Denmark have utilized external claims handling agents until the number of claims justifi ed in-house claims handling departments. At year end 2013, both countries have taken claims handling in-house.
Now that both Sweden & Denmark are becoming a signifi cant part of the company, focus will be turned to the exchange of knowledge and experience across borders as a result of all three geographical locations now having built up extensive expertise within diff erent insurance products and segments.
COUNTRY MANAGER SWEDEN Employee since 01.07.2011. Didring holds an MSc in Business Administration and Economics and a BSc in Computer Engineering. He has 6 years of experience from various positions in If and Länsförsäkringar. Didrings last position was as Head of Broker Sales and Service at If in Stockholm.
FLEMMING CONRAD (57) – COUNTRY MANAGER DENMARK Employee since 01.08.2012. IEP Insead, Handelshøjskolen, Merkonom (O), Forsikringsakademiet. He has 38 years of experience in insurance sector from Hafnia, Codan, Provinzial, Trekroner and Nykredit. His latest position was director in Gjensidige's branch in Denmark.
In 2013 Protector maintained its status as market leader. The company's most important brokers are Eiendomsmegler 1, Privatmegleren and Krogsveen. The larger real estate chains grew in line with or above the market trend- especially Krogsveen has expanded in number of offi ces and agentswhile the smaller chains reduced their market share. The real estate agent ProA reached an agreement with Protector to distribute change of ownership insurance in September 2013. Change of ownership is sold solely through real estate brokers, and Protector has maintained the relationship through proper information, effi cient support routines and a high level of quality in claims handling. Protector's market share exceeds 50 %.
The turnover of real estate was high in 2013 and was in line with 2012. Both sales and turnover remained at a very high level in 2013, even though turnover slowed down slightly towards the end of the year. Prices increased by 5 % yearto-year and contributed further to the growth of written premiums which increased by 6 % from NOK 427 million in 2012 to NOK 450 million in 2013. Hit ratio was stable at approximately 80 %.
Protector takes the quality leader in the change of ownership insurance market. The company's goal is to provide our real estate brokers with a service that lets them focus on their clients. Protector's service includes proper information, best practices and a general availability in our service centre that answers any questions.
During 2013 Protector off ered professional courses and training to most of the 2,500 brokers that are the company's sales channels. Professional courses within the area of the sale of property law, brokerage responsibility and area are accepted as a part of broker's mandatory continuing education by the Financial Supervisory Authority of Norway. We have seen a very good reception to these training opportunities among the real estate agents.
By the end of 2013 12 employees were working with sales and support towards the real estate brokers.
Protector regularly ask the real estate brokers to evaluate the company. In the latest survey the brokers score Protector highly in all areas. On the particular question,
board member in Finansklagenemda.
2013 2012 2011
"How satisfi ed are you with Protector as a distributor of change of ownership insurance", Protector receives a score of 89 out of a possible 100. This high level has been stable over several years.
Approximately 4,500 claims were reported through 2013, an increase of 4,7 % relative to 2012. The number of legal processes was over 500 which is stable compared to 2012. The underlying trend is a high, but stable, level of confl ict.
Quality in claims handling is a high priority, and the department has reached a high level in 2013. 80 % of reported claims are determined and communicated to the claimant within 10 days of receiving their documentation along with a low share of claimants who do not accept the company's conclusion.
At the end of 2013 Protector had a running portfolio of 1,700 claims and strong operational control supported by monthly reporting on each claims handlers progress. This results in a positive development on time consumption and a better sale of conclusions to claimants.
The number of court ruling in 2013 has increased to over 300. The ratio of settlements to court rulings was ca 50 % in 2013, relatively stable compared to 2012. The share of court rulings won completely or partially was 70 % in 2013 relative to 81 % in 2012.
Hvor tilfreds er du med Protector som leverandør av eierskifteforsikring? How satisfi ed are you with Protector as a supplier of COI?
I hvor stor grad har Protector innfridd dine forventninger til produktet Tp what extent had Protector redeemed your expectations to the PRODUCT COI?
Hva er sannsynligheten for at du kommer til å anbefale din neste kunde en eierskifteforsikring fra Protector? What is the probability of you recommending COI from Protector to your next client?
Hvilken verdi har eierskifteforsikring for What is the value of COI for you as a real estate broker?
Hvilken verdi mener du din kunde får ved å tegne eierskifteforsikring? What is the value of COI for your client?
Hvis noen spør deg om Protector, i hvor stor grad vil du omtale selskapet positivt? When asked for your opinion on Protector, to what extent will you speak of the company in positive terms?
Protector's conclusion was upheld in 80 % of claims brought before the independent appeal bodies KKFE or FinKn in 2013. This is a strong result and supports our conclusion that the company's claims handling holds a high level of quality.
Work with technical surveys began to fi nd its own form. Technical professional competence yields a better ground for decision within claims handling and better solutions –for claimants as well. Development within damage valuation is positive.
The share of real estate sales reports is stable, but the quality is still at a low level. Protector is active in several areas in order to eff ect the quality, among other things through the development of a new Norwegian standard.
Protector focuses on correct claims handling. This means that costs shall be allocated to the third party who has the responsibility for the fact that a claim has arisen. In 2013 Protector has achieved very good results within claims reducing measures and recourse. We are evaluating the basis for allocating responsibility to the third party in over 90 % of the cases.
Protector regularly ask our end customers to evaluate the company. In the latest survey the home sellers score Protector highly in all areas. On the particular question, "What is the probability of choosing Protector in your next sale", Protector receives a score of 94 out of a possible 100.
Our surveys show that home sellers – who are purchasing the insurance, and thus are our customers – are extremely satisfi ed. The same can be said about the real estate brokers, whom again give Protector and the product a very high score.
Protector Forsikring ASA is a general insurance company (P&C) serving non-marine industries. The company's focus is towards the commercial and public sectors and the affi nity insurance market. Protector was founded 2003 and obtained a license to engage in general insurance the same year. The company commenced its operations in 2004 and was listed on Oslo Stock Exchange in May 2007. Protector entered the Swedish insurance market in 2011 and the Danish insurance market in 2012. Protector is operating from its head offi ce in Oslo.
Strong growth within the commercial & public lines of business in all of the three countries the company has operations
Increase in cost ratio due to substantial increase in manning
A strong technical result
A strong return on investments
In 2013, gross premiums written increased by 23% to a total of NOK 1.860,6 million. Gross premiums earned increased by NOK 350,3 million to a total of NOK 1.814,6 million. Premiums earned for own account were NOK 1.373,6 million, an increase of 24% compared to 2012.
The company had especially strong growth within commercial and public sectors, where gross premiums written amounted to NOK 1.263 million, compared to NOK 959 million in 2012 (32% growth).The growth is mainly due to high new sales within both the commercial & public sector. The growth in Sweden and Denmark constituted 19% points of the total growth within commercial and public sector. In 2013 growth in the Norwegian municipality sector was 18%, and the company strengthens its position as number 3 in this market. In the public sector, Protector has continued to experienced strong competition, especially within personnel insurance products, where the pricing is more aggressive. In Sweden & Denmark, the company had 113 municipalities on the customer list at year end 2013. Gross written premiums in Sweden and Denmark constituted NOK 288 million, whereof 46% of business came from the public sector and 54% from the commercial sector.
Within the affi nity segment, gross written premiums amounted to NOK 597,2 million, compared to NOK 558,2 million in 2012. This is an increased growth rate compared to last year. Premium income within change of ownership insurance, the company's largest affi nity program, totaled NOK 450,9 million, a growth of 6% compared to 2012. The growth is driven by increased property prices and increased total number of insurance policies sold. Protector's market share is approximately unchanged in 2013 and is estimated to be above 50%. The total number of the real estate sellers who buy change of ownership insurance is at a stable level. In 2013 hit-ratio was slightly above 80%.
JOSTEIN SØRVOLL CHAIRMAN OF THE BOARD
Age: 64 Education: Actuary from the University of Oslo (1973) Work experience: Private investor CEO of Gabler Wassum AS (2009-2010) CEO of Protector Forsikring ASA (2003-2006) CEO of Norske Liv AS (1992-1998) Executive positions in the Storebrand group (1976-1990) Director of Protector since: 2006 Other essential tasks in companies and organizations: Chairman of the Board,
Gabler Rådgivning AS Regarded as an independent director: Yes
Education: Dipl. Pol. Free University of Berlin (F.U) Work experience: Franchise Performance Director forI Lloyds (2003-2009) Chief Underwriting Offi cer Faraday Underwriting (2001-2003) CEO of Europe Re (1990-2001) CEO of Polaris (1987-1990) Head of Reinsurance Storebrand Re (1975-1987) Director of Protector since:
Other essential tasks in companies and organizations: Board member in Beazley Furlonge Plc., Beazley Furlonge Ltd., member in an audit committee for Beazley Ltd. and Plc., leader in Risk and Reg committee in BFL Regarded as an independent director: Yes
Education: MSc in Economics and Business Administration, Stockholm School of Economics (1988) Work experience: Senior advisor, Yggdrasil AB (2008-) Executive Chairman, Erik Penser Fondkommission (2006-2008) CEO, Erik Penser Fondkommission (2004-2006) Founder and CEO, Mercurius Financial Communications AB (1994-2000) Corporate fi nance, Equity research, Investor relations at Investor AB (1988-1994) Director of Protector since: 2012 Other essential tasks in companies and organizations: Chairman of the Board, Spago AB and FTrack AB. Board member in Probi AB,
Pled Pharma AB, Axel Christiernsson International AB, Temaplan Asset Management Holding AB and AP-Fonden Regarded as an independent director: Yes
Operating profi t before changes in security provisions and tax amounted to NOK 430,3 million, compared to NOK 393,7 million in 2012. The return on the company's average solvency capital after tax amounted to 28%, compared to 38% in 2012. The improvement of the result is due to a strong technical result and strong investment returns.
The company's claims ratio for own account decreased from 84,9% in 2012 to 82,5% in 2013. The cost ratio was 4,1%, up from 1,3% in 2012. The development in claims and cost ratio resulted in a combined ratio of 86.7% in 2013, compared to 86,2% in 2012.
A stronger claims result is due to increased profi tability in most products in Norway, along with higher run-off gains in 2013 compared to 2012. The profi tability in all of the commercial lines of business is still satisfactory. The change of ownership insurance continues to develop nicely, and has a good level of profi tability in 2013. The profi tability in Sweden & Denmark is lower than set goals for 2013, however, there are no material profi tability challenges in the portfolio.
The cost ratio has increased slightly compared to 2012. Gross cost ratio (including claims handling costs) was 13,8% compared to 12,7% in 2012.The increase is driven by increased manning in all three countries. The manning has equipped the company for future growth, and the rate of manning is to decrease in 2014, leading to an estimated reduction of cost ratio through a strong topline development as well as continued focus on effi ciency and costs.
Net income from investments totaled NOK 256,7 million or 7,0% in 2013, compared to NOK 245,6 million or 8,9% in 2012. Credit spread tightening and a strong equities market contributed to the good result. Return on the fi xed income portfolio totaled NOK 193,9 million or 5,9% in 2013. In 2012 the return on the fi xed income portfolio was NOK 166,1 million or 6,8%. The return on equities was NOK 62,8 million or 17,3% compared to NOK 79,5 million or 25,2% in 2012.
The growth in premiums for own account requires higher statutory security provisions. In 2013, the security provisions increased by NOK 54,8 million, from NOK 503,3 million in 2012 to NOK 558,1 million in 2013. At year end 2013, security provisions were NOK 229,7 million higher than the minimum requirements set by The Financial Supervisory Authority of Norway
Net profit for Protector Forsikring ASA amounted to NOK 292,6 million.
The financial statements are presented on the assumption of meeting the requirement of a going concern. No circumstances which are material for the evaluation of the company's position and results have occurred following the end of the fiscal year.
Protector's solvency margin at year-end 2013 was 315%. The capital adequacy ratio was 20% against a minimum requirement of 8%. A more detailed description of the calculation of the solvency margin and capital adequacy ratio is provided in note 20.
At the end of 2013, the company's solvency capital amounted to NOK 1.335,3 million, NOK 777,2 million in total equity (before proposed cash dividend) and NOK 558,1 million in security provision.
The company's free equity before the proposed cash dividend amounted to NOK 302,8 million at the end of 2013.
Net cash flow from operational activities, before investments in financial assets, was positive at NOK 791,5 million. Net cash flow was negative NOK 5 million. The company's cash holdings at year end 2013 was NOK 201,2 million.
The Board of Directors regards the company's capital situation and financial solvency as satisfactory.
The company actively works with the preparations for Solvency II. Current calculations indicate that Protector Forsikring also has a satisfactory solvency according to the new regulations.
At the end of 2013 the company has 3.570.661 own shares, which is unchanged from 2012.
Protector Forsikring ASA had 2.525 shareholders at 31.12.2013.
The Board of Directors proposes a cash dividend of NOK 1,75 per share for 2013, totalling NOK 144,5 million. The Board considers the size of the dividend to be in line with the company's financial position and the position in the market. The proposed dividend is included in other equity.
The company's target is to maintain a solvency margin (calculated according to the regulations of the Financial
ELSE BUGGE FOUGNER BOARD MEMBER
Education: Cand.jur. (Law degree) from the University of Oslo (1971) Work experience: Partner in Advokatfirmaet Hjort DA (from 1991) Amanuensis at the University of Oslo (1990-1991) Minister of Justice, Justice Department (1989-1990) Partner in Advokatfirmaet Hjort DA (1975-1989) Lawyer in Advokatfirmaet Hjort DA (1972-1975) Director of Protector since: 2011 Other essential tasks in
companies and organizations: Chairman of the Board, Kommunalbanken and Eksportkreditt. Board member in Aberdeen Eiendomsfond Norge II ASA, Aker Kværner Holding AS Regarded as an independent
director: Yes
ERIK G. BRAATHEN BOARD MEMBER
Age: 58 Education: Master of International Management Work experience: Private investor (from 1999) CEO Braathens Safe ASA (1989-1999) Chairman of the Board, Norwegian Air Shuttle (2004-2009) Director of Protector since: 2009 Other essential tasks in
companies and organizations: Chairman of the Board, Holmen Fondsforvaltning ASA. Board member in Fly Leasing Ltd., Cenzia AS, Peer Gynt Tours AS, North Sea PSV, Opra Technologies ASA. Deputy board member in Pareto Bank ASA. Regarded as an independent director: Yes
Supervisory Authority of Norway) of at least 250%. Unless the need for capital suggests otherwise, it is the board's target to distribute 30-50% of the annual after-tax profit in a form of dividend. The final determination will be initially based on the company's results and capital requirement inclusive satisfactory buffer and the necessary flexibility for growth and development in the company.
