Protector Forsikring ASA

OSE:PROT

Earnings Call Transcript 2019-Q1

[Sverre Bjerkeli, Chief Executive Officer]

[Audio Gap] In English. A warm welcome to everybody to this investor presentation. As always, I've been through a state of the union speech towards the employees this morning. So in this same room, I'll have the walk through about quarter 1 figures. And I'm happy to share my thoughts with you now.I would like to start to comment a little bit about 2019 in total. I think it's fair to say that this is a transition year for Protector. As you know, we have a pretty poor 2018 year behind us with this kind of gray silverfish and change of ownership kind of challenges where we lost a lot of money and finally decided to have a walkout from the market, exit from the market, at the same time with a combined ratio sized 98.5% in the commercial sector which is not at all good in 2018.Entering into 2019, I would call it a transition year. One reason is that we have decided to exit change of ownership. But at the same time, there is a pretty significant volume arriving in 2019 in that particular segment which is twice as big as anticipated for 3, 4 months ago. So what we kind of indicated or said a few months ago that that volume would be NOK 150 million. Today we are pretty sure it will be around NOK 300 million. The reason why is because of distribution contracts with the market. They last longer than our expected exit date, April the 1st. So we were asked to stay according to the contract more likely. And it is a contract. So we can't really just throw it away.So the volume is higher. And it means that figures from that kind of exit area is more important than anticipated. The other big challenge entering 2019 is a major change in reinsurance structure, which we have been through many times before. So it's pretty difficult to compare figures from previous years with 2019 because, one, we'll use some margins due to that kind of change from reinsurance structure, and two, the distribution of the margin is more at a backend than at the forefront. And I will help you to look at some figures later in the presentation in order to make it a bit more visible for you. This is not extremely easy to understand, it's pretty -- it's not pretty complicated, it's slightly complicated to understand. To compare figure, figures are rather difficult.At the same time, we are growing a lot, and the product mix is changing pretty rapidly as well. So I think that seen from an analytical point of view, it's slightly more challenging to follow the company. And my ambition is to be, as always, as open and transparent as possible in order to share all the information I have with you. Please ask questions. And that goes also for after the presentation if you need more clarification what does it really mean? However, we got at least pretty impressed that when we sent out the Oslo Stock Exchange message like last evening, your comment, your analysis were [ also ] in the market. I'm quite sure I check them in this afternoon, something like that. Is that possible or…

[Unknown Analyst]

Yes, I was free after 11:00 last night.

