Protector Forsikring Ord

Hello and welcome to the presentation of quarter three 2025 result for Protektor. As always, I want to start with who we are and a small recap of what we did this morning with all employees. The topic has for some time been the challenger, and it's to us very relevant with new technology and AI and a more uncertain future when it comes to how we should do what we do. So what we have done lately is to involve all employees in exploiting the opportunities with AI. And we've done that through giving access to an enterprise model through Google to absolutely everyone. So it gives the opportunity to generate agents and use AI as we know it through ChatGPT and other types of platforms. What we want from it is to make sure that everyone understands the value of data, because when you use AI with poor or little data, then you get the wrong results. And data is our currency. It is one out of two targets we have for 2025 for the company. And we practice saying that it is our job to invest that data and create value by understanding our risks and making profits out of that. And some of the activity we've done is... as you have most likely heard, challenging to quantify in an actual return. But obviously there are efficiency gains that you get immediately from usage of AI. But our focus is more to see if we can solve the more complex tasks. So focusing on really challenging AI and the creation of agents and support to solve what we either have seen as too capacity requiring or too complex to solve ourselves. And what we see is that we get these efficiency gains, so we've made some agents and some functionality that reads through health documentation for personal lines or employee benefits in Norway. It takes five hours normally to read through it and get something out of it. Now it's a few minutes. We do that for incoming email. It makes it a lot more efficient. And that's interesting, but that's something that will happen. So, in our opinion, that's not where our focus should be. Our focus should be in seeing if we can get better results. And it is something interesting around... the fact that you will accept a poorer accuracy from a human than what you will accept with AI. And what we can see is that we get very high accuracy with very little effort. For instance, on what we call pre-underwritings, we get a tender, we get lots of information from the broker, and then we run it through a process that evaluates seven criterias. in order to decide whether we should spend time on it and evaluate it further and price it and quote it or not. And it is obviously also a start of the underwriting process. And we had one target and that was to increase the quote rate So meaning that we should actually quote more than what we have done because sometimes it is noise in the decision of whether to quote or not and some kind of assumption from an underwriter that this is going to take a long time or since I've seen it previously, it is a bad risk. which is not necessarily the case. It needs to be based on data. And we've increased the quote rate in the UK from 38% to 44% through using an application that we've designed on AI. And that's to us being the challenger. And then what we do becomes old very quickly as the technology develops. And we are not spending any time in predicting what this will look like in the future because I don't think that we have any edge in that. But what we do know is that we're not taking advantage of fraction of what we can do today. So we still have a lot of investment to do when it comes to utilization of AI and actually using data or investing data as our currency. We've discussed different ways of investing that time. We could have set up some expert center of excellence groups and seen if we could find something genius through those groups of people who know the technology and know the business. But we have decided that Protektor is, and we get some kind of, I've never used our, and I've used our values and our culture a lot in my decision-making every day, but I've never used it as much as now because it is more uncertain. And due to who we are, people who have a common set of values, who should make decisions, all of us, because that's what best-in-class decision-making is. we have decided that we'll include absolutely everyone in it but also that the only focus of our leadership development program that starts now in the first quarter of 2026 is AI. The previous decision not too long ago was data because that has been a focus but then we have realized that now it is about AI because it will include data and we need to make all our leaders, there are 140 leaders in Protector today, responsible