Risk taking is core to the company's business. Continuous monitoring and active risk management is an integrated area in Protector's activities and organisation. The main risk factors, of which the company are exposed to, are: market risk, insurance risk, credit risk, liquidity risk, operational risk and strategic risk.
Protector is exposed to losses due to changes in observable variable market factors such as interest and equity prices. At the end of 2013, the company's investment portfolio totalled NOK 4 billion, where 86,8% was placed in interest-bearing instruments and 13,2 % was placed in equities and equity funds. The equity share was increased by 4,3 percentage-points. This is due to reallocation from the fixed income portfolio to equities as well as new investments being allocated to equities. The duration (interest rates) in the fixed income portfolio was 0,56 years (inclusive bank deposits) at end 2013, a decrease from 0,88 years from end 2012. The interest rate risk is considered to be low.
The Board of Directors determines the company's investment strategy annually. Limitations for the company's ability to carry risk are established in the investment strategy and the market risk is continuously measured against the company's risk capital. The consolidated market risk is measured and is reported to the Board each quarter. The total market risk on the company's financial position is considered to be acceptable.
View note 3 of the accounts for further information regarding interest risk and stress tests.
The company's securities are managed by Alfred Berg Kapital Forvaltning, Arctic Fund Management, Carnegie Kapitalforvaltning, Danske Capital, Nordea Investment Management and Pareto Kapitalforvaltning.
The insurance risk is adjusted to the company's accessible risk capital. Risk related to insurance operations is limited by the company's establishment of a comprehensive reinsurance
Age: 52 Education: Cand.Jur. (Law degree) from the University of La Sapienza, Roma (1984), Ph.D. in Law from the Russian Academy of Science, Moscow (1995), Dr.juris at the University of Oslo (1999) Work experience: Leader of institute of Private Law, Univeristu of oslo (2012-). Professor at the Institute of Private Law, at the University of Oslo. Legal practioner and partner in the law firm Lindh Stabell Horten DA (2002). Legal practioner and partner in the law firm Hjort DA (1999-2001). Lawyer at Norsk Hydro ASA, Norway (1989-1999). Lawyer at FIAT S.p.A., Italy (1986-1989). Director of Protector since: 2005 Other essential tasks in companies and organizations: Chairman of the Board, Norwegian Association for Comparative Law Judge, Administrative Tribunal, European Bank for Reconstruction and Development Regarded as an independent director: Yes
Age: 65
Education: Cand.Jur. (Law degree) from the University of Oslo (1975), Supreme Court Attorney Work experience: Partner in Advokatfirmaet SIMONSEN Vogt Wiig AS (1980-present) Extensive national and international experience within the field of business law. Director of Protector since: 2003
Other essential tasks in companies and organizations: Chairman of the Board, Quorum Verdi Invest AS and Verpetangen AS. Member of the board in Quorum Invest AS, Nexen Exploration Norge AS, Agdesidens Rederi AS. Regarded as an independent director: Yes
FREDRIK H. ØYAN BOARD MEMBER (elected by the employees)
Education: B. Sc. Management (2005), M. Sc. Risk Management (2006)
Chief Underwriter P&C and Reinsurance in Protector Forsikring ASA (from 2009), Account Executive in Willis Ltd, London (2006 – 2008) Director of Protector since: 2012
Other essential tasks in companies and organizations: None
programme with well-established reinsurers. The limits for the reinsurance programme are determined by the need to protect equity against claims beyond an acceptable amount, as well as the need to reduce fl uctuations of results over time. Through the reinsurance programmes, the company is satisfactory covered against catastrophic incidences and large losses. At the end of 2013 the retention rate was 75,7% slightly up from 75,6% in 2012.
Credit risk is the risk of incurring losses when counterparties fail to meet their obligations. Furthermore, it includes the risk of changes in general credit prices, the so-called creditspread risk. Protector is exposed to the credit risk through its investments in interest-bearing instruments and through reinsurance.
The company has established limits for various issuers of securities and defi ned a minimum level for the credit rating within the various groups of issuers. Limits for credit duration are also established. In 2013, the credit duration on the fi xed income portfolio has been increased from 3,1 to 3.23 years. There have not been any signifi cant changes in the average credit rating for the issuers in the portfolio, where the average rating is BBB.
Outstanding claims with the company's reinsurers represent a credit risk. All Protector's reinsurers have got a very good rating and their rating is monitored closely.
The total credit risk in the company is regarded as acceptable.
In P & C insurance, the liquidity risk is in general low since premiums are due for payment before claims have to be paid. Protector's premium income is, in large, placed in cash accounts or liquid securities ensuring that Protector will be able to procure the necessary liquidity at all times. Thus, the company's liquidity risk is considered low.
Operational risk is the risk of losses because of insuffi cient or failing internal processes or systems, human error or external events. Today, the operational risk is documented in connection with the work to fulfi l the "regulation on risk management and internal control". The fundamental feature in this work is that the individual manager carries out a process to identify the main risks before and after measures have been implemented. In 2013, this work did not discover risks that were not satisfactorily controlled. The operational risk is regarded as low.
Education: Cand.jur. from University of Oslo (1999) Work experience: Lawyer in Protector Forsikring ASA (2005 – d.d.) Lawyer in Advokatfi rma Hersløv Bull & Co (2001-2005) Associate lawyer in Hersløv & Co (1999-2001) Director of Protector since: 2012 Other essential tasks in
companies and organizations: Member of Finansklagenemnda Eierskifte
Strategic risk relates to Protector's choice of strategic position, including distribution, IT-strategy, fl exibility relative to the market, business partners, reputation and changes in the market conditions. Protector's strategy is continuously assessed against results, fl uctuations in markets and competition and changes in framework conditions. Elements that are critical to the company's achievements are subject to special monitoring.
The company had 163 employees at year end 2013. This is an increase of 38 employees during the year, of which 19 are employed in Sweden & Denmark. 19 of the company's 163 employees are working in our offi ce in Sweden and 14 in Denmark. Great emphasis is placed on organisational development and further development of employees as well as recruitment of highly qualifi ed personnel. Through 2013, the company's core competence and capacity are strengthened, to enable continued growth.
Of the company's employees, 53% are women and 47% are men. The company's management team comprises two women and fi ve men. The Board of Directors comprises four women and fi ve men. No special measures have been implemented to promote equal opportunities.
Sick leave amounted to 4,6% in 2013, unchanged from 2012. No occupational accidents or injuries were reported during 2013.
The company's business activity does not pollute the external environment. For further information concerning Corporate Social Responsibility, please see the company's report on Corporate Governance.
CORPORATE GOVERNANCE Protector established its own principles of corporate governance in 2007. The Board has an annual review of these principles. The principles will contribute to value maximizing for shareholders over time and increased confi dence in the company through an open corporate culture and good reputation. The principles of corporate governance mainly follow the laws and regulations the company is subject to. Furthermore, the principles are based on the Norwegian Code of Corporate Governance of 23 October 2012. For a more detailed description of the Protector's corporate governance, see a separate article in this report.
The company expects continued growth in 2014 despite strong competition in all markets. The expected growth is based on a very good start in 2014 in all three geographical markets and a continued good access to new business.
The company expects that underlying profi tability will continue to be good. Nevertheless, as a result of the company's expansion in Sweden & Denmark, there is an increase in uncertainty concerning claims development.
Normally there is a great deal of uncertainty regarding forward-looking matters, however, in the Board's opinion the company is well-equipped to meet the competition in the furture.
Oslo, 13 March 2014 The Board of Directors of Protector Forsikring ASA Translation – not to be signed
| Jostein Sørvoll (Chairman) |
Rolf Tolle | Else Bugge Fougner |
|---|---|---|
| Erik G. Braathen | Eva Redhe Ridderstad | Giuditta Cordero-Moss |
| Jørgen Stang Heff ermehl | Fredrik H. Øyan | Marianne Kvanvik |
Sverre Bjerkeli
(CEO)
| [1.000 NOK] | Notes | 2013 | 2012 |
|---|---|---|---|
| PREMIUMS INCOME | |||
| Gross premiums written | 1 860 617 | 1 517 017 | |
| Premiums written ceded | (432 108) | (347 394) | |
| Change in gross provision for unearned premiums | (45 991) | (52 773) | |
| Change in reinsurers' share of provision for gross unearned premiums | (8 963) | (9 417) | |
| Earned premiums for own account | 4 | 1 373 555 | 1 107 433 |
| Allocation of investment return transferred from non-technical account | 1 | 47 376 | 24 663 |
| Other insurance related income | 3 368 | 3 929 | |
| CLAIMS | |||
| Gross claims paid | (940 341) | (753 826) | |
| Reinsurers' share of claims paid | 215 381 | 166 453 | |
| Change in provision for gross outstanding claims | (510 246) | (417 150) | |
| Reinsurers' share of change in provision for gross outstanding claims | 101 679 | 64 429 | |
| Claims incurred for own account | 4 | (1 133 527) | (940 094) |
| INSURANCE RELATED OPERATING EXPENSES | |||
| Sales expenses | 14 | (7 545) | (8 245) |
| Insurance related administrative expenses | 11, 15-17 | (151 279) | (104 481) |
| Commissions from the reinsurers | 4 | 101 882 | 98 515 |
| Total operating expenses for own account | (56 941) | (14 212) | |
| Other insurance related expenses | (2 982) | (4 055) | |
| Technical result before changes in security provision etc. | 230 848 | 177 663 | |
| CHANGES IN SECURITY PROVISIONS ETC. | |||
| Change in security provision | 4 | (54 839) | (146 531) |
| Technical result | 176 009 | 31 132 | |
| NET FINANCIAL INCOME | |||
| Interest income and dividend from financial assets | 108 810 | 113 861 | |
| Unrealised gains and reversed unrealised losses on financial assets | 92 218 | 43 118 | |
| Gains and losses from realisation of financial assets | 55 409 | 89 798 | |
| Administration expenses | 292 | (1 205) | |
| Total net financial income | 18 | 256 729 | 245 571 |
| Allocated return on investment transferred to technical account | 1 | (47 376) | (24 663) |
| Other income | 2 203 | 3 887 | |
| Other costs | (12 088) | (8 790) | |
| Non-technical result | 199 468 | 216 005 | |
| Profit before tax | 375 477 | 247 137 | |
| Tax | 12 | (88 504) | (48 366) |
| Profit before other comprehensive income | 286 973 | 198 772 | |
| Actuarial gain and loss from defined benefit pension plans- benefits to employees | (7 129) | 12 372 | |
| Currency changes from foreign enterprise | 15 077 | - | |
| Tax on other comprehensive income | (2 297) | (3 464) | |
| PROFIT FOR THE YEAR | 292 624 | 207 679 | |
| ALLOCATION OF PROFIT/LOSS | |||
| Transferred to/from other equity | 292 624 | 207 679 | |
| Total allocations | 292 624 | 207 679 | |
| Earnings per share | 19 | 3,47 | 2,41 |
| Diluted earnings per share | 19 | 3,47 | 2,41 |
Oslo, 13 March 2014 The Board of Directors of Protector Forsikring ASA Translation – not to be signed
Jostein Sørvoll Rolf Tolle Else Bugge Fougner
(Chairman)
Erik G. Braathen Eva Redhe Ridderstad Giuditta Cordero-Moss
Jørgen Stang Heffermehl Fredrik H. Øyan Marianne Kvanvik
Sverre Bjerkeli (CEO)
| [1.000 NOK] | Notes | 2013 | 2012 |
|---|---|---|---|
| ASSETS | |||
| INTANGIBLE ASSETS | |||
| Other intangible assets | 5 | 11 224 | 8 908 |
| Total intangible assets | 11 224 | 8 908 | |
| FINANCIAL ASSETS | |||
| Financial assets at fair value through profit or loss | |||
| Shares | 529 025 | 285 059 | |
| Securities, bonds etc | 3 422 903 | 2 843 465 | |
| Other financial assets | 47 884 | 64 295 | |
| Total financial assets | 3, 7 | 3 999 812 | 3 192 820 |
| REINSURERS' SHARE OF GROSS TECHNICAL PROVISIONS | |||
| Reinsurers' share of provisions for unearned premiums | 81 381 | 68 625 | |
| Reinsurers' share of provisions for claims | 324 491 | 220 419 | |
| Total reinsurers share of gross technical provisions | 4 | 405 872 | 289 045 |
| RECEIVABLES | |||
| Policyholders | 39 469 | 17 405 | |
| Intermediaries | 44 397 | 54 395 | |
| Other receivables Total receivables |
8 | 18 700 102 566 |
3 167 74 967 |
| OTHER ASSETS | |||
| Tangible fixed assets | 6 | 8 483 | 9 336 |
| Cash and bank deposits | 3, 9 | 153 323 | 141 890 |
| Total other assets | 161 806 | 151 226 | |
| PREPAID EXPENSES AND ACCRUED INCOME | |||
| Other prepayments and accrued income | 62 803 | 48 596 | |
| Total prepaid expenses and accrued income | 62 803 | 48 596 | |
| TOTAL ASSETS | 4 744 083 | 3 765 562 |
| [1.000 NOK] | Notes | 2013 | 2012 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| SHAREHOLDERS' EQUITY | |||
| Share capital [86.155.605 shares at NOK 1] | 10 | 86 156 | 86 156 |
| Own shares | 10 | (3 571) | (3 571) |
| Other paid-in equity | 4 847 | 4 847 | |
| Total paid-in equity | 87 432 | 87 432 | |
| EARNED EQUITY | |||
| Natural perils fund | 15 439 | 21 240 | |
| Guarantee scheme | 61 594 | 53 167 | |
| Other equity | 612 711 | 421 814 | |
| Total earned equity | 689 744 | 496 222 | |
| Total equity | 20 | 777 176 | 583 654 |
| Subordinated loan | 3, 20 | 148 125 | 148 125 |
| GROSS TECHNICAL PROVISIONS | |||
| Provision for unearned premiums | 275 543 | 226 786 | |
| Provision for claims outstanding | 2 | 2 535 109 | 2 017 886 |
| Security provision | 558 137 | 503 298 | |
| Total gross technical provisions | 4 | 3 368 789 | 2 747 969 |
| PROVISIONS FOR OTHER LIABILITIES | |||
| Pension liabilities | 11 | 8 627 | 11 686 |
| Deferred tax | 12 | 21 755 | 11 658 |
| Total provisions for other liabilities | 30 382 | 23 344 | |
| OTHER LIABILITIES | |||
| Liabilities related to direct insurance operations | 13 | 17 265 | 7 716 |
| Liabilities related to reinsurance operations | 13 | 182 439 | 130 515 |
| Other liabilities | 13 | 111 994 | 53 580 |
| Total other liabilities | 3, 13 | 311 698 | 191 812 |
| ACCRUED EXPENSES AND DEFERRED INCOME | |||
| Other accrued expenses and deferred income | 107 912 | 70 659 | |
| Total accrued expenses and deferred income | 107 912 | 70 659 | |
| [1.000 NOK] | Notes | 2013 | 2012 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| SHAREHOLDERS' EQUITY | |||
| Share capital [86.155.605 shares at NOK 1] | 10 | 86 156 | 86 156 |
| Own shares | 10 | (3 571) | (3 571) |
| Other paid-in equity | 4 847 | 4 847 | |
| Total paid-in equity | 87 432 | 87 432 | |
| EARNED EQUITY | |||
| Natural perils fund | 15 439 | 21 240 | |
| Guarantee scheme | 61 594 | 53 167 | |
| Other equity | 612 711 | 421 814 | |
| Total earned equity | 689 744 | 496 222 | |
| Total equity | 20 | 777 176 | 583 654 |