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So -- and I read it my back home leaving just outside Oslo. So when I went home from work around the same time last evening, I read your analysis. And I thought that wow, that was fast delivered and pretty good actually. I won't say that too often through words and analysts. That something is pretty good, but I think it was pretty good. I haven't seen the others, if you have something to say about, and I'm sure you have.Okay. And the reason why I had put some color on the word "open" is because it's one of the values of Protector. So the DNA of Protector which is the 12 statements you see here, "open" is one of the values. And that's the reason why I had put some color to the -- to this word here as well then. So a transition year. Okay. What about first quarter? A pretty poor start I would say. Claims ratio on the higher side and also kind of supported with some kind of reserve gains in the quarter. So the bad story is that this is, I would say, slightly higher than expected. Not a lot actually because we have updated you earlier on that the distribution of margins would be -- we would be above 100. That was my expectation.But exactly that figure with that kind of composition is not exactly what I would have expected. So it's slightly in the poor end. That is basically related to our motor fleet portfolio. And I'll come back and comment more on that one. Acceptable investment return, solvency ratio is high as always. But the big good thing in the last few weeks is the very significant win in the appeal court then. So that's the good -- very good story because we have had a lot of trouble in 2018 with this little bug. And today, I finally can say it's dead. So the bug is dead. And after the appeal court decision, it has been 3 -- this 3 court decisions, the last one yesterday. It's more like whim, whim, whim. It's moving fast, very fast.So we are back to normal and Norwegians can now take a deep breath. And so it's nothing really to worry about, this little shitty bug. So now it's finally dead and we are happy about that. We have taken then, as you would have expected, some reserve gains slightly higher than communicated a couple of weeks ago because we have been deeper into the analysis afterwards then. And it was a downside, as you know, it wasn't upside. The difference is around NOK 100 million. So in my opinion, it's nothing to worry about now. So I guess we won't talk more about this bug in the quarters to come. It's the end of the story here.And then we are into the kind of 2 highlight slides like we did last quarter, one inclusive of change of ownership and one exclusive then. I think it's one figure here which is pretty important that is related to the change of the reinsurance contracts. If we have had exactly the same reinsurance structure this year like last year, the combined ratio would have been 92% in this quarter, not 105.9%. So the difference is around 13 percentage points. I explained a bit more in the later slide. But trust me, this is correct in that area.It would not make a lot of difference. That figure is actually not better than this one, slightly only. Depending a little bit about how the property product will develop then seen from a client's point of view. So you should picturize here obviously. However, you should have a small look at the 92% as well. And then try to compare with last year in that area. So the change of reinsurance structure is for real and I try to guide you through how to understand it.Okay. So what about volume development? That is in the higher end. This is higher than expected. And that's mostly related -- not to related U.K. and Sweden, but mostly related to Denmark. So your common figure was absolutely right. That what we had communicated when it comes to Denmark is that we would expected a higher churn in Denmark because price increases are on the highest level in Denmark. But the good story is that it has basically been accepted in the market. It means that especially in workmen's comp area, all players in the market more or less they drive prices upwards at the same time. So the market acceptance of these kind of very significant price increases with Denmark has been better than expected, which means that volume development especially in Denmark has not been on the negative side, but on the positive side, as you can see here with 9% growth in local currency and 10% in Norwegian krone.These figures could have been negative, on the negative side which could have been totally okay, but obviously we are happy to see. So it's not a lot of new business flowing in. It's price increases driving more in Denmark. Norway also slightly on the positive side. It could have seen a negative development. Just closing a window. So you could have seen a negative figure here. So we are guided on a growth rate of 14%, but my expectation entering the year is that you will have to see more of that later in the year. So we are ahead of schedule. We are not changing I think on the volume side. And it's pretty important.I'll comment a bit more on U.K. later on and the rather important -- not rather, the very important April the 1st date as you know when it comes to U.K. So on the volume side, I am happy and satisfied and kind of sentence you see here is that it's supported by price increases. It's a pretty important one there.Okay. So the bad story is about the claims ratio, especially in the motor sector. And I have a couple of following slides on the motor. But before that, I only would like to draw your attention to the gross large loss ratio. This is something we have never ever communicated on before. Why not? Because we are a pretty new company growing very quickly with a limited claims history. It's difficult to define what is a normalized large loss ratio for a company like Protector. We are not Tryg [indiscernible] or if for others who have a pretty stable big