Protector Forsikring ASA (PROT) Earnings Call Transcript & Summary

Welcome to the presentation of the third quarter 2026 results for Protector. We'll start, as always, with who we are and a short summary of what we did this morning. So we've had all employees on one topic, obviously, the results, but one topic when it comes to our culture. And as it has been for some time, the focus is on the challenger. And what we have done is that we've worked on setting our vision for 2030. And I won't get into all of the details there with you. But that vision has a requirement of change. And the reason for the requirement is twofold. One is that Protector is changing. We're growing a lot more people, more countries and more years, more experience that we need to challenge. And it's harder to challenge ourselves than to challenge everyone else. And the other element is that the world around us is changing and in particular, technology. Those 2 things are actually giving us an opportunity to reduce the biggest risk in Protector. And the biggest risk in Protector is that we become like everyone else. And as long as we get to change, as long as we have means to make changes in order to create more value, we are reducing that risk. One mitigation has been and is to establish in new countries. That gives all employees an opportunity to be part of something else. We don't want the best people to butt their heads within areas where they don't get anywhere, where they don't get development. But when we open new opportunities, the best people can contribute either on those new opportunities or other people in existing areas will move to the new opportunities and then something opens up. But this change that is happening within Protector and outside of Protector is an opportunity to make further change. So another action to reduce that risk. And what we are doing is that we -- for all employees, first, all leaders, all employees, we are setting performance targets, so high ambitions on business value targets. We call them business commitments so that profitable growth is obviously a target for everyone in Protector. That's what we're paid to deliver. But when we measure an additional performance, when we measure who should have performance pay in Protector, then that is linked to something that has an even higher ambition. And what we will then do is, I'll give you a couple of examples. Say to 1 broker in 1 country that has GBP 200 million in volume. We will say that by 2030, we want to see GBP 300 million from that broker. So more than the broker has within that segment. That doesn't only require that we see everything that the broker has. It also requires us to help the broker get more within that segment. And it's an ambition that requires us to change because that will not happen if we do things the same way. And we need to choose. So it means we need to select that broker, we think is able to actually do something different. And then we need to get together as a team. Today, it's mostly underwriters and key account managers, broker service who are out with the brokers. But we need claims handling. We need IT. We need compliance. We need reporting, and we need the whole team, risk managers to go out to the brokers in order to increase their portfolio and make sure that we see all of that business because it needs to have the right data quality. Today, a lot of what we don't quote is because it doesn't have data quality. And this is possible to set ambitions where we have to change. It's possible because of technology. And we see it today that we have several areas where we have already deployed technology that changes the way we do things. And it's difficult to change, especially when what we've done previously has produced very strong results. So it's not necessarily our stars from history who are the best at challenging our existing processes. I've mentioned that before. But this is 1 way of doing that. So that's type of ambitions and targets that we're setting. We're taking some risk in prioritizing some areas where we set high ambitions. But there's a lot of energy, and it is very much related to staying the challenger, being bold and being committed to being that company that is always developing, always improving. So that's what we are talking about at the moment. We will have our targets for 2027 set a lot earlier than what we usually do in this process. And then we will focus on working on how to achieve them. But now we'll speak about history. And the results for quarter 3 are strong in total. I'll obviously get back to profitability and growth and investment side and capital later on. But just to put some words on the other highlights there. As you know, we have broker satisfaction surveys in all countries annually. U.K. was conducted a while back. We haven't communicated the result there in writing. So that's old news, but we were #1 on claims handling and in total in the U.K. Lots of interesting feedback that makes us understand where we can improve further in the U.K. broker market. But as you see, Norway #2. So we have a target of being quality leader. So when we're #2, it hurts. That's not quality leader. And the brokers in Norway, they have said that there is a company that is better than us in the deliveries. That is due to some deterioration in response times. That's important to the brokers. It