| Subordinated loan | 3, 20 | 148 125 | 148 125 |
| GROSS TECHNICAL PROVISIONS | |||
| Provision for unearned premiums | 275 543 | 226 786 | |
| Provision for claims outstanding | 2 | 2 535 109 | 2 017 886 |
| Security provision | 558 137 | 503 298 | |
| Total gross technical provisions | 4 | 3 368 789 | 2 747 969 |
| PROVISIONS FOR OTHER LIABILITIES | |||
| Pension liabilities | 11 | 8 627 | 11 686 |
| Deferred tax | 12 | 21 755 | 11 658 |
| Total provisions for other liabilities | 30 382 | 23 344 | |
| OTHER LIABILITIES | |||
| Liabilities related to direct insurance operations | 13 | 17 265 | 7 716 |
| Liabilities related to reinsurance operations | 13 | 182 439 | 130 515 |
| Other liabilities | 13 | 111 994 | 53 580 |
| Total other liabilities | 3, 13 | 311 698 | 191 812 |
| ACCRUED EXPENSES AND DEFERRED INCOME | |||
| Other accrued expenses and deferred income | 107 912 | 70 659 | |
| Total accrued expenses and deferred income | 107 912 | 70 659 | |
| TOTAL LIABILITIES AND EQUITY | 4 744 083 | 3 765 562 |
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| CASH FLOW FROM OPERATIONS | ||
| Paid in premiums | 1 853 654 | 1 496 208 |
| Paid claims | (928 849) | (757 564) |
| Paid reinsurance | (89 608) | (91 039) |
| Paid operating expenses including commissions | (120 272) | (114 587) |
| Interest / dividend income | 110 956 | 118 656 |
| Payments in from financial instruments | 1 916 950 | 1 498 886 |
| Payments out from financial instruments | (2 592 398) | (2 171 674) |
| Payable tax | (34 421) | (49 113) |
| Net cash flow from operations | 116 013 | (70 227) |
| CASH FLOW FROM INVESTMENT ACTIVITIES | ||
| Invested in fixtures | (2 151) | (6 444) |
| Invested in intangible assets | (7 777) | (4 910) |
| Net cash flow from investment activities | (9 928) | (11 354) |
| CASH FLOW FROM FINANCIAL ACTIVITIES | ||
| Dividend paid | (99 102) | - |
| Proceeds from subordinated loan | - | 148 125 |
| Interest payments on subordinated loan | (11 961) | (6 321) |
| Net cash flow from financial activities | (111 063) | 141 804 |
| NET CASH FLOW FOR THE PERIOD | (4 978) | 60 223 |
| Net change in cash and cash equivalents | (4 978) | 60 223 |
| Cash and cash equivalents opening balance | 206 185 | 145 962 |
| CASH AND CASH EQUIVALENTS CLOSING BALANCE | 201 207 | 206 185 |
| [1.000 NOK] | Share Capital |
Own shares |
Other paid in equity |
Natural perils fund |
Guarantee scheme |
Other | equity Total equity |
|---|---|---|---|---|---|---|---|
| Total equity at 31.12.2011 | 86 156 | (3 571) | 4 847 | 30 958 | 45 117 | 221 014 | 384 520 |
| 1.1- 31.12.2012 | |||||||
| Total equity before the result of the year | 86 156 | (3 571) | 4 847 | 30 958 | 45 117 | 221 014 | 384 520 |
| Total result after tax before fund provisions | 198 630 | 198 630 | |||||
| Total equity before fund provisions | 86 156 | (3 571) | 4 847 | 30 958 | 45 117 | 419 644 | 583 151 |
| Provisions to obliged fund gross | (9 718) | 8 051 | 1 667 | - | |||
| Total equity at 31.12.2012 | 86 156 | (3 571) | 4 847 | 21 240 | 53 167 | 421 311 | 583 151 |
| Change in accounting principle-pension | 503 | 503 | |||||
| Corrected equity as per 31.12.2012 | 86 156 | (3 571) | 4 847 | 21 240 | 53 167 | 421 814 | 583 654 |
| 1.1- 31.12.2013 | |||||||
| Paid dividend | (99 102) | (99 102) | |||||
| Total equity before the result of the year | 86 156 | (3 571) | 4 847 | 21 240 | 53 167 | 322 712 | 484 552 |
| Profit before other comprehensive income | 286 973 | 286 973 | |||||
| Actuarial gain and loss from defined benefit penion plans- benefits to employees |
(7 129) | (7 129) | |||||
| Currency changes from foreign enterprise | 15 077 | 15 077 | |||||
| Tax on other comprehensive income | (2 297) | (2 297) | |||||
| Total equity before fund provisions | 86 156 | (3 571) | 4 847 | 21 240 | 53 167 | 615 337 | 777 176 |
| Provisions to obliged fund gross | (5 802) | 8 427 | (2 625) | - | |||
| Total equity at 31.12.2013 | 86 156 | (3 571) | 4 847 | 15 439 | 61 594 | 612 711 | 777 176 |
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.
Insurance premiums are recognised over the term of the policy. Gross premiums written include all the amounts the company has received or is owed for insurance contracts where the insurance period starts before the end of the period. At the end of the period accruals are recorded, and the premiums written that relate to subsequent periods will be accrued under "change in gross provision for unearned premiums". For change of ownership insurance the income is entered into the financial statement at the time of the risk transfer. Premiums for ceded reinsurance reduce the gross premiums written and are accrued according to the insurance period.
When calculating the return on investments which is being transferred from non-technical accounts to technical accounts for non-life insurance, it will be on the basis of the sum of the average technical provisions during the year. The applicable technical interest rate is the average yield during the year on government bonds with a remaining maturity of three years. The Financial Supervisory Authority of Norway has calculated the average technical yield for 2013 and 2012 to be 1,62 and 1,44 per cent respectively.
Insurance products are generally divided into two main categories: long-tail and short-tail insurance products. The settlement period is defined as the duration between a loss or loss occurrence (date of loss) and the time when the claim is reported and then paid and settled. Short-tail insurance products are e.g. property insurance, while long-tail products primarily involve personal lines of business. The uncertainty in short-tailed lines of business is linked primarily to the size of the loss.
For long-tail lines of business the risk is linked to the fact that the total claim costs must be estimated based on experience and empirical data. For certain personal lines products, it may take 10 to 15 years before all the claims that occurred in a particular calendar year are reported to the company. In addition, there will be many instances where the reported information is inadequate to calculate correct claims provisions. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party's future work capacity etc. Many personal injury claims are tried in the court system, and the level of compensation for such claims has increased over time. This will also be of consequence to claims that occurred in previous years which have not yet been settled. The risk linked to provisions for personal lines of business is thus effected by external conditions. To reduce this risk, the company calculates its claims related liabilities based on various methods and ensures that the registered provisions linked to ongoing claims are updated at all times based on the current calculation rules.
Claims incurred consist of gross paid claims less the reinsurers' share, in addition to a change in provision for claims, gross, also less the reinsurers' share. The provision for claims includes provision for indirect claims handling costs. The claims incurred contain run-off gains / losses on previous years' claims provisions.
Total insurance related operating expenses consist of sales- and administrative expenses, less commissions received on ceded reinsurance premiums. The administrative expenses are accrued and charged as an expense during the accounting period.
The technical provisions are calculated in accordance with the principles established in the regulations of 10.05.1991 no. 301 for the minimum requirement for insurance technical provisions and non-life and reinsurance risk statistics and the supplementary regulations of 18.11.1992 no 1242 for the minimum requirement for insurance technical provisions and non-life and reinsurance risk statistics. The theoretical methods applied in the calculations are described in the 2nd chapter of the supplementary regulation.
The premium provision represents the accrual of insurance premiums and comprises the unearned portion of premiums written during the year. The earned premiums are accrued linearly throughout the period of insurance.
The claims provision comprises provisions for claims which are reported but not settled, and claims incurred but not reported at the end of the accounting year. The provisions in respect of known losses are individually assessed by the claims department, while the provisions for claims not yet reported are based on empirical data and the application of actuarial calculations. The provisions shall cover the company's expected future claims payments for risks covered to date.
The security provisions are statutory and shall cover fluctuations in the company's premium and liabilities for own account.
Operating surplus from the mandatory Norwegian Natural Perils Pool must be allocated to a separate Natural Perils fund. These funds may only be drawn upon in respect of claims related to losses caused by natural perils. The fund is restricted equity.
The purpose of the guarantee scheme is to guarantee that claims submitted under direct non-life insurance contracts entered into in Norway are settled in full. The fund is restricted equity.
Subordinated loan is accounted at amortized cost using effective interest rate method. Transaction costs related to the issue of the loan are included in the amortized cost.
In the balance-sheet trade debtors and other receivables are accounted for at face value adjusted for provisions for expected losses. Provisions for expected losses are made based on evaluations of the individual receivables.
Bank deposits are deposits used in the continuing operations.
Financial assets and liabilities are classified at fair value through profit or loss if they are included in a portfolio that is measured and evaluated regularly at fair value.
Protector holds an investment portfolio that is designated at fair value at initial recognition, and that is managed and evaluated regularly at fair value. This is according to the Board of Directors' approved risk management and investment strategy.
Ordinary purchases and sales of investments are booked at the time of settlement. All financial assets that are not booked at fair value through profit or loss are recognised in the balance sheet for the first time at fair value plus transaction costs. Financial assets that are booked at fair value through profit or loss are booked at fair value when acquired and transaction costs are allocated in the accounts. Investments are removed from the balance sheet once the right to receive gains from the investment terminates or once these rights are transferred and the company on the whole has transferred all risk and the entire profit potential inherent to the ownership. Financial assets with fair value through profit or loss are considered to represent fair value once they appear on the balance sheet for the first time.
Profit or loss from variations in fair value of assets is classified as "financial assets at fair value through profit or loss", including interest income and dividend, is included in the income statement under "Unrealised gains and reversed unrealised losses on financial assets" and "Gains and losses from realisation of financial assets" in the period they arise. Dividends from financial assets at fair value through income are included once the company's right to dividends are decided.
Fair value of listed investments is based on the prevailing bid price. Fair value of non-listed assets is determined by our management. The Norwegian Mutual Fund Association (VFF) weekly collects (credit-) spreads from 5 brokerages. The average is sent out to fund managers and used as a basis for valuation of the securities in their portfolios.
Fixed assets and intangible assets are recognised at acquisition costs, and are written down to actual value when the depreciation in value is not expected to be temporary. Depreciations are deducted from the durable business assets and intangible assets. Potential expenditures or improvements are added to the business assets acquisition cost and depreciate in line with the business asset. The immaterial assets comprise software and IT-systems. The
Company's IT-systems are developed in-house.
Dividend from investments is recognised when the company has an unconditional right to receive the dividend. Dividend paid is recognised as a liability at the time when the General Meeting approves the payment of the dividend.
Provisions are recognised when the company has a legal or constructive obligation as a result of a past event, it is probable that this will result in the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Information about contingent assets are disclosed where an inflow of economic benefits is probable. Information about a contingent liability is disclosed unless the possibility of a capital outflow is remote.
The pension costs and pension liabilities are calculated on a straightline earning profile basis, based on assumptions related to discount rates, projected salaries, the amount of pension and benefits from the National Insurance Scheme, future return on pension funds, and actuarial calculations relating to mortality rate, voluntary retirement, etc. Pension funds are recognised at fair value net of pension liability in the balance sheet. Changes in the pension liability due to changes in the pension plans are recognised over the estimated average remaining service period. Changes in and deviations from actuarial assumptions (changes in estimates) are recognised in the prfot & loss as other comprehensive income, along with any associated tax effects. Recognition as other comprehensive income is a new accounting principle adopted 01.01.2013. See "change in accounting principle" for more informasjon.
Linear contribution and expected terminal pay form the basis of contribution when pensions are accounted. Plan changes are amortized over estimated remaining service period.
Employers' national insurance contributions are ascribed to net pension commitment.
The cost of the defined contribution pension scheme is equal to the period's payment for the pension's savings which amounts annually to 5% of the payment basis between 1 and 6 G (G=National Insurance Scheme basic amount which totaled NOK 85,245 per 31.12.2013), as well as 8% of the payment basis between 6 and 12 G. The payments to the employees' pension savings accounts are made monthly. The future pension is dependent on the size of the contribution and return on the pension savings.
Tax The tax expense in the income statement consists both of taxes payable for the accounting period, and the period's changes in deferred tax. In the accounting period for 2013, we have used the future rate of 27% on deferred tax and the current rate of 28% on payable tax as the tax rate for 2013 is unchanged. The effect of changes in taxation are considered changes in estimates and are therefore recognised in the tax expense for the period. Deferred tax is calculated of the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, together with tax loss carried forward at the end of the fiscal year. Temporary tax increases or decreases, which are reversed or may reverse within the same period, are balanced. Deferred tax assets are recorded in the balance sheet when it is more likely than not that the tax assets will be utilized.
Transactions in foreign currencies are translated to the respective functional currencies at exchange rates at the date of the transaction. For transactions related to activities in Sweden and Denmark, the Swedish and Danish crowns are converted to Norwegian crowns by translating the profit and loss at average exchange rates for the period of activity, and by translating the assets and obligations on the balance sheet at exchange rates at the reporting date. Exchange differences arising on retranslations are recognised in profit or loss.
Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments.