portfolio where they can pretty easily state that my large loss level starts at NOK 5 million top. They have that kind of definition. The other ones have another definition, NOK 10 million. To Protector, I think it's more reasonable to say that a large loss start at NOK 7.5 million, not NOK 5 million, not NOK 10 million.And then down here we are giving a small comment that at the moment we think that an normalized large loss ratio based on that kind of definition, NOK 7.5 million, is something that we will consider carefully going forward. Is NOK 7.5 million a correct level or is it NOK 10 million? It's not NOK 5 million. And what is normalized? You could argue it's lower and you could argue it's higher. I think it's a reasonable starting point for understanding. So here we can see that it goes up and down, and this is gross. If you have seen this one related to our net figure of the reinsurance, it wouldn't have helped very much actually because of the surplus contract we have had with Munich Re for many, many years. It takes away the volatility.So what you should have look at is the gross claims ratio development. And we are slightly higher in quarter 1 that what you could call normal. That not a lot higher, but slightly higher. But we have to come back and share more information with you in the quarters to come, and we may change definition also during 2019. That's possible in that area.One of the big claims we have had in quarter 1 is related to a large property claim which is NOK 45 million. So that's more like 4 percentage points of those 10. That's a significant in Denmark only which obviously, since it's for own account, totally influences the quarter 1 figures in Denmark. You should read of more about that. You should see through that. Denmark one quarter, Sweden other, U.K. a third, Norway the fourth, possibly also a big one in Finland now and then. So don't put too much weight on quarterly figures in a particular country. Quarter 1 Denmark's figures are actually somewhat better than what you think because of that 1k, while others then are on the other side. But this is a bit higher than what you should expect on the large loss side.Okay. So what about motor area then? So when we see pretty poor motor results, especially in Sweden but also absolutely in Norway and to a certain extent also in Denmark, you have to ask yourself some question. How strong is seasonality in our motor portfolio, in a commercial-free portfolio which is different from a consumer sector portfolio for pretty obvious reasons? What about the price increases we already have decided? Are they in for revert? No, obviously not. So there is -- you will have more support. What about new price increases? And we have a new motor, big motor win in Sweden coming up in quarter 2, a SEK 60 million, give or take SEK 70 million, SEK 50 million, depending a little bit on how the retention will be finally decided.But a pretty big one. Will that influence on the motor results already in 2019 or will it not? And the question and answers to these kind of questions is that there is a strong seasonality in our portfolio. So you shouldn't be too worried about quarter 1. You saw that very, very clearly in the Norwegian motor portfolio last year and you have seen that in previous years as well. Will all price increases improve profitability through 2019? Yes. Will new price increases to some extent? We will increase prices more July the 1st renewal, August, September, October, November, December than what we did in January, February, March and April. Will new clients through 2019? The answer is no.So we are digging into it, trying to understand and trying to communicate to you what you should expect from the motor portfolio going forward, but we are not giving a precise answer, a figure to you. I think it's fair to say that we need a bit more time in order to give you a figure which you could strongly believe in, in that area. So we have to wait a little bit.The important thing to understand is that the motor portfolio in Protector has been growing not only 20% to 25% per year in line with company growth, but 34% a year 10 years in a row. Wow. And that portfolio here has been multiplied with 16 during that period of time. So it's a very, very different portfolio today obviously compared with only 3, 4, 5 years ago. And according and in line with the kind of growth you see here, we -- this is not really a mistake. So by accident it's 34% as well. So exactly, a third of portfolio today is motor fleets, short tail business basically while we started out on 14%. So the bad thing about quarter 1 is the poor claims results in the motor area.The good thing is that it is in the motor area. Why? Because it's easier to increase prices, much easier. To increase prices in a long tail product is pretty difficult. In motor area, it's pretty easy. You just do it. And if you have large fleets, all others will price equally basically and we will win through because we have the lowest cost ratio in that area. But remember, we are growing very quickly on the motor side and portfolio changes from a public sector portfolio to a public and commercial sector portfolio to a public commercial with a lot of weight on the high end fleet area in the commercial sector, buses, haulage.One example is the very, very big client we did win January the 1st in U.K., the biggest client in Protector's history. That's a haulage portfolio only. And it is, give or take, 6%, 6.5% of that total portfolio. So obviously it influences on the blue development you see here. So motor is growing quickly for many years, portfolio changes per quarter. It won't be very good results in quarter 2 or quarter 3, but it will be gradually better and better, and seasonality will kick in. And quarter 3 is normally the very best quarter in our fleet portfolio then. So a lot of improvement in quarter 2, even more in quarter 3, quarter 4. Okay, question?

