Protector Forsikring/ADR (PSKRF) Q4 2025 Earnings Call Transcript

all right welcome to the presentation of protectors full year 25 results we will focus on the full year a quarter is volatile we say that all the time focus on the four year result that is more interesting and says more about the underlying realities of the business and before i go into the results i always spend a little bit of time on who we are and what we did this morning was to continue on looking at what the challenger should be in the future and one thing that we care about is is that we even when we are 700 people even when we grow in number of countries that we still act as one team which is a bit contradictory to a performance culture where we compete against each other and also that we want local decisions and also that we want each individual in the company to make decisions because they are where it happens and they should know what decisions to make so so that's what the challenger is it is about making everything we do focused and simplistic but when it comes to culture we need to complicate it in order to spend time and really understand so that we're on the same platform and the same grounds for the future because i think that's extremely important in order to stay who we are the challenger and then to the highlights other than that 84.7 percent combined ratio and a 14 growth with an investment result of a return of 1.5 billion Norwegian kroner leading to 31.7 kroners per share in earnings. We have had some other activities in the quarter, one being the placement of a tier 1 bond where the market was good, so with good terms on that maybe the biggest other than the growth for 1st of january which i come back to news is that we have now been relieved of the maybe biggest mistake that we've made in in protective workers compensation in in denmark where we took on board a portfolio knowing that we didn't have the exact data we needed to underwrite it but but we underestimated the downside of that portfolio and and we have now sold that so the the agreement with that argus is completed and we can now focus on the lines of business and the business that we know how to do in in Denmark so so that's that's very good I'll get back to the reinsurance side and and the growth later on and speaking about the growth I think that it is important in particular following a 1st of January with with high growth it's important to to remember how the portfolio is put together and and what we see here is a development the development is driven by disciplined underwriting so so we underwrite in all these segments and remember that the commercial segments so if you look at the the segment distribution on the left of the cake diagrams here commercial sector in all countries is bigger than the public and housing sectors and and but we have grown more in the public sector that is due to mostly market conditions being so it's been more rational pricing in the public and housing sectors than what it has been in the commercial sector so that's why public sector and housing has grown a lot also in the past five year period and property and motor by far our biggest products short tail products and UK is now close to half the business or at least 42 percent of the business but it's also important to remember that the first of January growth is related to the Scandinavian markets or the Nordic markets and france not uk and the market conditions are different in those two geographies so it's been easier to grow in the nordics than and france than what it has been in the uk the past year so it's just a support so that you see what the inception structure in our portfolio was in the years from 21 to 25 obviously we don't know exactly how that will look in 26 but at least you then see that that distribution and when it comes to 25 what you have seen throughout the year is that from the UK we've had a good first of April in public sector and housing but we I've also said and we've also experienced that the market has been softening so rates have been going down especially on the product the property product in commercial sector so it is slightly harder to achieve price increases it's slightly harder to renew clients and also to get new sales but the churn in UK during 2025 has been good so we've managed to to keep the churn at a at the good level around slightly above 10 percent and been disciplined in the new sales side and then we've had a strong growth in in the other territories or in Scandinavia and and that is supported by good renewals renewal rate of 95% in total for the company. It's it's basically the same in in the Nordics and and But we've also had some new sales. So so the markets there are But it's good on The Norwegian business which has the highest growth out of the Scandinavian countries on 1st of January 26 So a similar situation to what you see here. Denmark is number two, 1st of January, 26. But Sweden has a lower growth in 26. So Sweden is the market where there is still more competition and more competition that we view as irrational. and then you have the french business of course where not a lot happens in quarter four so most of it is is old news of the start there however first of january is is an interesting date because we communicated a an estimated number of what we thought we would quote for first of january following quarter three and that that number was roughly right so what we have seen in the market for first of gen in france is that we have won approximately 10 of what we have quoted in the commercial sector space motor and and that's a lower figure than what we are used to in Scandinavia it's more in line with what we are used to on the motor side in in the UK and then on the housing sector where most of the property volume from 25 comes from we have basically won nothing first of January 26 so one of big competitors. AXA has come in and lowered prices a lot compared to what they did in 25. So it's not a hat trick in France. We have not won volume in all the segments we're in, but we've got some traction on the municipality side, the public sector side, where the market situation is very different from the housing sector. And the interesting thing is that the housing sector is quite similar to what we know in the UK where there is low deductibles lots of escape of water claims and calculating the price is not very difficult so when we may make a mistake and the competitors who the price lower than us they may know something we don't absolutely it's new were new in france but at the same time it's it's difficult to see that it's very sustainable those levels that we see in the housing sector now so at some point we believe that we can have success there as well maybe not in the same way as 23 in the uk but but at least at least it's not on the public sector side which is more about large loss and risk selection yeah sorry i forgot to say that so please ask questions during the presentation so it continued to to grow um not a lot from from that but uh but the quotation rate went slightly down both because of capacity uh our own capacity so we thought we we prepared as well as we could but we didn't have enough we didn't have enough manpower to do that