IAS 19R (changes to IAS 19) was ratifies in the EU in june 2012. Adoptation dato is 1. January 2013. The possibility of postponing recognition of changes in assumptions and estimates (the corridor method) has been removed. This means that pension liability in the balance sheet will coincide with best estimate of actual pension liabilities for the company.
The effect of adaptation in the balance sheet as per 1. January 2013 was a reduction of pension liabilities by NOK 699 thousang to NOK 11,7 million, and an increase in deferred tax asset with NOK 196
thousand and an increase in other equity by NOK 503 thousand. From 1. January 2013, the company presents a line in the profit and loss called "actuarial gain and loss on defined benefit pension plans- benefits to employees" and "currency changes from foreign enterprise" under other comprehensive income. These are lines concerning the changes in estimates described above in addition to the foreign currenct effects of our Swedish & Danish operations. Other comprehensive income totaled NOK 5,7 million in gains after tax in 2013 and NOK 8,9 million after tax in 2012.
The risk under any one insurance contract is the probability that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and must therefore be estimated.
Factors that have a negative impact on insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.
Protector operates primarily in the Norwegian market, but entered the Swedish insurance market January 2011 and the Danish insurance market in 2012. Protector writes all classes of business within general insurance. Protector seeks to diversify the insurance portfolio to reduce the variability of the expected results.
Underwriting risk is the risk related to whether charged premiums are sufficient to cover payable liabilities in respect of insurance contracts Protector enters into.
This risk is assessed and managed on the basis of statistical analyses of historical experience for the various lines of business. The insurance premium must be sufficient to cover expected claims, but must also comprise a risk premium equal to the return on the part of the company's capital that is used to protect against random fluctuations. All other things equal, this means that lines of business which, from experience, are subject to major fluctuations, must include a larger risk premium.
Reinsurance is used to reduce the underwriting risk in areas where this is particularly required.
The company has clearly specified guidelines for which types of insurance risks, as well as which limits of liability that can be written. Underwriting limits are in place to ensure that appropriate risk selection criteria are applied and to ensure that accepted risks are within the terms and conditions of the company's reinsurance contracts. Protector's reinsurance contracts which are a combination of quota share and XL agreements, further reduces the risk exposure. Insurance risks are considered moderate with the reinsurance cover the company has in place.
Once the policy period expires, the insurance risk relates to the provisions to cover future payments on claims incurred. Clients may report claims with a certain delay. Depending on the complexity of the claim, a shorter or longer period of time may pass until the amount of the claim has been finally calculated. This may be a prolonged process particularly for personal injuries. Even when the claim has been settled, there is a risk that it will be resumed at a later date, triggering further payments.
The size of the claims provisions is determined both through individual assessments and actuarial calculations. At 31 December 2013, the claims provisions amounted to NOK 2.211 million for own account. The duration of the provisions, that is, the average duration of provisions being settled to clients, was 3.25 years at 31 December 2013. 1%-point increase in inflation will result in a growth in claims provisions of NOK 72 million. See below how future cash flow is related to provisions for outstanding claims for own account at 31 December 2013.
The calculation of provisions for claims will always be subject to considerable uncertainty. Historically, many insurers have experienced substantial positive as well as negative impacts on profit (run-off) resulting from reserving risk and that may also be expected to happen in the future.
Reserving risk is managed by pursuing a reserving policy which ensures that the process for determining provisions for claims is updated and aligned at all times. This includes that it is based on an underlying model analysis, and that internal control calculations and evaluations are made.
| Future cash flow related to claims incurred | |||||
|---|---|---|---|---|---|
| [1.000 NOK] At 31 December 2013 |
0 - 5 years | 5 - 10 years |
10 - 15 years |
15 - 20 years |
|
| Claims provisions for own account |
2 210 618 1 755 288 343 625 | 86 521 | 25 184 |
| [1.000 NOK] | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| GROSS | |||||||||||
| Estimated claims cost | |||||||||||
| 2004 | 62 952 | 62 952 | |||||||||
| 2005 | 61 407 299 414 | 360 821 | |||||||||
| 2006 | 68 503 253 356 299 485 | 621 344 | |||||||||
| 2007 | 76 939 254 808 290 770 496 529 | 1 119 047 | |||||||||
| 2008 | 74 235 260 642 312 225 496 175 522 126 | 1 665 402 | |||||||||
| 2009 | 78 788 258 107 314 936 478 992 516 928 658 842 | 2 306 592 | |||||||||
| 2010 | 78 669 271 963 327 909 497 981 509 203 625 905 711 482 | 3 023 111 | |||||||||
| 2011 | 78 853 273 037 318 334 497 501 525 928 624 251 662 924 | 825 611 | 3 806 438 | ||||||||
| 2012 | 79 845 275 401 | 321 391 512 527 563 829 620 136 669 016 784 480 1 077 231 | 4 903 858 | ||||||||
| 2013 | 79 663 278 334 324 389 509 904 549 598 622 392 675 139 786 139 1 024 604 1 407 317 | 6 257 478 | |||||||||
| Estimated amount as at 31.12.2013 |
79 663 278 334 324 389 509 904 549 598 622 392 675 139 786 139 1 024 604 1 407 317 6 257 478 | ||||||||||
| Total disbursed | 77 955 275 540 316 668 480 304 471 459 | 501 241 457 593 436 048 459 538 370 777 | 3 847 122 | ||||||||
| Claims provision | 1 708 | 2 795 | 7 721 | 29 600 | 78 139 | 121 151 217 546 350 091 565 066 1 036 539 2 410 356 | |||||
| Provision for indirect claims handling costs |
124 753 | ||||||||||
| Total | 79 663 278 334 324 389 509 904 549 598 622 392 675 139 786 139 1 024 604 1 407 317 6 257 478 |
Insurance events are random, and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability of the expected outcome will be.
The frequency and severity of claims can be affected by several factors. The different factors will depend on the products, or lines of business considered. An increase in the frequency of claims can be due to seasonal effects and more sustainable effects. In some lines of businesses, with relatively few claims, severe claims may heavily influence the result. In most lines of businesses the underlying development of the severity of claims is influenced by inflation. For bodily injuries the severity of claims is also influenced by court rulings, which tend to increase the compensation more than the general inflation.
See the effect on profit before tax (for own account) in the sensitivity analyses below for 1% change in operating expenses , 1% change in claims incurred, 1%-point change in combined ratio and 1%-point change in inflation.
| Specification of financial assets grouped by maturity [1.000 NOK] | Less than one year |
More than a year |
No maturity | Total |
|---|---|---|---|---|
| Bank deposits related to investments | 47 884 | - | - | 47 884 |
| Interest-bearing papers | 20 332 | - | - | 1 103 762 |
| Equities | - | - | 178 007 | 178 007 |
| Equity funds | - | - | 351 018 | 351 018 |
| Bond fund | - | - | 2 319 140 | 2 319 140 |
| Total investments | 68 216 1 083 431 | 2 848 165 | 3 999 812 | |
| Bank deposits | 153 323 | - | - | 153 323 |
| Total financial assets | 221 539 1 083 431 | 2 848 165 | 4 153 135 | |
| Specification of financial obligations grouped by maturity | Less than | More than | No maturity | Total |
| one year | a year | |||
| Subordinated loan | - | 148 125 | - | 148 125 |
| Other obligations | 311 698 | - | - | 311 698 |
| Total finacial obligations | 311 698 | 148 125 | - | 459 823 |
The company's financial assets are placed as bank deposits, liquid interest-bearing papers, shares and funds. The liquidity risk is limited. Upon the sale of financial assets, the settlement day will be within 3 days. 29 March 2012 the company issued subordinated loan with a face value of NOK 150 million. Subordinated loan is classified as an obligation on the balance sheet and is valued at an amortized cost. See note 20 for more information.
An increase of 1% in interest will lead to a reduction in the portfolio of bonds and other investments with fixed returns by an estimate of NOK 19.6 million. This corresponds to interest rate sensitivity of ca 0.6 %.
Foreign exchange risk is defined as the financial loss resulting from a fluctuation in exchange rates. Some investments in bonds and bond funds are in foreign currency, mainly in USD, SEK and DKK. Generally, exchange risk in the investment portfolio is hedged close to 100 percent, within permitted limit of +/- five percent per currency.
| CREDIT RISK | |||||||
|---|---|---|---|---|---|---|---|
| Rating | Investments categorised by credit rating, Investments categorised by credit rating internal ratings included |
||||||
| [1.000 NOK] | 2013 | 2012 | 2013 | 2012 | |||
| AA | 127 | 33 | 127 | 33 | |||
| A | 223 115 | 240 342 | 581 614 | 494 075 | |||
| BBB | 10 074 | 20 289 | 1 315 310 | 655 996 | |||
| BB | 25 456 | 29 099 | 61 833 | 53 106 | |||
| B | - | - | - | 11 245 | |||
| No rating | 3 212 015 | 2 617 998 | 1 511 904 | 1 693 306 | |||
| Total | 3 470 787 | 2 907 761 | 3 470 787 | 2 907 761 |
72 % (72 % in 2012) of the amount under the category "no rating" was bond funds. 24 % (23 %) of the amount under the category "no rating" was Norwegian financial institutions. A significant proportion of the Norwegian fixed income portfolio consists of issuers without official rating. Therefore, many asset managers and brokers conduct their own creditworthness assessment with the same rating categories as the rating agencies. To provide an overall picture, the two right-most columns in the table above include the internal rating set by Protectors asset managers. The category "no rating" consists only of bond funds. Calculated average rating of the funds, based on internal ratings of the underlying securities is BBB.
| Effect on profit before tax (for own account) | 2013 | 2012 |
|---|---|---|
| 1 % change in operating expenses1 | 569 | 144 |
| 1 % change in claims incurred1 | 11 335 | 9 401 |
| 1 % - point change in combined ratio | 13 736 | 11 074 |
| 1 % - point change in inflation | 71 845 | 61 114 |
| [1.000 NOK] | Premiums written for own account Premiums written ² Premiums ceded Gross premiums |
Premiums earned Gross business |
Insurance related operating expenses Claims incurred |
Reinsurers' share Technical result |
Premiums earned | Claims incurred Commissions |
Reinsurance result | For own account Technical result |
Claims incurred, gross | Occurred previous years Occurred this year |
Total for the accounting year Technical provisions gross |
Incurred during the year | Total for the accounting year Incurred in previous years |
Provision for unearned premiums Technical provisions gross |
Provisions for outstanding claims NFSA minimum requirement |
NFSA minimum requirement | Technical provisions for own account Provision for unearned premiums |
Provision for outstanding claims NFSA minimum requirement |
NFSA minimum requirement | 1Other private includes children-, risk-, and change of ownership insurance 2 Premiums comprise of insurance premiums in Norway, Sweden & Denmark. Gross written premiums in Sweden constitute NOK 147,4 million (7,92%) and Denmark constitute NOK 140,7 million (7,56%). NFSA minimum requirement Security provision |
Pool-schemes: NOK 1.000 |
Workers' Compensation Insurance Association Auto Insurance Association Natural perils pool Total |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accident | 26 499 16 560 (9 939) |
26 568 | (20 337) (1 952) |
4 278 | (10 162) | 4 735 600 |
(4 828) | (549) | 3 457 (23 794) |
(20 337) | (18 532) | 2 930 (15 602) |
5 850 | 5 850 39 092 |
32 511 | 2 739 | 2 739 30 753 |
23 472 8 835 |
8 835 | |||||||||||
| Other1 | 463 331 459 214 (4 118) |
463 533 | (309 340) (57 616) |
96 576 | (4 231) | 863 (149) |
(3 517) | 93 060 | (292 253) (17 087) |
(309 340) | (289 471) | (19 006) (308 477) |
5 439 | 5 439 680 254 |
680 239 | 3 404 | 3 404 671 336 |
608 563 194 484 |
127 834 | |||||||||||
| Total rivate | 489 831 475 774 (14 057) |
490 101 | (329 677) (59 569) |
100 855 | (14 393) | 5 598 451 |
(8 344) | 92 511 | (316 047) (13 630) |
(329 677) | (308 003) | (16 076) (324 079) |
11 289 | 11 289 719 346 |
712 750 | 6 143 | 6 143 702 089 |
695 047 243 774 |
136 669 | PROVISION FOR UNEARNED PREMIUMS | Gross | 2 984 - - 2 984 |
||||||||
| Combined | 248 039 58 347 (189 692) |
240 850 | (18 275) (243 663) |
(21 088) | (189 170) | 179 066 38 599 |
28 496 | 7 407 | 3 738 (247 402) |
(243 663) | (73 492) | 8 895 (64 598) |
40 204 | 40 204 210 723 |
101 190 | 13 738 | 13 738 58 378 |
34 980 7 523 |
7 523 | For own account | 2 984 - - 2 984 |
Expected useful life (years) | 4 | 7 | ||||||
| Auto | 193 881 - 193 881 |
182 343 | (160 518) (14 285) |
7 540 | (1 335) | - (332) |
(1 667) | 5 873 | 12 190 (172 708) |