is some feedback on that we are a bit too square, a bit not flexible enough. We have increased prices quite a lot on several areas, in particular, on the health product, which has been a very poor profitability. And then we have also started challenging the brokers on their value chain. So we are seeing the brokers as an integrated part of our value chain. So we are starting to challenge the brokers in particularly delivering very good data to us. If not, we don't quote. We need good quality data, but also that we don't do too much double work. And we're challenging them on use of technology on top of that. So there are some areas that we have delivered poor on, and we get that feedback. And then there are some conscious activities that we've done, which we probably could have done better because we're getting this feedback. But the totality is a good opportunity to have further discussions with the Norwegian brokers in order to improve that position. So in some ways, I said it hurts, and it hurts. It really hurts for the whole Norwegian business unit as well. But in some ways, it is a bit of an advantage to be hit because I think that sometimes we can lean back and see that we're good and good is the enemy of great. So it's not to talk #2 away, but we are very motivated to change that. We have, in Norway, gotten feedback on claims handling as well, and we're #1 on claims handling. So we have very good feedback on the claims handling, but also there, lots of room for improvement. And as you know, claims handling is the product we sell. That's what the clients buy. Denmark is #1. So we continue to be #1 in Denmark, good feedback there. And it is both on claims handling and in total. So that's a good result. But I don't think the actions are any different from what they are in Norway. So it's just more important to focus on that, let's not only celebrate #1 position, but understand what we can improve and really dig into what the brokers mean when they give us feedback because there are lots to improve there as well. Yes, we placed a Tier 1 bond and then the dividend is written here. So I'll go straight into the volume. And I think that quarter 3 2026 is a good example of what we say every single quarter. Quarterly volatility must be expected. It's not only on the profitability side, it's also on the growth side because when I get into this, and Amund reminded me that please ask questions during the presentation. That makes it a bit more dynamic. That goes for everyone in the room, but also online. When I get into this, you'll understand what I mean because, first of all, we've mentioned the U.K. client. That is a very large client, like we said, and affects a small volume quarter like quarter 3 by a lot. If you take away that client, the total growth in local currencies is 20% for Protector. In U.K., the growth is 18% without that client. So it's a -- there are very strong numbers, excluding that client. But those numbers don't tell the full story either. So it's much better to look at year-to-date figures to understand what is actually going on, on the growth side. If I say some words in quarter 3, again, back to that on U.K. So the market is still soft and softening. It is difficult to renew our commercial clients, in particular, at profitable levels. So on motor, we have high churn in commercial sector. U.K. Property, we don't have a lot of churn. We managed to retain the clients there, commercial sector. And then public sector and housing, we managed to have low churn and get price increases where we need it. So it's public sector that drives the 18% growth through renewal rate. New sale -- the new sales figures in the U.K. are except for the very large clients, fairly low. And that's due to the market. We're quoting a lot of business, but it's a soft market, and we're not winning as much as we have done before. At some point, that will most likely change. We're obviously looking ourselves in the mirror to see if we're doing something wrong, but it probably will change. And then it's on the other countries, there are some volatility in those growth figures as well, where in Norway, we have a very high renewal rate. We also have good new sales. So in Norway, everything comes in at the same time and a bit more than what the running rate is. And then in Sweden, we're picking up again on the new sales side. So it's coming back on the new sales in Sweden, but we still have a fairly high churn because we are increasing prices in Sweden as well where needed. So in my opinion, the Swedish portfolio is improving profitability-wise. And we are now seeing that we actually are competitive again on especially motor, but also on the property side, which we have -- don't have a lot of in Sweden. And in Denmark, they are very small numbers. But France is worth giving a comment on, even though there are very small numbers there. We see that public sector last year, same quarter, we had some clients in public sector. This year, there has been anything to quote. So this is commercial. And on commercial, we are -- we have strong renewal rates. It's early, of course, but we retain the right clients, and we also win some smaller clients in France. So when you look at the running rate and France is obviously early and special, look at the year-to-date rather than the quarter 3 figures. Any questions to volume?