with quality so the the actual number is very similar to what you could derive out of the 370 to 75 and quotes any more questions on volume side and please ask questions in writing as well okay again when we look at the full year we also bring out the the longer picture here and and there is volatility in not only the runoff and the large losses but but also on the the loss ratio below those large losses and without the runoff. The large loss situation in 2025 is lower than what we have said is normalized and the comment on the top here going from seven to eight I'll get back to when I speak about the reinsurance but that goes for 26 not not for 25. So for 25 it's still a normalized level at seven percent approximately so we're slightly lower than a normalized level in in 25 and we've had some runoff gains even though it's best estimate but i've also said previously that following a period with uncertain inflation you should expect that we that there is a bit more uncertainty and then and then there could be some runoff gains from that situation if we have been on the on the conservative side um and then and then when it comes to claims i think that the important message here is is to say that if we compare full year 25 to full year 24 and you normalize for runoff and large losses all countries are slightly better on the loss ratio side so it's an improvement coming from the price increases where we have unprofitable products or clients and and that's the simple way of seeing it the only country that is slightly up but but very much the same is is Sweden and then there are some technicalities one of which is related to the transfer of the Danish workers' comp portfolio. So the risk margin is reduced, it's a one-off of approximately 80 million for the quarter of the year. Due to lower risk in the remaining portfolio, we have changed that model. and then there is a small between the countries has nothing to or no consequence on the total loss ratio but between the countries there is a we've changed the this from a standard very old model of of calculating the future claims handling costs and that changes the distribution with slightly lower cost which is claims handling cost is on a loss ratio for uk so uk is slightly higher and then norway and sweden have had a bit more of that cost and that's a one-off again so they're slightly lower and with that information it's the conclusion is that all countries compared to 24 are slightly better normalized for all of that. Any questions on the loss development side? You have all the figures on large loss and in order to normalize on all these levels so I won't go through each of them but that's the total picture. So we have Cost and quality leadership leading to profitable growth as our targets. The cost side is very flat. There is no or very limited efficiency improvements in what you see here. There are some effects that make this look at 25 look higher than than 24. But if you correct for the fact that the share price has increased, we've talked about that before more than what it did in 24 and that is connected to a incentive-based share program for some employees and france then you'll get slightly lower than than what we had in 24 on the cost side but there is no or very limited efficiency improvement and and we we do that consciously but of course we we do want to see the effects of that investment we we make i think it's more likely that we see that effect in new opportunities for growth that we spend it on developing the company in on the growth side to to grow then that we cut and slim down departments very quickly in order to to get the low cost and that takes some time as you understand so i i think there's no nothing very special to to comment on here other than those comments i've already had unless you have any questions on specific countries or the totality on cost. Now continue to the quality leadership and last time we brought this up we had the UK survey with the brokers where we got very strong feedback. We've also had the Scandinavian or the Nordic surveys out and had very strong feedback and it's especially good to see that we are increasing the distance to our competitors in all the Scandinavian countries and we are also winning more prices external prices from the brokers so the largest broker in Scandinavia we are number one in in Sweden and in in Norway and we've also won other external surveys that support our own survey but at the same time and as always the most important thing about this survey is to understand that feedback use it as a basis to discuss with the brokers who are our best and only friends how we can improve what we should prioritize to improve in the future. So, so this is good news. It doesn't automatically mean that we will get more business from the brokers. But it, but it means that we can, we're in a position to require more from our best and only friends. And I think that's the important part that the long term, the long term gain from this is that we can require better data more data we can require that they invest together with us in competing against against the direct channels and that we can do those larger projects because we you say that we are the best partner for you so so that's a good thing but it doesn't mean that we win more clients tomorrow yeah there is basically nothing I haven't touched upon here since we've talked about the cost previously as well so I'll move forward to the investment side and And, yeah, when you see this, it's per 31st of December and does not then include the reduction from the transfer of the workers' comp agreement, which is for 26, and it does not include new growth, of course. so that's a change. But the results on the investment side are strong in absolute terms and relative especially on the equity side but also on the bond side in a very strong market and the yield is down due to the reference rate if you compare it to last year. other than that on the bond side it's a very similar portfolio we steer interest rate towards our liabilities and we have a slightly shorter duration in our reserves so so that's down and then you see the comment at the end that we have the the assets under management are reduced by the transaction amounts of the reserves that we had on the Danish workers comp portfolio approximately one billion Norwegian kroner and on the equity side I think it's it's right to say that it's a both absolute and relatively strong result there is some changes in the portfolios in that see that the discount to intrinsic value has reduced significantly from from last year some of it is obviously that we've had had the gain that we have so share prices have gone up but there are also some companies or some sectors that have performed worse than what we have expected so there's been some changes in in the intrinsic value so we open as a value with so and and this year it has been some disappointments on certain segments and companies and some changes in in that portfolio but even though it's the same number of holdings there have been some changes in in the portfolio during 2025 and you'll see that in the annual report what we had at the year end 25. Any questions to investment side? Microphone.