(160 518) | (172 698) | 11 848 (160 851) |
44 291 | 44 291 125 924 |
92 652 | 44 291 | 44 291 124 798 |
89 971 21 566 |
21 566 | Annual depreciation Fixed assets are depreciated on a straight-line basis over the assets expected useful life. Artworks are not depreciated. |
2 167 | 532 | - | 2 699 | ||||||
| Liability | 71 539 - 71 539 |
68 099 | (34 526) (5 271) |
28 302 | (1 661) | - (412) |
(2 073) | 26 229 | 8 018 (42 544) |
(34 526) | (42 542) | 7 603 (34 939) |
11 501 | 11 501 81 158 |
68 952 | 11 501 | 11 501 79 878 |
68 677 11 979 |
11 979 | Gross | 20 633 | Accumulated depreciation at 31.12.2013 Net Book value at 31.12.2013 |
(7 489) 5 945 |
(2 298) 2 322 |
- 216 |
(9 788) 8 483 |
||||
| Workers compens- sation |
346 013 346 013 |
335 139 | (323 939) (25 494) |
(14 293) | (1 346) | (1 127) | (15 420) | 17 114 (341 053) |
(323 939) | (341 060) | 17 340 (323 720) |
69 803 | 69 803 1 032 688 |
831 178 | 69 803 | 69 803 1 032 425 |
831 058 238 558 |
115 962 | CLAIMS | 20 131 352 150 |
Additions Disposals Cost as at 31.12.2013 |
1 093 - 13 435 |
1 057 - 4 620 |
- - 216 |
2 151 18 271 |
|||||
| - | 219 - |
For own account | 20 633 | Fixed assets [1.000 NOK] Cost as at 01.01.2013 |
Office machinery 12 342 |
Furniture and fixtures 3 563 |
Art 216 |
Total 16 120 |
||||||||||||||||||||||
| Security | 186 249 90 825 (95 423) |
182 592 | (59 375) (13 723) |
109 495 | (93 947) | 26 504 28 283 |
(39 159) | 70 335 | 52 138 (111 513) |
(59 375) | (58 504) | 25 634 (32 870) |
41 008 | 41 008 270 897 |
258 701 | 19 693 | 19 693 152 786 |
141 585 20 507 |
20 507 | 20 131 352 150 |
NOTE 6 TANGIBLE FIXED ASSETS | |||||||||
| Cargo | 5 783 - 5 783 |
5 789 | (42) (426) |
5 321 | - | 9 - |
9 | 5 330 | 1 556 (1 598) |
(42) | (1 598) | 1 565 (33) |
1 380 | 1 380 1 597 |
1 228 | 1 380 | 1 380 1 597 |
1 098 468 |
468 | |||||||||||
| Annual pure insurance |
298 278 165 343 (132 935) |
291 518 | (272 580) (21 977) |
(3 039) | (132 137) | 101 949 34 549 |
10 506 (283 086) |
(272 580) | (174 221) | (170 631) | 53 082 | 53 082 72 143 |
24 627 | 24 627 38 034 |
37 886 13 762 |
13 762 | Expected useful life (years) | 4 | 3 | |||||||||||
| 4 360 | 1 322 | 3 590 | 71 579 | Annual depreciation Intangible assets are depreciated on a straight-line basis over the assets expected useful life. |
210 | 5 344 | 5 554 | |||||||||||||||||||||||
| Total commercial | 1 349 781 931 730 (418 050) |
1 306 331 | (1 094 644) (99 451) |
112 237 | (419 595) | 307 002 101 432 |
(11 161) | 101 075 | 105 261 (1 199 905) |
(1 094 644) | (864 116) | 76 475 (787 641) |
261 270 | 261 270 1 795 130 |
1 425 480 | 185 034 | 185 034 1 487 896 |
1 205 255 314 363 |
191 767 | Net book value at 31.12.2013 | 1 223 | 10 001 | 11 224 | |||||||
| Cost as at 31.12.2013 Accumulated depreciation at 31.12.2013 |
2 486 (1 263) |
33 078 (23 077) |
35 564 (24 340) |
|||||||||||||||||||||||||||
| Pool-schemes | 21 005 - 21 005 |
18 193 | 196 (26 266) |
(7 877) | (7 082) | 4 459 - |
(2 623) | (10 499) | - (26 266) |
(26 266) | (21 806) | - (21 806) |
2 984 | 2 984 20 633 |
20 633 | 2 984 | 2 984 20 633 |
20 633 | - - |
Additions | 1 288 | 6 490 | 7 777 | |||||||
| Intangible assets [1.000 NOK] Cost as at 01.01.2013 |
Software 1 198 |
IT- system 26 589 |
Total 27 787 |
|||||||||||||||||||||||||||
| Total Protector | 1 428 509 (432 108) |
1 814 626 | (1 450 587) (158 824) |
(441 071) | (22 128) | 183 087 | (1 542 218) | (1 450 587) | (1 193 926) | (1 133 527) | 275 543 | 275 543 2 535 109 |
2 158 863 | 194 162 2 210 618 |
1 920 936 558 137 |
328 437 |
| NOTE 5 INTANGIBLE ASSETS | |||
|---|---|---|---|
| Intangible assets [1.000 NOK] | Software | IT- system | Total |
| Cost as at 01.01.2013 | 1 198 | 26 589 | 27 787 |
| Additions | 1 288 | 6 490 | 7 777 |
| Cost as at 31.12.2013 | 2 486 | 33 078 | 35 564 |
| Accumulated depreciation at 31.12.2013 | (1 263) | (23 077) | (24 340) |
| Net book value at 31.12.2013 | 1 223 | 10 001 | 11 224 |
| Annual depreciation | 210 | 5 344 | 5 554 |
| Expected useful life (years) | 4 | 3 | |
|---|---|---|---|
| Fixed assets [1.000 NOK] | Office machinery | Furniture and fixtures |
Art | Total |
|---|---|---|---|---|
| Cost as at 01.01.2013 | 12 342 | 3 563 | 216 | 16 120 |
| Additions | 1 093 | 1 057 | - | 2 151 |
| Disposals | - | - | - | - |
| Cost as at 31.12.2013 | 13 435 | 4 620 | 216 | 18 271 |
| Accumulated depreciation at 31.12.2013 | (7 489) | (2 298) | - | (9 788) |
| Net Book value at 31.12.2013 | 5 945 | 2 322 | 216 | 8 483 |
| Annual depreciation | 2 167 | 532 | - | 2 699 |
| 4 7 |
|---|
| Investment [1.000 NOK] | Book value 31.12.13 |
Fair value 31.12.13 |
Book value 31.12.12 |
Fair value 31.12.12 |
|
|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss | 3 999 812 | 3 999 812 | 3 192 820 | 3 192 820 | |
| Total investments | 3 999 812 | 3 999 812 | 3 192 820 | 3 192 820 | |
| SUBORDINATED LOAN CAPITAL IN OTHER COMPANIES | |||||
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | Duration |
| Financial assets at fair value through profit or loss | NOK | 7 220 | 9 708 | 9 708 | 0,11 |
| Total subordinated loan capital in other companies year 2013 | 7 220 | 9 708 | 9 708 | 0,11 | |
| Total subordinated loan capital in other companies year 2012 | 23 423 | 27 537 | 27 537 | 0,12 |
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
| STOCKS AND SHARES | |||||
|---|---|---|---|---|---|
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | |
| Eguities | NOK | 145 713 | 178 007 | 178 007 | |
| Equity funds | NOK | 291 767 | 351 018 | 351 018 | |
| Total equities and equity funds year 2013 | 437 480 | 529 025 | 529 025 | ||
| Total equities and equity funds year 2012 | 247 474 | 285 059 | 285 059 |
The equity funds (2013 and 2012) are not listed.
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | Risk weight |
|---|---|---|---|---|---|
| AKER SOLUTIONS ASA | NOK | 4 667 | 5 192 | 5 192 | 100 % |
| ATEA ASA | NOK | 1 898 | 1 798 | 1 798 | 100 % |
| AUSTEVOLL SEAFOOD ASA | NOK | 1 140 | 1 576 | 1 576 | 100 % |
| DET NORSKE OLJESELSKAP ASA | NOK | 3 363 | 2 508 | 2 508 | 100 % |
| DNB ASA | NOK | 12 705 | 20 056 | 20 056 | 100 % |
| FRED OLSEN ENERGY ASA | NOK | 3 695 | 3 950 | 3 950 | 100 % |
| GJENSIDIGE FORSIKRING ASA | NOK | 4 800 | 7 937 | 7 937 | 100 % |
| HAFLSUND ASA | NOK | 861 | 688 | 688 | 100 % |
| KONGSBERG GRUPPEN ASA | NOK | 7 589 | 8 007 | 8 007 | 100 % |
| LERØY SEAFOOD GROUP ASA | NOK | 1 288 | 2 266 | 2 266 | 100 % |
| MARINE HARVEST ASA | NOK | 3 360 | 7 664 | 7 664 | 100 % |
| NORSK HYDRO ASA | NOK | 5 994 | 5 080 | 5 080 | 100 % |
| NORWEGIAN AIR SHUTTLE ASA | NOK | 2 698 | 5 288 | 5 288 | 100 % |
| PETROLEUM GEO-SERVICES ASA | NOK | 4 089 | 3 658 | 3 658 | 100 % |
| PHOTOCURE ASA | NOK | 928 | 596 | 596 | 100 % |
| PROSAFE SE | NOK | 2 513 | 2 373 | 2 373 | 100 % |
| ROYAL CARIBBEAN CRUISES LTD | NOK | 6 102 | 9 826 | 9 826 | 100 % |
| SCHIBSTED ASA | NOK | 3 543 | 8 064 | 8 064 | 100 % |
| SEADRILL LIMITED (NO) | NOK | 6 282 | 6 727 | 6 727 | 100 % |
| SIEM OFFSHORE | NOK | 2 065 | 2 071 | 2 071 | 100 % |
| SOLSTAD OFFSHORE ASA | NOK | 1 070 | 1 289 | 1 289 | 100 % |
| SPAREBANK 1 SMN | NOK | 2 371 | 3 512 | 3 512 | 100 % |
| SPAREBANK 1 SR-BANK ASA | NOK | 1 399 | 2 345 | 2 345 | 100 % |
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | Duration |
|---|---|---|---|---|---|
| Subordinated loan capital in other companies | NOK | 7 220 | 9 708 | 9 708 | 0,11 |
| Financial institutions | NOK | 956 617 | 974 532 | 974 532 | 0,20 |
| Industry | NOK | 115 893 | 119 498 | 119 498 | 0,13 |
| Bond funds | NOK | 2 252 272 | 2 319 165 | 2 319 165 | 0,76 |
| Total bonds and other fixed income securities year 2013 |
3 332 001 | 3 422 903 | 3 422 903 | 0,57 | |
| - of this not quoted on the stock exchange year 2013 | 2 271 046 | 2 339 308 | 2 339 308 | 0,75 | |
| Total bonds and other fixed income securities year 2012 |
2 787 128 | 2 843 465 | 2 843 465 | 0,90 | |
| - of this not quoted on the stock exchange year 2012 | 1 950 567 | 1 988 571 | 1 988 571 | 0,88 |
Average effective interest rate based on market value is 5.1 %. Average interest rate is future cash flows (coupon disbursements and payments on principal amount) discounted with expected market rate for the security concerned at the particular cash flow points in time. The effective interest rate on bond funds is estimated based on the bonds quotations.
| OTHER FINANCIAL ASSETS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | Duration | |||||
| Bank deposits related to investments | NOK | 47 884 | 47 884 | 47 884 | 0,00 | |||||
| Total other financial assets year 2013 | 47 884 | 47 884 | 47 884 | 0,00 | ||||||
| Total other financial assets year 2012 | 64 295 | 64 295 | 64 295 | 0,00 |
| FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS | |||||
|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss [1.000 NOK] |
Currency | Level 1 | Level 2 | Level 3 | Total |
| Shares | NOK | 178 007 | 351 018 | - | 529 025 |
| Bonds and other fixed income securities | NOK | 1 083 595 | 2 334 488 | - | 3 422 903 |
| Bank deposits | NOK | 47 884 | - | - | 47 884 |
| Total assets year 2013 | 1 309 486 | - | - | 3 999 812 | |
| Total assets year 2012 | 1 064 499 | 2 123 593 | 4 728 | 3 192 820 |
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 not 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.
| Investment [1.000 NOK] | Currency | Acquisition cost |
Book value | Fair value | Risk weight |
|---|---|---|---|---|---|
| STATOIL ASA | NOK | 18 005 | 17 373 | 17 373 | 100 % |
| SUBSEA 7 SA (NO) | NOK | 12 773 | 11 502 | 11 502 | 100 % |
| TELENOR ASA | NOK | 12 223 | 16 690 | 16 690 | 100 % |
| TGS NOPEC GEOPHYSICAL COMPANY ASA | NOK | 5 415 | 5 530 | 5 530 | 100 % |
| VEIDEKKE ASA | NOK | 1 833 | 2 022 | 2 022 | 100 % |
| WILH. WILHELMSEN ASA | NOK | 2 909 | 4 404 | 4 404 | 100 % |
| YARA INTERNATIONAL ASA | NOK | 8 132 | 8 014 | 8 014 | 100 % |
| 145 713 | 178 007 | 178 007 |
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Employee withholding tax | 5 979 | 5 021 |
| Total | 5 979 | 5 021 |
The company has (as in 2012) no receivables due later than one year.
| Share capital consists of: | No. of shares | Face value | Capital |
|---|---|---|---|
| A-shares (each share has one vote) | 86 155 605 | 1 | 86 155 605 |
| Protector Forsikring ASA has 2.525 shareholders at 31.12.2013. | |||
| List of the 20 major shareholders at 31.12.2013 | No. of shares | Face value | Ownership |
| Odin Norden | 6 780 422 | 6 780 422 | 7,9 % |
| MSF-Mutual Financial Services FD | 4 479 410 | 4 479 410 | 5,2 % |
| Stenshagen Invest AS | 3 789 873 | 3 789 873 | 4,4 % |
| Ojada AS | 3 563 116 | 3 563 116 | 4,1 % |
| Hansard Europe LTD | 3 325 875 | 3 325 875 | 3,9 % |
| Tjongsfjord Invest AS | 2 811 809 | 2 811 809 | 3,3 % |
| Gabler Rådgivning AS | 2 502 751 | 2 502 751 | 2,9 % |
| Verdipapirfondet Alfred Berg Gambak | 2 391 136 | 2 391 136 | 2,8 % |
| MP Pensjon PK | 2 375 706 | 2 375 706 | 2,8 % |
| Artel Holding A/S | 1 873 451 | 1 873 451 | 2,2 % |
| Avanza Bank AB | 1 729 918 | 1 729 918 | 2,0 % |
| VPF Nordea Norge Verdi | 1 681 268 | 1 681 268 | 2,0 % |
| Frognes AS | 1 649 916 | 1 649 916 | 1,9 % |
| Varma Mutual Pension Insurance | 1 642 329 | 1 642 329 | 1,9 % |
| Verdipapirfondet Handelsbanken | 1 604 734 | 1 604 734 | 1,9 % |
| Johan Vinje AS | 1 437 841 | 1 437 841 | 1,7 % |
| Verdipapirfondet DnB SMB | 1 390 000 | 1 390 000 | 1,6 % |
| Petroservice AS | 1 343 815 | 1 343 815 | 1,6 % |
| Nordea Nordic Small Cap Fund | 1 283 657 | 1 283 657 | 1,5 % |
| JP Morgan Chase Bank, NA | 1 250 000 | 1 250 000 | 1,5 % |
| Total | 48 907 027 | 48 907 027 | 56,8 % |
| Protector Forsikring ASA | 3 570 661 | 3 570 661 | 4,1 % |
| Other shareholders | 33 677 917 | 33 677 917 | 39,1 % |
| Total number of shares | 86 155 605 | 86 155 605 | 100,0 % |
| Shares owned by the board of directors and their close relations, together with shares owned by other senior executives and their |
||||
|---|---|---|---|---|
| close relations at 31.12.2013 | Identification | No. of shares | Face value | Ownership |
| Ojada AS | Board member Erik G. Braathen | 3 563 116 | 3 563 116 | 4,1 % |
| Tjongsfjord Invest AS | CEO Sverre Bjerkeli | 2 811 809 | 2 811 809 | 3,3 % |
| Gabler Rådgivning AS | Chairman of the board Jostein Sørvoll | 2 502 751 | 2 502 751 | 2,9 % |
| Ditlev de Vibe Vanay | CFO | 225 800 | 225 800 | 0,3 % |
| Verpentangen AS | Board member Jørgen Stang Heffermehl | 222 260 | 222 260 | 0,3 % |
| Merete C. Bernau | Director for ownership change insurance | 65 200 | 65 200 | 0,1 % |
| Pia Almvang | Director for commercial insurance | 51 200 | 51 200 | 0,1 % |
| Laila Stange | Board member Jørgen Stang Heffermehl | 14 558 | 14 558 | 0,0 % |
| Henrik Wold Høye | Director for public sector insurance | 10 100 | 10 100 | 0,0 % |
| Eva Redhe Ridderstad | Board member | 10 000 | 10 000 | 0,0 % |
| Giuditta Cordero-Moss | Board member | 5 000 | 5 000 | 0,0 % |
| Christel Friis Conrad | Country Manager Denmark, Flemming Conrad |
4 222 | 4 222 | 0,0 % |
| Arvid Moss | Board member Giuditta Cordero-Moss | 1 000 | 1 000 | 0,0 % |
| Marianne Langrind Kvanvik | Board member, employees' representative | 100 | 100 | 0,0 % |
| Total | 9 487 116 | 9 487 116 | 11,0 % |
Protector Forsikring is required to have an occupational pension plan pursuant to the Mandatory Occupational Pension Act. The company's pension plans meet the requirements of the Act. The defined benefit plan is closed (discontinued from 1 July 2012). New employees are enrolled in defined contribution pension plan.