[Foreign Language] Just 2 questions on volumes. The first, and I appreciate the comments on sort of new sales versus price hikes. But is there any way to decompose those 18% in what is sort of price driven and what is volume driven? And the second question is on the visibility in the U.K. going into 2027. You have you talked about last -- well, maybe not this summer, but in April that you saw sort of more limited tenders out there. There was less volumes for you to sort of quote on some customers chose to use an option to sort of roll the contracts for another year. Can you elaborate somewhat or help us understand sort of the dynamics into 2027 in the U.K. in particular?

Yes. I can do the first question first, the decomposing of the renewal rate. And I can also say that this renewal rate in local currencies is higher than 89%. There's -- a lot has happened on the currency. And it's not only the currency of the volume in the quarter, but it's also a starting point that changes with the currency changes. So it's -- the renewal rate is closer to 95% in local currencies. But the difference there between prices and retention is that -- or the composition of those is that we have -- we get inflation on average for all clients in all segments. And then we get some price increases on the clients that need it, but that's much smaller than the inflation. So it's lower numbers than what you've seen previously when we had a need of more profitability actions. So that's the approximate figure on you can figure out what that is yourself on the price increases. And then the churn is, as I said, so we have very little churn in U.K., very little in Norway. And then we have churn of slightly above 15% in Sweden and similar in Denmark. France is also very close to 100%. And the rest -- so the question you asked is not for the U.K. market in total. That's public sector that the comment came from. So that's the public sector. And there has also been 1 change in -- so I mentioned the local government reform that was planned in the U.K. that made the local authorities wait with marketing their insurance programs because they were waiting to be merged with other local authorities. That is now canceled, postponed or happened to 1 or 2 local authorities and then they gave up. So that's not happening. So next year, we will see slightly more, but I think that 1st of April 2028, we will see quite a lot of volume out. And then it will be a lot of our clients, but also new opportunities then because our market share in the local -- and we're speaking local authorities, not housing so much on this. Market share there is probably around 30%, depending on exactly how we define that market. So we will see some of that. The good thing there in that sector is that we have had time to prepare. So we have renewed many of these clients on new long-term agreements. So not all of them will come out in '28. It will be more along the lines that I have mentioned previously.

Herman Zahl from Pareto Securities. Two questions on the U.K. Could you say something about your expectations in Q4 on the commercial real estate segment? Do you expect any meaningful contributions there? And secondly, just to understand how the different segments in U.K. varies. Can you say something about your current hit rates in commercial motor, for instance, versus public housing? Is it like 10% in motor U.K. Can you say something about that?

So on the real estate side, I've said previously that we will -- we expect it to really start quoting in quarter 4 this year. And we have some volumes. So we've won some clients in real estate, but not any significant volume. We are starting to see more volume now, and it will be -- quarter 4 will be a quarter when we quote significantly more. Whether we will win a lot of that is a different question. because the market there also seems to be soft. So let's see. We will at least be able to collect a lot of data and learn that segment, get closer to the brokers. At some point, that will also turn around. That is based on the data we have, no doubt because there, you have low deductibles and lots of escape of water claims. It needs to turn around at some point. So let's see. We'll win some business. We'll quote quite a lot. When it comes to hit ratios motor commercial, as an example, in quarter 3, we have, yes, approximately 10% hit ratio on what we quote. We also don't quote everything because some -- especially some of the larger normal fleets, they are priced at too low levels, and we know that before we start.

Thomas Svendsen from SEB. So yes, back to the U.K. and the commercial segment, very difficult to get, you said a business at profitable level. So what combined ratios are we talking about that you don't accept just to get a feeling with the softness in the market?