[Unknown Analyst]

How was the performance of the U.K. motor portfolio this quarter?

[Sverre Bjerkeli, Chief Executive Officer]

Okay, so what about U.K. motor portfolio? I'll come back to that one. I'm kicking in to a slide on U.K. Yes?

[Unknown Analyst]

There's been a lot of speculations about the drivers for claims inflation for motor and more so it does spend on the private side. What could you say is the driver for the claims inflation on the commercial side?

[Sverre Bjerkeli, Chief Executive Officer]

It's a mixed picture. In Sweden, it has been a change in a system called [ carbus ] which is a common purchasing system for all players in the market. And it is a system in Sweden where you actually negotiate with a main -- with industry at the average price per hour and price per spare part. And that ended up in a situation where so from our point of view, a pretty unexpected claims inflation went through without necessary it being -- seen from our point of view, totally correct. It must have influenced others as well. However, you can fight it if you go out in the market and negotiate these directly with the different garages throughout in Sweden, which we do but possibly not good enough and possibly at a poor level than competitors to be honest in that area. So I wouldn't expect my competitors in Sweden to say the same thing because I think they have been slightly better than us to navigate through these kind of inflationary situation than us in that area. The other element which is common for everybody is obviously the technical development of cars and that when you have to repair a car, you must do more than what you did in older years, 1, 2, 3, 4, 5 years ago, so it grows gradually. And the worst part is obviously in Norway then, the Teslas and the electrical cars, which is also gradually entering into the commercial portfolio. Remember, we insured all the Teslas in Sweden in the opening years. However, we had a very good contract, so we actually earn money on it. But the claims were - they were kind of 3x a level you could expect. That is obviously kicking in not in Sweden because they have a handful of electrical cars in Sweden, while we in Norway is growing extremely quickly in that area. So there are combination of reasons why claims inflation is higher than what you should think. Good story is that to fix prices in multiple areas is pretty easy. However if you are slightly late, you will suffer for a year, you will, and we will to a certain extent do that.Okay. What about cost development? It's good. Norway is here and you can now see very strong development in U.K. on the cost side. So I won't spend any time on the cost side, but try to walk you through. This is not very easy to read, the combined ratio development. Remember, some of these countries are pretty small and a quarter is only a quarter. It will be a lot of volatility. But one of the most important things to have a look at is net reinsurance commissions. That figure could have been 0% today, and it will be 0% of going forward, could be 1% in quarter 2, then it will be 0% basically forever. Last year it was 15%, so that is change of reinsurance structure.This figure is not exactly the same as what I had on the highlight foil, the first foil. And the reason why is because there are 2 different methods to calculate and both are correct. So I won't comment in detail, but what you can see very easily is that change of reinsurance structure have a pretty significant -- not pretty significant, a very strong impact in quarter 1 and then it will gradually disappear. And next year, we are back to kind of normal in that area. One comment on Denmark is that I wouldn't worry too much about these figures because you have a NOK 45 million property claim from account that kind of destroys Denmark for the first quarter.The underlying reality in Denmark is improving. That's a good story. The bad story is that the underlying reality in Norway is actually worst than what you see here because there are some reserve gains in quarter 1 related to workmen's comp in the Norwegian market. So underlying reality in Denmark is better. Underlying reality in Norway is worse. Sweden pretty correct, but figures on the negative side, so it is slightly worse than expected. But I'm not too worried about Sweden because the team in Sweden are more than capable of handling the situation. And further price increases in Sweden, it will happen and it will happen quickly in that area.Finland is not a biggest year seen from an industrial point of view. It's small and there are some activities coming on in order to improve. The big thing is U.K. then. And I will sure to go to U.K. and share a couple of comments with you. The price increases are somewhat higher than we would have expected in quarter 1 especially in Denmark. So what you can see here is a pretty strong figure in Denmark according to target here. Today we know that this figure here is 6 in Sweden, it's too low. So you could discuss whether we should have seen it earlier or not. I'm not absolutely sure and I will have my normal kind of business review with all business units during the next 2, 3 weeks. So I will be kind of more competent 2, 3 weeks from now in order to really understand whether we should have seen it earlier or not.But the conclusion is that rate increases for the second half year of 2019 and 2020 will be higher, a lot higher, lower, higher and U.K. is a different case. So the message to the market is price increases on average [ and also ] 10% in the Nordic market, which basically is in line with what other competitors is communicating in other segments. Pretty clearly, you can see there rather clearly, I haven't really heard a lot what if I have said about it, about the situation, I don't know in that area. So yes, this is slightly better than target. The target was too low. So let's move harder on price development. Okay, question?

[Unknown Analyst]

So if I understand these slides correctly, when you're growing with 4% in Norway and repricing with 8%, you are losing customers?

[Sverre Bjerkeli, Chief Executive Officer]

Yes.