Based on insurance technical principles, actuarial calculations have been carried out on future pension payments. The calculated liabilities are held together with the value of the paid in and accumulated pension funds. The difference is kept as long-term liabalities or pension funds under the assets.
The cost of the defined contribution pension scheme is equal to the period's payment for the pension's savings which amounts to 5% of the payment basis between 1 and 6 G (G=National Insurance Scheme basic amount), as well as 8% of the payment basis between 6 and 12 G.
The company has defined contribution pension scheme in Sweden and Denmark which is the standard for the branch.
The CEO has an agreement of top-pension. Maximum annual top pension is 70% of the salary up to 12 G which exceeds 12 G. Allocation to the top pension totaled NOK 0.8 million in net pension costs incl. employer's contribution in 2013.
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Present value of this years acquired pension | 6 607 | 9 520 |
| Interest costs on the acquired pension | 456 | 596 |
| Net pension costs incl. employer's contribution | 7 063 | 10 116 |
| Present value of future pension liabilities as at 31.12. | 41 917 | 32 586 |
| Pension funds at 31.12. | 33 290 | 20 900 |
| Surplus/deficit at 31.12. | (8 627) | (11 686) |
| Net pension liabilities incl. employer's contribution | (8 627) | (11 686) |
| (6 293) | 90 072 | 96 365 |
|---|---|---|
| COMPOSITION OF PENSION FUNDS | 2013 | 2012 |
|---|---|---|
| Stocks | 9,0 % | 11,0 % |
| Property | 1,0 % | 0,0 % |
| Property | 11,0 % | 16,0 % |
| Term bonds | 42,0 % | 36,0 % |
| Bonds | 19,0 % | 20,0 % |
| Money Market | 12,0 % | 12,0 % |
| Other | 6,0 % | 5,0 % |
| Total pension funds | 100,0 % | 100,0 % |
| Actuarial gain and loss from defined benefit pension plans- benefits to employees | (7 129) | 12 372 |
| ECONOMICAL ASSUMPTIONS | ||
| Discount rate1 | 4,0 % | 3,9 % |
| Expected return | 4,0 % | 3,9 % |
| Future increase in salaries | 3,8 % | 3,5 % |
| Change in social security base amount | 3,5 % | 3,3 % |
| Pension adjustment | 0,6 % | 0,2 % |
| Employer's contribution | 14,1 % | 14,1 % |
| DEMOGRAPHIC ASSUPTIONS | ||
| Mortality | K2013BE | K2005 |
| Disability | KU | KU |
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| THIS YEAR'S TAXES ARE DIVIDED BETWEEN | ||
| Tax payable | 75 681 | 33 620 |
| Effect of change in accounting principle | - | 55 |
| Adjusted for tax in previous years | 800 | - |
| Change in deferred tax | 12 022 | 14 691 |
| Total taxes | 88 504 | 48 366 |
| COMPUTATION OF THIS YEARS TAX | ||
| Profit before taxes | 375 477 | 246 941 |
| Permanent differences | (59 955) | (71 405) |
| Changes in temporary differences | (45 232) | (55 463) |
| Basis for the tax expense of the year | 270 290 | 120 072 |
| Tax payable 28% | 75 681 | 33 620 |
| Tax on other comprehensive income | 4 222 | - |
| Payable tax in the balance sheet | 79 903 | 33 620 |
1 The market interest rate for covered bonds is utilised when calculating discount rate
Recognised amount for defined contribution pension plans is NOK 7.193 thousand
| TEMPORARY DIFFERENCES | 2013 | 2012 | Changes |
|---|---|---|---|
| Fixed assets | 415 | 666 | 252 |
| Receivables | (800) | (800) | - |
| Financial assets | 89 587 | 53 455 | (36 132) |
| Technical provisions | 96 365 | 90 072 | (6 293) |
| Pension liabilities | (8 627) | (11 686) | (3 059) |
| Net temporary differences | 176 940 | 131 708 | (45 232) |
| Differences which are not included in the calculation of deferred tax / deferred tax assets |
96 365 | 90 072 | (6 293) |
| Basis for deferred tax in the balance sheet | 80 575 | 41 636 | 38 939 |
| 27 % deferred tax | 21 755 | 11 658 | 10 097 |
| Deferred tax benefit in the balance sheet | (21 755) | (11 658) | (10 097) |
| RECONCILIATION OF TAX | |||
| [1.000 NOK] | 2013 | 2012 | |
| 28% profit before taxes | 105 133 | 69 144 | |
| Permanent differences (28%) | (16 787) | (19 994) | |
| Effect of change in accounting principle | - | 55 | |
| Corrected tax earlier years | 800 | (74) | |
| Differences which are not included in the calculation of deferred tax / deferred tax assets |
(1 762) | (765) | |
| Estimated tax | 87 384 | 48 366 | |
| Effect of change in tax rate 1% | (806) | - | |
| Tax on other comprehensive income | 1 925 | - | |
| Tax from profit and loss account | 88 504 | 48 366 |
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Payables, operations | 11 173 | 3 880 |
| Payables, claims | 6 092 | 3 836 |
| Liabilities related to direct insurance operations | 17 265 | 7 716 |
| Reinsurance yet to be settled | 182 439 | 130 515 |
| Liabilities related to reinsurance operations | 182 439 | 130 515 |
| Allocation of vacation pay | 11 815 | 8 829 |
| Allocation of employers contribution | 5 620 | 2 437 |
| Advance tax deduction | 6 307 | 4 926 |
| Tax payable | 79 903 | 33 620 |
| Other liabilities | 8 349 | 3 768 |
| Other liabilities | 111 994 | 53 580 |
| Total other liabilities | 311 698 | 191 812 |
The company has no secured liabilities.
| NOTE 15 INSURANCE RELATED ADMINISTRATIVE EXPENSES | ||
|---|---|---|
| Insurance related administrative expenses [1.000 NOK] | 2013 | 2012 |
| Depreciations (notes 5 and 6) | 8 253 | 7 237 |
| Salary- and pensions costs (note 16) | 168 969 | 124 470 |
| Administrative costs | 12 151 | 8 881 |
| Remunerations | 21 800 | 12 985 |
| Change in accounting principles - claims handling costs | -91 319 | -73 277 |
| Other costs | 31 425 | 24 186 |
| Total | 151 279 | 104 481 |
| Auditing remuneration [1.000 NOK] | 2013 | 2012 |
| Auditing (inclusive VAT) | 1 114 | 1 460 |
| Other attestation services (inclusive VAT) | 213 | 121 |
| Services regarding tax (inclusive VAT) | - | 23 |
| Other services outside auditing (inclusive VAT) | 1 325 | 983 |
| Total | 2 652 | 2 587 |
| Labour- and pension costs [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Salaries ¹ | 126 084 | 85 119 |
| Director's remuneration , control committee, nomination committee, audit committee, the board of representatives |
2 525 | 2 568 |
| Defined benefit pension costs ² | 4 931 | 9 163 |
| Defined contribution pension costs ² | 4 537 | 1 502 |
| Social security tax | 19 494 | 14 571 |
| Other payments | 11 398 | 11 548 |
| Total | 168 969 | 124 470 |
¹ The company has an ordinary arrangement for performance-related pay. The arrangement involves all employees with the exeption of the top management. The company has reserved NOK 8,5 million for bonus in 2013. Whether performance-related pay is triggered depends on achievement of goals pursuant to concluded performance contracts. Top level management has a long term bonus plan. In 2013, the provision for this plan is NOK 7,8 million
² Refer to note 11 for further information.
| Number of employees | 2013 | 2012 |
|---|---|---|
| Number of employees at 31.12. | 163,0 | 125,0 |
| Number of man-labour years at 31.12. | 162,0 | 124,8 |
| Average number of employees at 31.12. | 146,0 | 116,5 |
| Average number of man-labour years at 31.12. | 145,1 | 115,7 |
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Sales expenses | 7 545 | 8 245 |
| % of premium due | 0,4 % | 0,5 % |
The company's sales expenses consists of commission to the insurance brokers .
According to Public Limited Companies Act § 6-16a the Board will present a separate statement about determination of salary and other remuneration for senior executives. It follows further from the Public Limited Companies Act § 5-6 (3) that an advisory reconciliation of the Board's guidelines for senior executives' salary determination for the upcoming fiscal year will be held in general meeting (see (ii) below). As long as the guidelines are linked to the share-based initiatives, these will also be approved by general meeting (see (iii) below).
Since 2010 the Board has had a separate compensation committee. The compensation committee consists of three members: a chairman and two members.
The compensation committee shall prepare and present to the Board:
(i) Salary and other compensation to senior executives for the prior fiscal year are presented in the table below. The Board confirms that the guidelines for salary for senior executives for 2013 given in the previous year's statement have been followed.
Employment contracts for CEO and his management team have been revised in 2013 in connection to the implementation of a long term bonus plan
(ii) Concerning the guidelines for the establishment of salary and other compensation for the senior executives for the upcoming fiscal year, the Board shall propose the following guidelines for advising reconciliation in 2014 general meeting:
The purpose of Protector's salary policy is to attract employees with the necessary competence, further develop and maintain the key competence and motivate for long-term and continued progress in order to achieve Protector's business goals.
Protector's policy shall, first and foremost, be directed towards proposition of a total remuneration which is competitive so that the company can attract and maintain the best senior executives.
CEO's salary and other economic benefits are established by the Board based on the proposition from the compensation committee. Terms and approval for other senior executives are established by CEO within the framework approved by the Board.
The total remuneration to senior executives consists of fixed salary, variable salary, pension, and fringe benefits.
The fixed salary is reviewed annually and determined based on salary development in the society in general and financial sector in particular.
The total remuneration to senior executives shall be competitive and reflect work efforts, responsibilities and professional challenges that are related to the leadership responsibilities in a company of the size of Protector and the branch.
The variable salary (bonus) to senior executives can be paid based on a concrete result measurement of the defined goal areas derived from the company's strategy and goals. The review takes into account a combination of the company's total targeted result, relevant business
unit as well as estimation of a personal contribution, thereof a total valuation with regards to the compliance with the company's vision, values and leadership principles. Variable salary for senior executives is set by the Board on the basis of levels set by the compensation committee.
The company in 2013 established a long-term bonus policy for the senior executives and other key persons where the distributed bonus is converted to synthetic shares based on the Protector's share price pr. 31.12 of the year earned. The conversion does not give separate employees the right to buy shares in the company. The synthetic share holdings are distributed with 1/5 in cash while the remaining 4/5 are accounted for as a contingent capital. The cash part is paid out based on the company's average share price during the first seven trading days after general meeting. The contingent capital is paid out by 1/5 of the share capital over four years effective from the year after the cash part is paid out. The payments are based on the weighted average company's share price during seven trading days after publishing quarterly results after the company's general meeting has approved annual accounts for the previous year. Share price calculation for the cash payment and contingent capital shall be adjusted for dividend paid out between the conversion of bonus to share holdings (31.12 of the year earned) and the payment date. The unpaid contingent variable remuneration can be reduced if later results and development indicate that it was based on wrong assumptions.
Individual variable salary can total up to 50 per cent of the annual loan. The variable salary is not included in pension schemes.
Any fringe benefits shall have connection with one's functions in the company and shall be in line with general practices in the market.
Senior executives' pension age is 67 years in Norway, 65 years in Sweden and 70 years in Denmark.
In Norway, CEO and 2 of the senior executives are members of the now-closed defined benefit pension scheme. At the full earning of the pension, they have right to the pension equal to the difference of 70% of the salary (salary over 12G are not taken into calculation) and the calculated (not guaranteed) social security pension. 2 senior executive is a participant in the company's defined contribution pension plan. CEO has in addition an agreement about top pension which totals maximum 70% of the salary up to 12G for the amount which exceeds 12G (i. e. 8.4G).
Senior executives in Sweden and Denmark have defined contribution pension arrangement which is a standard for the branch.
CEO and his management team have an agreement for 6 months' termination notice and upto 12-month salary after termination of employment relationship.