You managed to earn an annual rate of return on investments of like 14 percent over the last 10 years which is on the last slide.

How did you do that and are you going to keep on doing it or is it going to be another number in the next 10 years yeah as uh so we uh dog marius is here and he's he's in charge of that but i can i can answer that question in at least a simple way and that is that we we believe in what we're doing and we will uh continue believing in in doing that so uh investment is core business for protector as insurances and we will continue to step by step have improvements in our processes and but but what the future will give that's very difficult to say our our ambition is to to beat the market over time and we think that those processes are set to do so unless Dagmaris has anything to add on the income statement here we have a couple of comments and and and I've touched upon one of them before the change in risk adjustment it's an IFRS element so it's on top of the best estimate reserves there is a risk adjustment in IFRS and when a long tailed reserve portfolio is out of our portfolio then the risk in total for the rest of the portfolio is is lower so that's why we've made that change it's a one-off and it should be a stable number or fairly stable number in in the future depending on where the growth comes from and then it's the the the larger change that we've made on on reinsurance and it's it's a bit complicated just because there are no figures that will exactly clarify what has happened on the reinsurance side in in the accounts but to make it simple we see it from two sides so i said that we increase the large loss normalized large loss rate by one percentage point from seven to approximately eight so we're taking a bit more risk ourselves uh buying less reinsurance on certain programs i'll get back to that and then on the other side we pay less for that reinsurance and we wouldn't have done that if we didn't think it was a good idea and we've done that on the areas where we have a lot of data so where we think that we're actually able to predict what those large losses will be over time so so that's so one angle is that we have increased risk and that's that that will mean that so it's the very large losses and as you've seen the last five years our large loss rate is lower than seven percent and so these are the very large losses so it's uh it's not something that will happen every year it's uh this is a volatile element it's a volatile part it's long far out on the tail, that one percentage point that we're speaking about. And then the reduction in cost is then higher than what that increase is. On the capital development side, on the own funds, we have the tier one that we issued. And then as we're growing, we utilize more of tier two capital that we have issued previously and then that's basically the same amount as the dividends that will be paid so that's stable and then on the requirement side it's on the insurance side that there is a change and it's related to reinsurance and that's the other angle to that reinsurance exercise that we so it's increased approximately 300 million Norwegian kroner and the requirement side and when we do that and we have a target or a requirement of 20 return on on that capital we need to hold for 300 million insurance risk which is higher than 300 of course then our view is that has to be that it's much higher or higher than 20 percent return on that equity and our estimations is that it is much higher than that if not we wouldn't have done it so what we have done is to say that on what we call risk the risk program that's basically fire fires that can be that large on the risk program we have increased from 100 million Scandinavian kroners or or 10 million pounds or euros to 300 or 30 and that's because we have very solid data sets to to document and to calculate losses between or up to 300 and the price is too high so so let's not buy it we can take that volatility but obviously there will be slightly more volatility in our in our results but the economic realities of it is that it's the right thing to do the cut is different so natural catastrophes that's different uh just like uh predicting the interest rate i i don't think we should uh believe that we are best in the world at predicting what the weather will look like um and what climate changes will will do so so to increase too much uh on that side obviously we have a view of both how we select risks when it comes to natural catastrophes we have processes and data that that aim to avoid the worst ones and so where there will be the most flood or the most windstorm damage but but to predict the the consequence of of weather related damage to our portfolio is is difficult so we we have increased retention on the traditional program to the same level or actually higher since it is in danish kroner as on the risk side but that's only for the first loss then we bought more reinsurance that reduces that to 100 million danish on the second loss and and the reason is basically that we don't think we know exactly how to calculate that on the uk liability it's just a too high price so we we then we say that you pay this price or or we take it ourselves to the reinsurers and some wanted to pay that price or take that price and some didn't so then we took a higher share of the layer between 10 million and 25 million pounds on UK liability and we are much more comfortable with that portfolio today than what we were when we entered the UK so so that's any questions on on the reinsurance side what you're doing sounds reasonable absolutely so we like it what's your estimated or guesstimate