for taking that ownership of utilizing AI because the fact is it is here and we are not utilizing even a fraction of it. So that's been part of the topic. And in order to do those things, we have also decided that for the first time in many, many years, all protected employees will get together. So in March, we will get all protected employees together in Norway at the place that is big enough to house close to 700 people. And we will have workshops. to decide together with everyone and pre-work before we go there who we will be and where we want to be in 2030. So, which could be an exercise that we did in the management group and we did as leaders, but we want to include everyone in that. It's a complicated resource requiring a task to do that well, and I don't know if we're going to do it well, but at least we have decided that going forward, both because we are growing becoming more people, more countries, and getting a bigger risk or having a bigger risk of becoming like everyone else, which is, in my opinion, the biggest risk of Protektor. We need to invest more in this and in our people. So that's the angle that we take to AI. And unfortunately, we don't have a lot of exciting demos and value creation documentation to share with you. But a lot of it is happening. And we are investing, which you have also seen in our cost ratio, which I will come back to. But then let's get over to the results. So the quarter three results are very strong on the profitability side. As always, I get back to normalizing that and explaining the underlying realities. We have a weak growth in quarter three, and I'll get back to that as well. And then the investment result is, in absolute terms, poor. And also that I will explain further when I get into that. On the side of that, the transfer deal of the portfolio on Danish workers' comp that we previously expected to be finalized in quarter three, and it was due to subjectivities, and that is mainly the authorities in the different countries, now expected to complete in quarter four so volume and and I think that this is in in many ways where we have spent more time this quarter because this is this is not anything close to what we have had previously in percent. It is the smallest quarter. It's 12% of the volume totally in Protector. So there is some volatility in it. But the composition is some underwriting discipline, which we should have. Profitability comes first. So we've lost some large clients. Some of which we wanted to lose, so we actually priced them out. Some we haven't managed to match the price, which is fair. And then there is this normal churn where we don't manage to renew all the clients. And then there are some technicalities. in this where inception dates moved from the volume incepted quarter three, 2024, and then they've moved the inception date to another. We mentioned this in the quarter one presentation that we had some volume there that moved to quarter two and quarter four. And there's some of that. But it's also, so it's a mix of that discipline and some technicalities, but also some realities. And the reality is that, in particular in the UK market, we don't get support from high inflationary increases on the prices anymore. So the property market, which is our biggest product, is in a softening cycle. So the rates are going down. And then we don't get that. Then we get very high churn if we continue to increase prices. And we don't need it, as you can see on the profitability side in the UK. So that's a reality. And we have talked about that before as well. I forgot to say that it's better if we have questions during the presentation than all of them are saved for the end. So please raise your hand and I guess you'll get a microphone if you have questions along the way here. So the market situation... in the different areas is interesting to say something about in quarter three. And there is not anything very special from what we have communicated previously. So the softening property market in the UK, and that's both corporate and public sector and housing, makes it harder to retain the clients at the same rate levels, and makes it harder to win new business. In the Nordic countries, it is no real change in the market situation, so it's still a rational market, but obviously we don't get that support from the same inflationary increases also there. And our new sales in quarter three are on the low sides. We've missed out on also some of the larger opportunities that sometimes come our way and now not. I wouldn't read too much into that part of it because it doesn't look like a trend. So that's quarter three. Any questions to quarter three, Sverre?