(iii) With regards to the share-based incentives for the coming year, the Board shall propose the following guidelines for approval in General Meeting:
Of the variable salary earned in 2014 by CEO and other employees that are covered by regulations for remuneration in financial institutions, 80% of the variable salary shall be paid in a form of contingent capital which reflects the company's value development which cannot be freely disposable earlier than equally divided over a period of four years. The period shall take into account the company's underlying business cycle and risk assessment. Such part of the variable salary shall be reduced if either later result development in the company or latter results indicated so. The basis for the variable remuneration shall be related to the company's results during minimum 2 years. Valuation criteria for the variable remuneration shall be based on financial and non-financial criteria related to the individual, one's business unit and the company as a whole and defined in advanced.
| Payments and remunerations [1.000 NOK] | Salaries | Other remu nerations 2 |
Paid-up pension premium |
Total remune rations |
|---|---|---|---|---|
| Senior executives | ||||
| Sverre Bjerkeli, CEO¹ | 4 798 | 297 | 243 | 5 338 |
| Ditlev de Vibe Vanay, CFO | 2 132 | 166 | 18 | 2 316 |
| Merete C Bernau, director for ownership change insurance |
2 206 | 58 | 233 | 2 497 |
| Pia Almvang, director for commercial insurance | 3 336 | 26 | 163 | 3 525 |
| Henrik Wold Høye, director for public sector insurance | 1 707 | 110 | 75 | 1 891 |
| Kjersti Myking, Marketing director3 | 834 | 21 | 89 | 943 |
| Hans Didring, Country Manager Sweden | 1 615 | 13 | 377 | 2 006 |
| Flemming Conrad, Country Manager Denmark | 2 424 | 47 | 225 | 2 696 |
| Total | 19 051 | 738 | 1 423 | 21 212 |
¹ The CEO has an agreement about top-pension with a recognized cost of NOK 0.8 million in 2013.
² Other remunerations comprises of company car, telephone, insurance and other contractual benefits. ³ Employed 01.04.2013.
| Payments and remunerations [1.000 NOK] ¹ | Remunera tions |
Compensation committee |
Audit committee |
Total remunera tions |
|---|---|---|---|---|
| Board of Directors | ||||
| Jostein Sørvoll, the chairman of the board | 401 | 45 | - | 446 |
| Rolf Tolle, deputy chairman | 287 | - | 30 | 317 |
| Eva Redhe Ridderstad, board member | 221 | - | 30 | 251 |
| Giuditta Cordero-Moss, board member | 183 | 45 | - | 228 |
| Jørgen Stang Heffermehl, board member2 | 180 | - | 40 | 220 |
| Erik G. Braathen, board member | 180 | 35 | - | 215 |
| Else Bugge Fougner, board member 2 | 180 | - | - | 180 |
| Fredrik Øyan, employee's representative | 102 | - | - | 102 |
| Marianne Langrind Kvanvik, employee's representative | 102 | - | - | 102 |
| Total | 1 835 | 125 | 100 | 2 060 |
| CONTROL COMMITTEE | ||||
| Anders Jørgen Lenborg, chairman | 90 | - | - | 90 |
| Thorvald M. Haraldsen, member | 70 | - | - | 70 |
| Tore G Clausen, member | 70 | - | - | 70 |
| Kaare Oftedal, deputy | 50 | - | - | 50 |
| Total | 280 | - | - | 280 |
| NOMINATION COMMITTEE | ||||
| Truls Holthe, chairman | 25 | - | - | 25 |
| Per Ottar Skaaret, member | 15 | - | - | 15 |
| Nils Petter Hollekim, member | 15 | - | - | 15 |
| Total | 55 | - | - | 55 |
¹ Remunerations paid out in accounting year 2013.
2 Advokatfirmaet Hjort DA where board member Else Bugge Fougner is partner, has invoiced NOK 363.718 to the company for services rendered during 2013. Advokatfirmaet Simonsen Vogt Wiik AS, where board member Jørgen Stang Heffermehl is partner, has invoiced NOK 263.438 to the company for services rendered in 2013.
The Board of Representatives has recieved NOK 130 thousand in fees in 2013. Fixed fee to the board director is NOK 10 thousand and per meeting NOK 5 thousand. Fee to other representatives is NOK 5 thousand per meeting.
There were no loans granted or guarantees given to senior executives, other close related parties or members of governing bodies.
In the profit & loss for 2013, a provision is made of NOK 7,8 million concerning share-based remuneration (long term bonus plan for top level management and other key personell).
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Income from financial assets | ||
| Interest income | 102 459 | 108 919 |
| Dividend | 6 351 | 4 942 |
| Unrealised gains on financial assets | 119 321 | 62 775 |
| Gains from realisation of financial assets | 57 187 | 101 380 |
| Total income from financial assets | 285 319 | 278 016 |
| Expenses from financial assets | ||
| Unrealised losses on financial assets | (27 103) | (19 658) |
| Losses from realisation of financial assets | (1 778) | (11 583) |
| Administration expenses on financial assets | 292 | (1 205) |
| Total expenses from financial assets | (28 589) | (32 445) |
| Net financial income | 256 729 | 245 571 |
| NET FINANCIAL INCOME DIVIDED BY ASSETS CLASS | ||
| Net income and gains / (loss) from financial assets at fair value through profit or loss | ||
| Interest income from financial assets at fair value through profit or loss | 102 459 | 108 919 |
| Dividend | 6 351 | 4 942 |
| Net gains / (loss) from equity and shares | 57 187 | 74 526 |
| Net gains / (loss) from bonds and other fixed income securities | 90 441 | 58 389 |
| Administration expenses | 292 | (1 205) |
| Total net income and gains / (loss) from financial assets at fair value through profit or loss | 256 729 | 245 571 |
Earnings per share is calculated by dividing the profit for the year assigned to the company's shareholders at a weighted average number of outstanding ordinary shares throughout the year, net of treasury shares.
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Profit for the year assigned to the company's shareholders | 286 973 | 198 772 |
| Weighted average number of shares | 82 584 944 | 82 584 944 |
| Earnings per share | 3,47 | 2,41 |
There were no share dilution in 2013 and 2012.
| ٠ | ٧ | |
|---|---|---|
| Jostein Sørvoll (Chairman) |
Rolf Tolle | Else Bugge Fougner |
|---|---|---|
| Erik G. Braathen | Eva Redhe Ridderstad | Giuditta Cordero-Moss |
| Jørgen Stang Heffermehl | Fredrik H. Øyan | Marianne Kvanvik |
Sverre Bjerkeli (CEO)
| [1.000 NOK] | 2013 | 2012 |
|---|---|---|
| Total equity | 777 176 | 583 151 |
| Proposed dividend | (144 524) | (99 102) |
| Natural perils fund | (15 439) | (21 240) |
| Guarantee scheme | (61 594) | (53 167) |
| Intangible assets | (11 224) | (8 908) |
| Core capital | 544 396 | 400 733 |
| Reinsurance provision | (19 332) | (15 664) |
| Subordinated loan | 148 125 | 148 125 |
| Net primary capital | 673 189 | 533 194 |
| Assets with weighted risk of 0% | 405 872 | 289 045 |
| Assets with weighted risk of 20% | 1 175 763 | 981 055 |
| Assets with weighted risk of 100% | 3 151 224 | 2 486 554 |
| Risk weighted total assets as at 31.12. | 3 386 377 | 2 682 765 |
| Capital ratio | 20 % | 20 % |
| Net primary capital | 673 189 | 533 194 |
| Proportion of security provision | 377 497 | 341 819 |
| Proportion of Natural perils fund (25%) | 3 860 | 5 310 |
| Solvency margin capital | 1 054 545 | 880 323 |
| Reduction of solvency margin capital, § 8a | 74 146 | 88 214 |
| Solvency margin capital in percent of requirement | 311 357 | 260 882 |
| In excess of requirement | 669 043 | 531 227 |
| Solvency margin capital in percent of requirement | 315 % | 304 % |
The subordinated loan was issued 29 March 2012 in order to strengthen the company's capital adequacy during the expected significant growth in the company's business. The loan was listed on Oslo ABM 22 October 2012. Table below provides a detailed overview of the loan.
| Subordinated loan | |
|---|---|
| Name | Protector Forsikring ASA 12/22 FRN C SUB |
| Ticker | PROTCT01 PRO |
| ISIN | NO0010642127 |
| Nominal value | MNOK 150 |
| Interest rate | 3 month NIBOR + 600 bp p.a. |
| Issue date | 29-03-12 |
| Due date | 19-04-22 |
| Callable | Yes |
We confirm, to the best of our knowledge, that the financial statements for the period 1st of January to 31st of December 2013 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity taken as a whole. We also confirm that the Directors' Report includes a true and fair review of the development and performance of the business and the position of the entity, together with a description of the principal risks and uncertainties facing the entity.
Oslo, 13 March 2014 The Board of Directors of Protector Forsikring ASA Translation – not to be signed
PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap
To the Annual Shareholders' Meeting of Protector Forsikring ASA
We have audited the accompanying financial statements of Protector Forsikring ASA, which comprise the balance sheet as at 31 December 2013, and the income statement, showing a profit of NOK 292 624 thousand, statement of changes in equity and cash flow statement, for the year then ended, and a summary of significant accounting policies and other explanatory information.
The Board of Directors and the Managing Director's Responsibility for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these financial statements in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements are prepared in accordance with the law and regulations and give a true and fair view of the financial position of Protector Forsikring ASA as at 31 December 2013, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
Independent auditor's report - 2013 - Protector Forsikring ASA, page 2
(2)
Opinion on the Board of Directors' report
Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements and the going concern assumption is consistent with the financial statements and complies with the law and regulations.
Opinion on Registration and Documentation
Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements ISAE 3000 "Assurance Engagements Other than Audits or Reviews of Historical Financial Information", it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.
Oslo, 13 March 2014 PricewaterhoouseCoopers AS
Geir Julsvoll State Authorised Public Accountant (Norway)
Note: This translation from Norwegian has been prepared for information purposes only.
To the Board of Representatives' and the Annual Shareholders' Meeting of Protector Forsikring ASA
The Control Committee has examined the company's activities, including the Board's disposition, and confi rms that the company has followed the laws, regulations and provisions as well as the articles of association and resolutions passed by the company's decision-making bodies.
The Control Committee has reviewed the Board of Director's proposals for the 2013 annual report and the audit report of 13 March 2014. With reference to the audit report, the Control Committee recommends full acceptance of the submitted annual statement as Protector Forsikring ASA's annual report for 2013.
Oslo, 14 March 2014 Translation – not to be signed
Anders J. Lenborg (chair)
Thorvald M. Haraldsen Tore G. Clausen
To the Annual Shareholders' Meeting of Protector Forsikring ASA
The Board of Directors' proposed annual report and the annual accounts, together with the auditor's report and the Control Committee's statement have, in the manner required by law, been presented to the Board of Representatives. The Board of Representatives recommends that the Annual General Meeting approve the Board of Directors proposed Annual Report and Accounts of Protector Forsikring ASA.
The Board of Representatives raises no objections to the Board's proposal regarding the allocation of the profi t for the year of Protector Forsikring ASA.
Oslo, 20 March 2014 Translation – not to be signed
Harald Elgaaen Chair of the Board of Representatives
Protector Forsikring ASA is a Norwegian general insurance company (P&C) listed on the Oslo Stock Exchange. The company is required to hold a licence to engage in general insurance and is subject to legislation for finance institutions that ensures strict regulation and follow-up of its business activities. The continuous monitoring of Norwegian finance institutions is covered by Norwegian laws and regulations and implemented by The Financial Supervisory Authority of Norway.
The company's corporate governance complements the Board's guidelines for the enterprise, cf. amongst others the Public Limited Companies Act §6-12 and the Board's instructions for executive management cf. the Public Limited Companies Act §6-13.
As a publicly listed company the annual report must account for its corporate governance, cf paragraph 7 "Continuing obligations for listed companies". Following the same rules, the company is obligated to provide an explanation when the Norwegian Code of Governance is not followed.
Following the Accounting Act §3-3b, the company must in its annual report or documents being referred to in the annual report explain its principals and practices regarding corporate governance, including a justification for any deviation from the recommendations and regulation for corporate governance.
The Norwegian Code of Practice for Corporate Governance is publicly available on NUESs website www.nues.no
Continuing obligations of listed companies is publicly available on the Oslo Stock Exchanges website www.oslobors.no
The company's principles for corporate governance were first agreed by the Board 4 May 2007 and revised at a board meeting13 March 2014. The principles shall contribute towards creating the greatest possible return on investment for shareholders over time, strengthened confidence in the company through a transparent corporate culture, and a good reputation. To a large degree, the principles follow the laws and regulations by which the company is governed. In addition, they are based on the Norwegian Code of Practice for Corporate Governance of 23 October 2012.
The following presentation of corporate governance in Protector Forsikring mainly follows the general structure and form of the Norwegian Code of Practice for Corporate Governance of 23 October 2012.
Protector sets out to be the challenger.The company will achieve this goal through unique business relations (easy to do business with, competitive, reliable and trustworthy), good decision-making and cost-effective solutions. Protector shall establish a reputation as a considerable and competent provider of risk-reducing solutions.
Protector has defined 4 core values as the basis for developing a corporate culture and which will guide the day-to-day running of the business. These core values are: Trustworthy, Accommodative, Brave and Enthusiastic.
Trustworthy: Protector endeavours to develop competence at all levels, ensure that deadlines are kept, and that we are honest and upright in everything we do. By putting ourselves in the client's position we show that we take the client seriously and thus create confidence.
Accommodative: Protector's employees shall be positive, open and flexible. This means that we look for opportunities, not problems, and are solution-oriented in everything we do.
Brave: Protector's employees shall stand for what the company believes in. Each and every one is urged to exercise the decision-making powers at their disposal. We shall never avoid the truth, and shall be transparent and clear in all communications.
Enthusiastic: Protector's employees are urged to participate in company matters and take initiatives. We wish to provide a good and honourable service. We will achieve this by thoroughly getting to grips with cases and keeping the client continually informed. We shall also endeavour to give each other feedback internally.
Protector has established a set of ethical guidelines to govern what is acceptable behaviour for employees and others who represent the company. The aim of the guidelines is to create a solid corporate culture as well as look after Protector's integrity by helping employees to exercise good business practice. The guidelines are also meant as a tool for evaluating our individual performances, as well as a means for developing our corporate identity.
Human rights: With exception of "employee rights" covered below, the company does not consider this an area major challenge in our daily operations. The company always strives to get to know our suppliers, and seek to avoid using suppliers whom do not satisfy our core values, which include not breaking human rights in their operations.
Harald Elgaaen (chair) Per Ottar Skaaret (deputy Chairman) Anders J. Lenborg Cathrine Vinje Muri Edgar Ellingsen Halgrim Thon Jan Eiler Fleischer Knut Aspelin
Thorvald M. Haraldsen Svein Garberg
Elected by Employees
Atle Nikolaisen Elisabeth Kaspersen Karoline Winnæss
Anders J. Lenborg (chair) Tore G. Clausen Thorvald M. Haraldsen
Deputy Kaare Oftedal
Truls Holthe (chair) Nils Petter Hollekim Per Ottar Skaaret
Employee rights and social conditions: The companies employees are the most important resource we have for achieving our goals. As a result, the company focuses on making sure that employees have rights and social conditions that make Protector an attractive place to work. In addition, the company has a Working Environment Committee, which in accordance with laws and regulations strive for a good working environment in the company and follow up on challenges or deviations from regulations within this area. There are also two employee representatives on the Board of Directors, whom have the responsibility for being the employees voices in the BoD. The personnel handbook is consistently being revised to reflect and document the employees rights & obligations in the best possible manner.