Combined ratio is above 100% with our cost ratio. So that's history. We have also talked about that we are working on new markets, and we are still working on new markets. The very good news is that, as I mentioned last time, Spain is ahead of the other countries due to obvious reasons. We started there before. We know the brokers. We had already understood some of the market there. We now have actual data, good data in Spain for commercial motor. So that looks very good. The 2 broker houses we are working closely with now. They have real clients that we have seen and that they want us to be competing on. And we expect that during 2027, we will be quoting Spanish business. And then Germany has always looked -- or we've had no on the data side from Germany. And coming into Germany now, speaking with the brokers there, we are already seeing data on motor and real estate and even public sector. But public sector is dominated by the incumbents and the mutual companies, so the brokers don't have a very large position in public sector, but the brokers are very strong in commercial sector and real estate where we are getting data. And then we are speaking with some Polish brokers, public sector only for the time being, and it looks promising with data there as well. We haven't started Italy yet, but we are still looking into the U.S. where we have data, that's public sector excess type of business. And when and what that will be is not very important. It sounds very big because it's U.S., but it's very related. The type of business is very related to parts of the commercial sector in the U.K. property and parts of the real estate sector. It's more excess of loss type of business. But we -- with the data we have and with the understanding we have of that type of underwriting, we see that we can have some competitive advantages there as well. So it's very exciting to work on new markets, and we are having progress, but we will be disciplined in what we do and wait until we have data before we quote anything. And then to the profitability, again, a very good example of volatility between quarters because obviously, many of you will have heard me say that U.K. is softening, will normalize on the loss ratio side. And now all of a sudden, you get a jump from last quarter. So now it normalized in 1 quarter. No, it didn't. It's much more relevant to look at the year-to-date figures there as well. The quarter 3 figures are influenced by large loss -- 1 very large loss in U.K. in quarter 3 on the property side and runoff. So that's what drives the big change and the underlying realities have not changed that much. But the underlying realities have never been what they were quarter 3 2025 either. So then we said you need to adjust that upwards because there were no large losses then. So the underlying realities are more similar between 2025 and 2026, but with some deterioration, which is natural when rates go gradually down. But it takes time before rates go down. Not all clients go out. We managed to keep clients. Our retention is -- or our churn rate is closer to 10% than more than that. And then you can calculate how many years we have these clients on average, and we get to correct profitability on the ones that are unprofitable along the way. So it will happen gradually. But that's the U.K. example here. And the same with Norway. It's not -- Norway has not turned from 79% to 58%. So all of a sudden, Norway is that much better. That's also no large losses in quarter 3 for Norway and 8% runoff gains. So adjust for that, and you still have a very strong profitability or loss ratio in Norway. So it's improving, especially motor is improving, but actually all products improving in Norway. And we have done measures for some time when we've had problems in Norway. And it takes some time before you get the result. Now you get a little bit of a catch-up effect with some volatility on top of that, but it is improving also underlying, as you can see, if you adjust and normalize that. And Sweden is fairly stable, even though the figures don't show that underlying profitability. And Denmark is actually very similar as well when you normalize. On the French side, we've had some large losses, so it's slightly better in France, but still, it's very early. And with some long-tail products, motor is our biggest product in France and motor third-party liability has personal injury claims that has a long tail. That takes time before we know what that is. It's not that we've had many of those losses that we could get and some of those losses can be larger personal, and that's something we reserve for, obviously. So there is a lot of uncertainty in the French figures. But the underwriting view, meaning the view that we see client by client when we do renewals. So when we look at our portfolio and we say each client is now going to renew with either an inflationary increase or because everything is okay or a price increase because it is unprofitable, is very similar to the view we had when we did the underwriting, which is a good thing because it doesn't look like it's anything different from what we -- so the data looks good and it seems like we have done basically the right thing, at least in total. And then everyone has read about France. We have some public sector clients, and you've read about riots in France. That was also the case when we entered the French market, which was one of the reasons why we got -- we were welcomed in public sector France at that time, and we got data from those brokers because they didn't have a lot of competitors. Everyone was scared about riots. And when we entered, it was possible to impose cover reductions and high deductibles on riot events, and we have that on all our clients. So we have a very small exposure per client, and we don't really have that many clients. And we don't have that many clients in the cities. So exposure is not very large. We haven't had any claims from the recent riots in France.