Nick first could you give a bit more flavor on the UK real estate statement you have on one of the bullets here to make us understand a bit more and the second question is that you have seen so far 460 billion euros in France, will that figure increase through quarter four, or is it kind of the final volume that you will see in entering January the 1st?

Yeah, I can do that. So I was just wondering if there were any more questions on quarter three, because I was going to get to those two. Yeah, Thomas. Yeah. Microphone. Amund can run a bit now.

Thomas Hansen from SCB. So questions to the UK. The combine has been stable at around 80 for several quarters. So what is your assessment? What is sort of the new level of combined ratio there? On new sales? On new sales.

No, I think that on the corporate, so commercial sector, we basically target below 91% and have been doing that for some time. We've been able to get rate increases in renewals. So not a lot of difference on the corporate commercial sector. We've been quite stable there. But obviously in the public sector and housing where we haven't had a lot of competition, we have not targeted a lower combined, but we have been able to increase our margin and still win business. So then I think that for new sales, I would say that we – we will close in towards 91% combined ratio on our new sales over time. But that market will fluctuate and have volatility.

Thank you. Ulrik? Hi, Ulrik. It's softening a bit in the UK. Should we read anything into that, into the renewal next year? Has it had an impact on growth expectations?

It has been softening for some time on the property side. If you read the big reports of property and property rates in the UK, you'll see that there were quite significant rate reductions in that market. But that doesn't mean that we come from those extremely high levels on everything. So I wouldn't read too much into it. We see that we can still be competitive in the UK property market. But the kind of 1st of April 2023 situation is not the case anymore. So it's more like a normal situation.

Yeah, but we have to come to, like, something is the same, your borough, like, public market, but then we also need the new market, the real estate. Yeah. You're not saying there's any reasons why you shouldn't have very potentially high growth in the UK next year in new business? No.

And then I can come to that, because that's interesting. In a market like the UK, so we're in the... corporate sector clients with £50,000 and more annual premium. And that's where we started. And we've also entered what we call the mid-market between £20,000 and £50,000 approximately annual premium. So we're starting to get some kind of traction in that market. And then we had public sector and housing the whole time. And that's where we have fairly high market shares. So we are a top three player there. There's still opportunities. But the real opportunities lie in the commercial private space. And there we will find pockets and segments that are fairly big pockets because it's the UK, and the UK real estate is one of them. And there's two reasons why we are entering that market now. One, and the most important one, is that we have hesitated entering that market because of extremely high commissions. So there's been commissions between 30% and 40%, not only to the broker, but also to the property administrators. And the value chain is not very transparent. We don't want to be part of that type of a value chain. And in addition to that, the... volatility in those or fluctuations in those commission levels means that cost ratio, cost advantage is not that important because a lot of it is with the brokers and the administrators. Now the authorities have put the focus on it, so the commission levels are coming down. So that market is more professional. It suits Protektor in a better way. And then we have achieved the A rating, which is important in that sector because the banks who finance the properties, they require it in their contracts. So then we get an access to that market. So we've spent some time getting to know the brokers who operate in that market. So the largest broker players in that market gathering data and it's always a milestone to win the first client in the segment that has a new product. So there's new terms and conditions and it is accepted by the market when you win the new client. So this is a big market. It's bigger than one billion pounds. That's our risk appetite. So that's basically what we think we will quote on. So that's a big opportunity. And then on France, it is the same thing. We need to say something about what we know, and what we know is the tender volume. It will not stop there, so there is still volume coming out, but we know, this we've known for some time, that the tender volume is a high number for 1st of January 26, because we do pipelining together with the brokers. But then the ones that they don't know about will come out throughout quarter four, especially on the motor side, which is 50% of this, but also on the public sector and housing side. In France, they have something they call failed tenders. So if a tender doesn't meet the criteria, then they put it in a failed category. And then they can go out and negotiate those contracts. And they have budgets. So most of them fail because of a budget that is too small on the premium. And if it doesn't meet, then they have to. So they're required to cancel it. So they will come out. A few of those will come out as well.

You forgot a bullet point because you forgot to put in your expected win rate.

And you can estimate and guess as much. I'm sure that we could probably be slightly more accurate than you, but we don't know what the market is. And there is actually a reason for why I don't even want to indicate anything there. Because from the beginning, which is right to do. We have been a bit more restrictive on terms, and we have slightly higher margins on what we quote in the beginning. And it should be like that because we both need to get confidence in what we look at. And the first ones that come out have had slightly poorer data than what we require. And then we need to test the market. So we know very little about the quotes that are out in the market now because the ones we have sent out and have some feedback on, they are not representative for the majority of them.

Regarding the UK real estate market, you have won the first client now in the third quarter. Last time you presented, you said that you expected the first client to be on board at earliest April 2026. I have in my notes what has happened and has the process speeded up?

It's a combination of things. The reason why we said 1st of April was that we didn't believe that we were going to be able to collect enough data to quote in that market before that batch, 1st of April inception. And then we also know that we needed a different kind of process, underwriting process, and using technology has made it easier to create those models. So we have in our IT systems today 60% of the code is AI generated, but on the underwriting side, I'd say that probably, yeah. at least two-thirds of the code is AI generated on our modeling. And that gives a huge advantage in developing these models. So we can make one version, benchmark it with another one, and then we can create a lot of different models and benchmark them with each other without being delayed in the process. So that's that. And then we've also managed to get traction with at least one of the brokers earlier than what we expected. They were a bit skeptical in the beginning because there are many competitors in this market and it's a commodity. But then they've understood that we have an edge and have something to bring to the table. So then they have started to send us. So it's actually a case where we've said no to quote cases because we are not ready.