The external environment: The company's operations are not considered to pollute the external environment. Nevertheless, the company strives to find green solutions wherever possible in its day to day operations. Such solutions can be exemplified by twin computer screens to employees to reduce paper print, and the use of video conference equipment as a substitute for traveling between our offices.
Combatting corruption: The company's industry is subject to strict rules & regulations concerning combatting of corruption. Due to the company being listed on the Oslo stock exchange, the company also has insider trading regulations that the employees must read and sign. In addition, we refer to the ethical guidelines for the company, which are ratified by the Board of Directors.
Protector's mission is to indemnify lives and assets and relieve the customers of economic risk, which is also our most important social responsibility. Specific policies or measures related to Protector's corporate social responsibility are not yet established, but it will be considered.
The articles of association describe the company's business and objectives. Protector's objective is to provide general insurance and reinsurance and the company has a licence to operate within all classes except classes 14 credit insurance and 5 guarantee insurance. The company's prioritised market segments include the commercial and public sector and the market for affinity insurance. The company's annual report provides more information about the company's objectives, and the main features of its business strategy and activity. The articles of association can be found on the company's website www.protectorforsikring.no
The company has continuous focus on ensuring that the solvency margin capital matches Protector's objectives, strategy and risk profile. The company shall endeavour to optimize its capital while at the same time maintain sufficient capital to satisfy the regulatory capital requirements, shareholders' confidence and flexibility for growth and development.
The Company's dividend policy is to distribute 30 – 50%
of the solvency capital as cash dividends, after taken into consideration the profit for the year, capital requirements inclusive acceptable buffers and necessary flexibility for growth and development of the company. The company's goal is to maintain a minimum solvency margin (calculated according to the regulations of the Financial Supervisory Authority of Norway) of at least 250%.
The Board is also authorized to repurchase 8,615,560 own shares. This corresponds to approximately 10% of the company's total share capital. This authority expires with the ordinary general meeting in 2014. The Board of Directors' will purpose for the general meeting that the authorization is renewed. At year-end 2013, the company has a holding of 3,570,661 own shares.
The Board is authorised to increase share capital through the subscription of new shares with an aggregate nominal value of up to NOK 8,615,560 divided on 8,615,560 shares, each with a nominal value of NOK 1. The authorisation may be used for one or more share issues. The Board of Directors may decide to deviate from the pre-emptive right of shareholders to subscribe for shares pursuant to section 10-4 of the Public Limited Liability Companies Act. The Board of Directors may decide that payment for the shares shall be effected in assets other than cash, or the right to subject the company to special obligations pursuant to section 10-2 of the Public Limited Liability Companies Act. The authorisation also applies to decisions to merge pursuant to section 13-5 of the Public Limited Liability Companies Act. This authorisation is valid until the Annual General Meeting in 2014. The Board will propose to the General Assembly that the authorisation is renewed.
According to the Norwegian Code of Corporate Governance, the authorisation should be restricted to defined purposes. The Board wants a mandate that gives flexibility, thus the recommendation is not followed.
The company has only one class of shares and all shareholders are treated equally.
Existing shareholders have re-emption rights to subscribe for shares in the event of an increase in capital, unless the Board finds it expedient and in the interest of the shareholders to waive this right. If the Board proposes to the general meeting to waive this pre-emption right, then such a proposal must be fully justified. If the board of directors resolves to carry out an increase in share capital and waive the pre-emption rights of existing shareholders on the basis of a mandate granted to the board, the justification shall be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital. Any transactions carried out by the company in its own shares shall be carried out through the stock exchange whenever possible. The company is listed on the Oslo Stock Exchange under the ticker PROTCT.
The company has established rules for trading in the company's shares by primary insiders or close associates of any such parties (defined as transactions that involve shareholders, board members, executive managers, members of the control committee or auditor and close associates of these). There are also insider rules for other employees in the company.
The company is generally reserved about transactions by shareholders, board members, executive managers and their close associates. To avoid damaging the company's reputation, the Board believes it essential to be open and cautious about transactions that could be perceived as doubtful in terms of the closeness between the parties. The members of the board and management shall therefore give the board by the chairman written notification if they have significantly direct or indirect interests in transactions undertaken by the company.
In general, the company will endeavour to follow the principles for equal treatment and transactions with close associates that are laid down in the Norwegian Code of Practice for Corporate Governance.
There is no restriction on negotiability of the company's shares beyond the provisions of the Financial Institutions Act.
Protector holds its AGM no later than the end of June each year. All shareholders with a known address receive written notice of the AGM by post, sent out no later than 21 days before the AGM. The notice calling the meeting and supporting papers are published on the company's website 21 days before the general meeting. All shareholders are entitled to attend general meetings, and arrangements are also made for proxy voting. The company should to the extent possible, prepare a form for the appointment of a proxy, which allows separate voting instructions to be given for each matter to be considered by the meeting and for each of the candidates nominated for election.
The Chairman of the board, the Chairman of the committee of representatives, the Chairman of the nomination committee and the auditor shall be present at the meeting. An independent chairman shall be elected to conduct the meeting. By this is meant that a chairman and his/her close associates (Public Limited Liability Companies Act § 1-5) must not have substantial interest in orders of business being treated by the general meeting concerned.
Protector's articles of association regulate the company's nomination committee, which has three members. The shareholders at the general meeting elect the members of the committee. The nomination committee is independent of the company's board of directors and management, and its composition aims to ensure broad representation of shareholder interests.
The nomination committee is responsible for proposing candidates to the board of representatives, the board of directors, the control committee and the nomination committee, and the remuneration of the members of these bodies. The committee must give reasons for their recommendations. The committee shall operate in accordance with the Norwegian Code of Practice for Corporate Governance.
The Board of Representatives in Protector is a legal requirement, and has 12 members, of which 8 are elected by the general meeting and 4 by the company's employees. Members are each elected for a two-year term of office so that half the members retire each year. It is a statutory requirement that the members elected by the general meeting shall reflect the company's interest groups, customer structure and its function in society.
The duties of the board of representatives include making recommendations to the AGM on the Board's proposal for the annual report and accounts, electing the shareholder nominated directors, including the chairman and deputy chairman, to the board of directors, determining the fees paid to the directors, electing the company's auditor and determining the auditor's fee, issuing the mandate for the work of the control committee and considering reports from the control committee. The board of representatives is entitled to make recommendations to the board of directors on any matter.
According to the company's articles of association the board of directors shall consist of minimum 3 and maximum 9 directors including the number of deputy directors decided by the board of representatives. The company's employees shall appoint at least 1 member and one deputy director. If a director elected by the employees resigns from the company, the director shall resign from the board of directors. The directors of the board of directors and the deputy directors are elected for two – 2 – year terms. When retiring there will be a drawing of lots among those having served for an equal length of time. The Chairman of the board and Deputy Chairman are elected for one year at a time.
The company's intention with the composition of the company's board is that the members are elected in light of an evaluation of the company's needs for expertise, capacity and balanced decisions, and with an intention to ensure that the board can perform independent of any special interests and that the board can function effectively as a collegiate body. Moreover, majority of the board members shall be independent of the company's executive management and material business contacts. At least two of the board members elected by shareholders shall be independent of the company's main shareholders. The board of directors shall not include representatives of the company's executive management.
An assessment of independence shall take into consideration whether the board member; has been employed in the company, has share options in the company, has crossrelations with other board members or general management, has close family links or otherwise has represented or represents material business relations with the company. Information about the individual board member's qualifications, capacity and independence are given at page 20-24. Moreover, note 10 to the annual accounts states how many shares the individual shareholder owns in the company. Members of the board are encouraged to buy shares in the company.
The nomination committee's proposals for individuals as board members will be based on the above-mentioned guidelines.
In the company's opinion the current board of directors satisfies the requirements set by the Norwegian Code of Practice for Corporate Governance to the members' independence of the company's executive management and material business relations.
The Control Committee of Protector is a legal requirement, and has three members. The control committee shall ensure that the company carries out its business in an appropriate and reassuring manner in accordance with relevant laws, regulations and guidelines. The committee is entitled to look into any matter, and has access to all relevant documentation and information. The committee has the power to demand information from any employee and any member of the company's corporate bodies. The control committee has no decision making power.
In accordance with Norwegian law, the board of directors has the ultimate responsibility for the management at the company and for supervising its day-to-day management and activities in general. In addition to the mandatory requirements, the board of directors shall operate in accordance with the company's written instructions for the board. The instructions stipulate rules for administrative procedure, confidentiality, competency and responsibility for establishing a control system to ensure that the company is run in accordance with relevant laws and regulations. A deputy chairman shall be elected for the purpose of chairing the board in the event that the chairman cannot or should not lead the work of the board. In accordance with its instructions, the board of directors shall, to the extent it is necessary, agree to strategies, business plans and budgets for the company. In addition, the board shall ensure that the company has a good management with a clear internal allocation of responsibilities and duties. In this connection, a set of instructions has been prepared for the CEO.
Each year, the board of directors agrees a concrete meeting and work plan for the following year. The plan includes strategy work, other relevant business problems and control work. Further information about the work of the board of directors is provided in the directors' report.
The Company shall, in accordance with Norwegian law have an audit committee. The Audit Committee consists of 3 members elected by and from the board members. The majority of the Audit Committee must be independent. The Audit Committee shall have the duties imposed by the Insurance Act §5-11.
The Board shall, in accordance with Norwegian law have a Compensation Committee. The Compensation Committee consists of the Chairman of the board and two board members. The Committee shall be independent of the company management.
The Compensation Committee shall prepare and present recommendations to the Board on the following:
The board will not establish sub-committees beyond the legal requirements. The size of the board and the frequency of its meetings mean that such committees are not required.
The company is subject to strict requirements for risk management and internal control. This includes a requirement for an annual review of the company's most important areas of exposure to risk and its internal control arrangements. This annul review is to be confirmed by an external auditor. In connection with the annual review of the company's internal control, a complete assessment of all routines and procedures is implemented, including an updating of the risk to which the management believes the company is exposed and accompanying control measures. As a finance institution the company is subject to Regulation no. 1057 of 20 June 1997 relating to the clarification of responsibility for control, documentation and review of the company's internal control. The company has established routines that are in accordance with the regulation.
Protector's internal control of financial reporting encompasses guidelines and procedures that ensure that accounts are prepared according to the Accounting Act, regulations for annual accounts for insurance companies and good accounting practices and ensures a correct picture of the company's operations and financial position.
The board of representatives determines the fees paid to the board of directors following a proposal from the nomination committee. The remuneration shall reflect the board's responsibility, expertise, time commitment and the complexity of the company's business.
The chairman of the board has a higher fee than other board members as a result of the larger responsibility and time consumption connected to his position. The board receives a fixed annual fee for its work, and has no share options. Details of the amounts paid to the individual board members are provided in the annual report. As a rule, members of the board, or companies to whom they are linked, shall not take on assignments beyond the work done by the board for the company. If they nevertheless take on such assignments, they must inform the entire board. Substantial payments from the company over and above the fixed board fees shall be presented to the general meeting for approval. Information about the scope and costs linked to such work shall also be provided in that payments beyond the normal fee shall be specified separately in the annual report. The company does not give loans to members of the board of directors.
The Board's statement of guidelines for the pay and other remuneration of the executive management has since 2007 been presented for the General Assembly for necessary treatment. The declaration is stated in the financial statement notes. The salary and other remuneration for the CEO are determined by the Board after the suggestion of the Compensation Committee. The determination of salary and other remuneration for other executive managers is determined by the CEO with boundaries discussed with the Compensation Committee. Further information concerning compensation, loans and share ownership of senior management is set out in note 17. The executive management is encouraged to buy shares in the company.
For the communication of financial and other price-sensitive information, the board of directors has based its policy on the requirements of the stock market regulations and provisions of the Acts relating to accounting and securities trading. In addition, Protector has a corporate culture based on openness, which means that all relevant information about the company's business activity will be published on the company's website, including annual and quarterly reports. Annual and quarterly reports are also made available via the Oslo Stock Exchange's reporting system. The company also aims to provide open presentations in connection with the publishing of annual and quarterly reports. The company has a financial calendar on its homepage and will provide the same information via the Oslo Stock Exchange's reporting system. This overview will contain the date for the annual general meeting as well as dates for the publishing of quarterly reports. With the presentation of company information for individual shareholders or other interested parties, only publicly available information is presented.
In the event of a take-over bid for the company, the board of directors shall evaluate the situation thoroughly and with consideration for the rules relating to equal treatment of all shareholders. The board shall gather all relevant information, including the views of the employees, in order to undertake the best possible assessment of such an event. The board will thereafter give the individual shareholders the best possible advice with underlying information that ensures that each individual shareholder is able to take a position on an eventual bid. The board's statement on the offer shall make it clear whether the views expressed are unanimous, and if this is not the case it shall explain the basis on which specific members of the board have excluded themselves from the board's statement. The board shall arrange a valuation from an independent expert. The valuation shall include an explanation, and shall be made public no later than at the time of the public disclosure of the board's statement.
The board of directors will not seek to hinder or obstruct takeover bids for the company's activities or shares unless there are particular reasons for this.
Any transaction that is in effect a disposal of the company's activities shall be decided by a general meeting.
The company has no clauses that can exclude it from the restrictions under the Securities Trading Act § 6-17 concerning "Restriction of the offeree company's freedom of action" in a take-over process. Nor has the general meeting given the board of directors or CEO any special authority for use in such situations.
The auditor shall submit the main features of the plan for the audit of the company to the board of directors annually.
The auditor shall take part in meetings with the board of directors that deal with the annual accounts. At these meetings, the auditor shall review any material changes in the company's accounting principles, comment on any material estimated accounting figures and report all material matters on which there has been disagreement between the auditor and the executive management of the company. The board of directors will meet the auditor at least once a
year to go through a report on the auditor's views on areas of risk, internal control routines, etc. The board shall arrange an annual meeting with the auditor that excludes the executive management.
Significant services beyond the statutory audit must be approved by the Board.
Information about the auditor's fees for a mandatory audit and other payments shall be presented to the board of representatives and stated in the annual report.
PROTECTOR FORSIKRING ASA Filipstad Brygge 1, PB 1351 Vika, 0113 Oslo Tlf.: 24 13 17 00, Fax.: 24 13 17 10 Epost: [email protected] www.protectorforsikring.no
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