it increase in the retention rate after this one because when we do our calculation we end up that you estimate a large loss ratio to go up from seven to eight and the overestimation is that the retention rate will increase with around 2.0 percentage points is is that a fair assumption would you say yeah i think that's a fair assumption and and obviously it depends on on how the portfolio develops but but with a 25 portfolio it's a fair assumption the distribution

policy it is very similar to what we have had previously what you do see is for the one who has studied it next to each other is that it is the arrow is slightly taller the green starts slightly higher up and the box the blue box above 200 is slightly higher than the one below and and that is to reflect the process that we have where it's not really about these numbers 200 or 150 is important that that's that's a bottom and and then then there are activities but it's about the risks that we look at and evaluate every quarter on the different areas mainly the insurance side and the investment side but all the underlying risks from them and then the stress scenarios and what we have in a stress situation because what we always want to be sure of is that we are ready to act on profitable growth and good investment opportunities in a crisis situation but at the same time not to get lazy obviously and make sure that we we don't think that we can make a lot more than than you if we don't see those opportunities right in front of us but that's a it's a quarterly process or a continuous process with a quarterly decision and it is it happens after we know what the results are not not before Our long term financial targets, no change in them. And it may seem a bit conservative to say 91% combined ratio with the history of the past five years and the underlying realities. When I say that they look good and we deliver 85, they still look good. But it is something about the growth the protector as the growth company we profitability is extremely important but we we also have to face the fact that that in order to find new markets there is a bit more uncertainty and we need price is the deciding factor so so 91 is long term a very good return on on equity and the same the same there conservative relative to those numbers but but i think that it is a good steering to have and then we're back to to the summary and any questions on the totality

or the last part hello my name is per halmralst i have a question if i remember correctly at the last quarterly presentation you talked about the possibility of entering a new market in the UK within real estate and could you say something about are you quoting for the first of April already or is it too soon and could you say something about your volume expectations in this market yep your question should probably have said something about it on the volume side so it's a we have