[Unknown Analyst]

Okay. Which type of customers are you losing and to whom?

[Sverre Bjerkeli, Chief Executive Officer]

Which type of customers do I loose and to whom? Hopefully I lose to right ones. That's the obvious question and basically I think I do. In public sector, there is only one guy who are stupid enough to take up that kind of volume and you know the name is [ KP ]. They are not really an important competitor for Protector in totally in Norway, and the other ones got the different companies. There is possibly one who is acting a bit more aggressively than the other ones. And I think they will have some kind of challenges in future. But I won't give a name and I could be wrong on whether they do understand. And that is more likely in the employee benefit area, personal lines of business where there's a one pretty aggressive player, but it would not be in your first guess. It's another one. But it's a pretty hard market in Norway now. Prices is coming up, competitors are rational. One is exiting the market. There is a big U.S.-based company called Berkley. Some of you know the company pretty well, very few actually, but some do. They just exit, not a big player. I'm not quite sure the portfolio size is NOK 500 million, a bit more possibly NOK 600 million, NOK 700 million in our segment. So they just close down and move away. They have possibly then taken on board too much unprofitable volumes. I'm not quite sure the reason why they leave, but they leave. So there's volume flowing in to the market and it's a pretty disciplined situation. So price increases is possible to do and most competitors act rational, like they do in Sweden and basically also in Denmark. And I'm not close enough to Finland to give a comment on it.Okay. So what about U.K. then? This weekend, we are moving into new offices in Manchester. So it's exciting setting in U.K. this weekend. We have our IT people there. The network is working too slowly today, but it will work perfectly on Monday. So if you go to Manchester to see a football match or whatever, so feel free to invite yourself to our offices in Manchester. It's centrally located, easy to find, and you will be warmly welcomed. We have the chairman in the room this time and we will have the Board strategy meeting a few weeks from now in Manchester for obvious reasons as we had a board meeting yesterday and we went through the agenda which we will have in Manchester when we bring the Board to a very important sitting for the kind of future of Protector. And as we have said earlier on, we kind of are gradually manning up our small office in city of London.This slide is rather important. If you have a look at the claims ratio development and then also if I include motor claims in U.K., so motor claims situation in U.K. is good at the moment. However, it's a bit early to say that we have a healthy portfolio. It's fast growing. It's not very big, a quarter is only a quarter. But at the moment, the claims development in U.K. is good. So the net combined, you shouldn't worry at all. The gross combined, you shouldn't be too excited, 89% is a fine figure obviously. There are good reasons why the difference between net and gross is what it is and that will gradually go towards -- they will go towards each other through the next 2, 3 years.But the claims ratio in U.K. should be lower than in Nordic market. Why? Because commission to brokers are a lot higher obviously. So I will gradually help you to understand a bit better. But the commission to broker is really not an issue because if they take 10 percentage points, that's fine. We then price not a 100, but a 111. And then 10 goes to the broker and it's neutral seen from a competitive point of view. So you shouldn't worry about a potential increase in our official cost ratio going forward. It will be driven by commissions from U.K. They are neutral from a competitive point of view, and gradually it will be slightly more difficult to compare Protector with Nordic players where commissions are illegal in Norway and Denmark and only excess to a certain extent in Sweden. But we help you to understand that. So the good news [Audio Gap] see that.So I'm pretty satisfied with the U.K. development. What about April the 1st renewal date then? Remember last year, I told you that the quarter 2 hit ratio in public sector was historically low at 4% hit ratio, which is wow. April the 1st is 13%. It's in the lower end, but better in that area. However, the volume after competition is lower, a lot lower. So I'm not saying that you will see a very significant volume development out from U.K. in quarter 2. You will see a strong growth, but not -- don't start multiply with anything in that area. Overall guiding is 14%. We will be on 14% at the end of the year give or take, and the visibility at the moment is pretty good because you know a lot about quarter 2 already since we are getting closer to May already.So I'm happy with what's happening in U.K. We are very glad to introduce a new country manager to arrive already in June. He is coming from a chief executive officer position from JLT, which is one of the big brokers in U.K. So his background from the industry is very, very strong. Obviously, he will be supported a lot when he enters U.K. from Henrik and Fredrik and Maureen and David and Matt and [ Aaron ] and others.So we contact a person from the broker side and say, feel free that without being slightly risk it out. But we have known him for a period of time and tried to convince him that Protector could be a good place to go. Then Marsh is buying JLT, which they have worldwide. So one of the biggest brokers in the world buy one of the big brokers in U.K. JLT is not only U.K.