But is 1st of April also very important in this segment as the order in the UK?

1st of April is, because of some kind of a strange financial year set up there, is important in all segments, but not at all like a public sector. So it's more spread out in the real estate. But we don't have all the data, so we don't know exactly how it's spread out. But it's less dominant 1st of April in real estate. Okay, so that's volume. So if you look at it on the face, adjust for large losses and runoff, compare it, the quarter three figures there to quarter three last year, you see a very similar number on the loss ratio. But the underlying realities are slightly better than that in 25 relative to 24. We have had large losses on the property side only in UK, Sweden, and Norway in quarter three, not in the other countries. So then you understand that they are artificially low in Denmark, Finland, and Norway. And France to a certain degree, but France, as I said last time when we had black figures on the combined ratio, it's very early. And I wouldn't read much into the loss ratios in France for quarter three. So that's... That's on the large loss side. Runoff gains in all quarters. We had a question around our practice of best estimate reserving, which we follow and which is correct, both on the case side and on the actuarial side. But obviously, following a period of time when there's been more uncertainty on the inflation, which I have mentioned before, there is a higher probability of some runoff movements and uncertainty increases. sometimes makes us a bit more conservative. So I think that it's a slightly higher probability that you get gains than losses for some time after an uncertain inflation period. So that shouldn't be too much of a surprise either. And then there was a big storm that mostly hit in Norway, but also a little bit in the UK and Denmark. And for the Norwegian part of this, this is quarter four numbers, it is... It doesn't make a big difference as you can see if you try to calculate those numbers and especially with the reinsurance side of it. So we get our share, but the natural perils pool is reinsured with a quota share this year. So it's not a very large number, some few tens of million Norwegian kroner approximately is what that will have of effect. So, one large loss. Yeah, so any questions on the claims development? I've touched upon some of these points that you could potentially see here both on the runoff but also on the volatility for large losses. I think that still it's important not to kind of look for trends in large losses because this is about very few losses and it's very volatile. So I would still look at around 7% as a normalized level. When it comes to the cost ratio, it is up, exclusive of commissions, by a bit more than a percentage point for quarter three. And there's been a development in the share price. We've talked about this before. And only that is – so if you're correct for that relative to quarter three, this is real cost. So it's about – salaries for some key people that have been part of a bonus scheme for some time that follows with synthetic shares that follow the share price and when there is a lot of movement there it does affect But if you correct for that, you're basically at the same level. And then France was booked out on the other expenses row before. Now it's in the cost ratio. And so that's a bit more. So it's slightly lower if you're correct for those two. I don't think it's very important to correct for any of them because the important message I want to give and what we talk about with with the employees is that we are in a position now where we have a lot of development opportunities on the volume side as we've opened a new market. UK is still, there's a lot of opportunities and even in the Nordics there are a lot of opportunities on facilities and the property side. So we're investing in creating. It's a great time to invest in creating better data and preparing ourselves for the future in utilizing AI. So let's do parallel processes where we... create AI functionality that can do exactly the same as the process today and then we benchmark. That costs some resources and we could have been more efficient today and I've talked about that before. I still mean that we have overcapacity and we're not stressing in taking out those efficiency gains at the moment because that's probably the wrong decision. Any questions on the COTS side?

Not on the COTS side, but on AI. You are using a lot of time talking about AI, and I understand you are putting a lot of effort on this. Regarding your competitors, how are they using the same tool? Do you have some indication or...