quoted very selectively so far in the real estate market. We have won a handful of clients in that market, but the selectiveness is due to the fact that we basically only quote what looks like what we have from before. Housing, for instance, in the real estate sector and in that part of the real estate segment and especially for the large clients it seems like the rates are a bit too low so we haven't won many of the larger clients there yet but but we have quoted very little so far so that it's a bit unsure if if the market intelligence is is significant but but we're building those databases with data from the so from the brokers we're actually getting large databases from the brokers and when we have a more granular model that can separate the different types of risks within real estate we are very ready to to make that a quoting machine so so we have there we have the the model the people and the setup so we're feeding that with data and and then we've said that it's approximately one billion pounds in in that market for what we have risk appetite for and and over time and i don't know what that is let's say it's a it could be three years if things uh if there's if it's a hard market and a rational market it could be seven years if it's a bit up and down but uh but that we should have a large share of that market meaning at least double digit percent or higher than that is is quite obvious because there is a lot of attrition attritional losses and cost will matter in in that segment it's very similar to what we do so nothing in the figures for now no no good understanding of the market situation but we're preparing still preparing 1st of April is not necessarily a very large date

it's more spread out on the real estate sector Good morning, Thomas Svensson from SCB, so question to your UK business just to help us to try to calculate sort of the trajectory or the combined ratio there. So the business you have today, that's the back book, and then you have the front book. So how many years do you think it will take before you have replaced the favorable business with a new, maybe softer business?

So I've commented on this before, and we haven't changed the view on it, other than that the parts of the portfolio that should be out in first of april 26 is going to be smaller than what we estimated so so then it's not coming out for tender but basically what you can can say is that for all the business we wrote in 23 which is the big inflow as first of April 23 it will be some clients with then three year but I'm saying that that's a smaller share than what is the normal and then some clients with a four year um before they go to market uh and um and then so let's say that it's a approximately i think i said that before 40 percent on four years and 40 percent on five years and then 20 percent on three years and then maybe it's 42 and 42 16 okay good uh just uh on your if you look away from france but just uh on your combined ratio so are you thinking are you prepared to go materially above or somewhat above 91 percent in in certain of your established markets uh if some some are below and you think about the average on your existing business looking away from France I think on existing business we are prepared to write contracts over time that that can be slightly above 91 on short-tailed business if it makes sense and and that can mean first-year and not to not to do it to price system but that it is necessary to come in on on a higher combined ratio than or significantly higher than 91 on on the first year with mechanisms and risk management initiatives that make it profitable over time and and we but but maybe more interesting i think is that we we then we're more interested in looking at new segments or or going into business that we find data for but but that are new to us which there's a bit more uncertainty around but we have a strong book in the bottom.

Okay, thank you.

Hello, David, Valimest. A question regarding volume in Sweden going forward. You mentioned that it's still somewhat irrational pricing there and such a bit harder to gain volume.

Should we expect the coming years, 26, 27, to be at approximately 25 levels or do you expect that to decrease or increase based on the market situation i think that it's a it's very hard to to predict what the competitors will do over the next two three years but but i what we see now is that it is still more difficult in in sweden and and that probably doesn't change tomorrow But there are a couple of market movements in Sweden that can give us more opportunities. So one of the largest players in Sweden, they haven't officially gone out with it, but they are not very interested in brokers. And that can give some better opportunities, more opportunities. There are also some large initiatives on facilities in the Swedish market that goes for the whole Scandinavian market, where we have a very strong position with the brokers to do that cooperation. And then we're in a game where it's more about finding an efficient way of dealing with clients that are slightly smaller and and give them a good product through a broker and that can grow the broker market share the broker's market share and and that's since the largest scandinavian broker is headquartered in sweden they they are furthest ahead there. So there are some market opportunities that can be bigger but the competitive landscape is a bit volatile in Sweden.

You've probably been asked this question many times before but why did you really choose France?

So the short version of that is that we we looked at many countries on a high level is it do the brokers have a good market share and is the market large enough that we that is it is an interesting to us is data available in in that market and public sector has been important for us that that is a market that is has the same dynamics as we're used to with the public procurement regulations and and a similar type of insurance purchase and then we through the high level analysis we started in spain we didn't get data in spain when we went to france which was number two and then we met the brokers, got data in France and then we can go to the table and at least have a similar starting point as competitors when it comes to competence and understanding of the history. No more questions. Thanks for meeting or listening in. Wish you a good day.