-based company, it's a pretty big one in that area. So we look forward to have Stuart onboard. It is very well received in Manchester, our team of 40 people or so in Manchester. They are very happy about kind of recruitment you see here.As you know, there is a downside situation relative to the arbitration with Munich Re and it's getting closer. We are well prepared. I think we will win and we will definitely be open with you whether we win or lose afterwards and share the result from the arbitration here. So we haven't signed on a non-disclosure agreement with Munich Re. They have asked for it. We say no. We won't do that. We have open as a valuer and we will be open. And I think that it will be a chapter in the future reinsurance literature about this arbitration because it's Grenfell Tower. It's not because it's that huge because it's not compared with a hurricane. The financial losses is pretty limited as you would have guessed. But it's Grenfell Tower.So it's lot of learning and hopefully it will not be hard learning for Protector because obviously understand that there is a risk for losing when you're up against the biggest 3 insurance company in the world. I do understand that, but we think we are well prepared for the arbitration. We do expect the result to arrive before summer. So before July the 1st, we have the kind of a feedback. Gray silverfish has disappeared. There is one big one to go and it is arbitration with Munich Re.On the investment side, you have kind of seen the results. The -- we are supported in the quarter which a what you could call a good investment result. And we are doing whatever we can in order to take the right decision. I think it will -- and at the end of a cycle like you have seen before that we do better than peers. That's our ambition at least, but the quarter is as we all know a very short time period.What about the level of equity? It's around 11% at the moment supported by some kind of increases in the portfolio and what you should expect is us to continue on that level, possibly increase slightly more, possibly in the near future. We have a handful of better ideas today [ by modules ] than a few quarters ago. So about the same level or slightly increase on the equity portfolio in the next quarter to come.Okay, so here you have the figures with and without change of ownership. And the retention here is what we keep and do not send to the reinsurance industry. It's not client retention. Okay? So it's what we retain in our books and what we share with the reinsurance industry. That figure will gradually go to 90%, but in the real world, a 100%. But we do have a solvency-based reinsurance contract with one big company located in [ Hannaford ] and that will technically be solved as a retention lower than 100%, but it is with what we call funds withheld, so we got a money in our pockets.It's a technical issue in re-life, our retention will go towards a 100%, when the property surplus contract in Munich Re gradually is fading out during the next quarters to come. So premiums for our own account will grow a lot faster than gross premium development in the next quarters to come. That's the reason why we are saying here we'll continue to increase. And this figure here will go to 0 pretty quickly because this is profit sharing from previous years, which is booked in quarter 1, and that should be expected to be close to 0 in quarter 2 and 0 in the next years through to come then.You could see some profit sharings in quarter 2. That's possible still, but it's too early to say, but lower than 28. And I think that I have been through all the other areas here. Solvency ratio is strong, normal information that you always see. No big change on the shareholder side. I would say the summary is more like a poor motor claims quarter. That's the poor part. The good part is it is easier to fix. And further profitability actions, they are needed. We are happy with the volume development and it's pretty important that a part of that is driven by price increases, not new customers only.And the guiding is unchanged. However, margin of safety is reduced. So I guess it is pretty much what we see at the moment, and you will see an aggressive organization in Norway and Sweden in the next quarter to come. And I think we are competent to do what is needed in those 2 markets, while it's a bit easy situation at the moment in Denmark and U.K. actually. U.K. is never easy. It's not, but it's now kind of hard initiatives which is necessary to take in U.K. So feel free to pop your questions.