I think it's much better that we spend our time on how we can utilize it, but obviously we should learn from successes and mistakes out there, so we need to look out the window as well. But I think what we do see is that A lot of our competition, they focus that on their customer experience and because of the weight of the consumer segments in their companies. So it's a lot about improving the customer journey or whatever they call it, which is not very relevant for us. And I also, what I do here and see is that it is a lot about efficiency. So it's automation, which is not what AI is. That's not our focus, at least. That's a bonus, and it will happen. So let's not stress about getting some efficiency gains because we're all becoming more efficient every day, and you are, I'm sure. So that's not the main aim of this. It's the quality. And automation and robots, that is something we could have done a long time ago. So that's not really about AI, but I think the focus is, we hear that the focus is a lot around that. So to the investment side, I'm not planning on spending a lot of time here, but please come with questions. So in absolute terms, for equity results, and then we've done a... So we've accumulated profits or... funds in the different currencies and countries as that has come in and now we've moved that equity home. That increases the running yield on the interest rates the bond portfolio slightly because we get better yield in the Norwegian than what we have on average for the rest. And then on the underlying realities for our papers or the companies in the equity portfolio, it is a, so we have some IT consultancy where there is some poorer underlying development. And other than that, it's a good development. So in total, we characterize that as okay. So it's not like it's just volatility there. But we haven't changed any strategy. And one quarter is a short time. A year is a short time, as we've said many, many times on this area. No losses in the bond portfolio. Capital position is, yeah, so there's no, if you look at the other income expenses row here, you see that it is a high increase that is due to the increased debt that we have, the tier two debt that we have increased during 2025, so the interest rates there. Other than that, nothing special. And then this is slightly new in how we present it. The biggest element that you can see here is on the market risk, on the solvency capital requirement, on the market risk, the 5.58 that is on the orange box is due to moving the equity from the branches to Norway. That decreases the requirement on the market risk but on the other side we get less diversification so there is an effect there on the solvency which takes the requirement down and the solvency position is very strong and we still see obviously some geopolitical uncertainty in the world and then in spite of what you see on the growth side for quarter three we see a lot of opportunities. When that volume will come in I don't know because that's dependent on the market. But we see a lot of opportunities and we have the data and we are quoting and we're comfortable with the quotes we send to the market. So we still believe that over time the growth journey of Protector will continue and therefore it's good to be on the solid side since there is some volatility in that and so that we don't have to do stupid things or the wrong thing either on the insurance or the investment side in the future. Yes, Ulrik.

Yeah, good, good. You have a tier two bond that's up in December, right? Yes. Will you refinance that or will you cancel it?

So we will continuously look to what we can utilize because there is a, so now we're not able to utilize and partially because the requirement has reduced, right, from taking equity home. So we'll continuously monitor how much we can utilize and there are also limitations on how much we can take in. So it may be that we wait But most likely we won't renew it in December. December is also a poor date, so it's better to have it at a different date. But that's a small part of it. But we'll assess that going forward, and then we'll most likely renew it or fill up with something in 2026 on that. Is that an okay answer, Bitlev, Hammond? Yeah.

It's a bit important when we judge your actual solvency now. It's like that bond, because now you're not utilizing, so you could pay that back, and then you can utilize what you have.

Or you're very forward-leaning on growth, so you need... So in general, what we will aim to do is to have what we can utilize. So that's where it will be. And then you'd probably in a good market be a bit ahead of that curve rather than behind it. So I spent more time here on this than I usually do, and we do that in the organization as well. But when it comes to the quarter three results, this is the same slide as I started out with. So any further questions outside of what we have covered so far or anything that we have online? Yeah, we have a couple of.

been dealt with already but continuing on the capital situation which is seemingly very strong and potential for high growth in France given the numbers Could you say something about how much of that volume we will win? How much that will kind of consume of capital? So how much will one kroner in growth consume in January 1st?

I can't give an exact answer, but today I guess it's about 30%, so one unit is 0.3. And then there is something, especially on the CAT side, natural catastrophes, that will make a difference because France is a different geographical area, so we will get diversification. property euro in France consumes less because we have a lot of property pounds and property kroners. So it consumes slightly less on the property side, not on the motor side. Any other questions? Thanks for coming. Thanks for listening.