[Unknown Analyst]

On the 96% combined ratio target for 2019, could you say something about what the expected level of runoff gains is in that number?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So what kind of runoff gains do we expect going forward? Somewhat more than what you have seen in quarter 1. So as you saw in our Capital Market Day at the end of 2018, we have been kind of pretty prudent on the reserve side in the commercial sector in last 10 years. We had an accumulated reserve gain size some NOK 900 million or something like that. So it's pretty strange to think that that will suddenly go to 0 for the next quarters or years to go. But I wouldn't expect any very significant figure either, but possibly some support.

[Unknown Analyst]

With somewhat, you mean more than the 7% on the quarterly basis or just a bit more than the amount that you released now in Q1?

[Sverre Bjerkeli, Chief Executive Officer]

I don't think I should answer. It's too precise. It's too difficult to say, but possibly what you have seen in quarter 1 or slightly lower or something like that. But I could be wrong on that, so don't expect too much. But I will expect something. Yes. More questions? Is there any questions from the web?

[Unknown Executive]

Yes.

[Sverre Bjerkeli, Chief Executive Officer]

Yes.

[Unknown Executive]

Do you think the change of ownership exit was rushed in light of recent developments?

[Sverre Bjerkeli, Chief Executive Officer]

Say again?

[Unknown Executive]

Do you think the change of ownership exit was rushed in light of recent development?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So was it a good decision to exit change of ownership or not or was it a wrong decision to take? And was it too much influenced by the gray silverfish? We think that that decision is the right one. We did think that when we took the decision and we still do today. So even if the gray silverfish problem has disappeared and even if we expect what you could call smaller positive margins of total product in 2019, we still think the decision to exit is the right one. We will not reconsider. And we have explained the reason why before and it's a combination of different factors; one, very important one is that it is very likely that you will see a new law arriving possibly already January the 1st, 2020. And then we are back to square one. So the real estate transaction market will be a market for niche players in future obviously, but not for Protector because it's actually a new decision to enter that market and start from scratch with a new product. Our competitor in that market is actually launching something today. I don't know what. I don't really care. So it will be product development. It will be possibly a new law. We expect that law to be pretty stupid and pretty difficult to read. And so the minister of justice in Norway should rethink, but we don't really care because we will not be in that market anyway. So others have to sort out the kind of situation. So we will not rethink on the decision of leaving change of ownership. Next question?

[Unknown Executive]

Can you please comment on how the profit for 2019 will be used, i.e., financing growth, buybacks, dividends?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So we are guiding on some kind of profit development through the year and how will we use it. We will not pay dividend. It will not be a subject for discussion. And what you should expect is that it will support further growth because we think that is a good route to hold up. So it will be kept back with the company is what you should expect and support future growth either in U.K. or any combination our growth in U.K. and in the Nordic market. Next question?

[Unknown Executive]

One more. In the last years, you have expressed willingness to have a higher combined ratio in order to take market share. Has that changed?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So the question is whether we have expressed a willingness to accept a higher combined ratio than in earlier years in order to support growth. What we always have said that we must balance growth with an acceptable or good combined ratio. So I wouldn't say that we have changed. So we are not going to a 90% combined ratio and 0 growth because we still think that it's more valuable for shareholders to see a double digit growth and a somewhat higher kind of combined ratio. But obviously, we will always consider how to use our capital the best possible way. So a combined ratio closer to 98% is totally unacceptable through a cycle. So you shouldn't expect and hopefully won't see that going forward. So I wouldn't say that the balance between profitability and growth has changed. However, at the moment we are more focused on profitability than on growth. So we must make sure that discipline is good enough in turning another company so that the kind of weakened claims development that you have seen the last 18 months that we are turning that around. That's most important message I think. One more question?

[Unknown Analyst]

The one off gains you have in Norway was worker's compensation as you said.

[Sverre Bjerkeli, Chief Executive Officer]

Yes.

[Unknown Analyst]

Then what is the difference between that they, niche worker's compensation, is strengthening last year and the release we see in Norway this year? What kind of function is behind it? Is it the court cases or is it that we have a different kind of a working life or what's the behind it if you can…

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So why…

[Unknown Analyst]

Would like to know through different situations?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So why do we release worker's comp reserves in Norway? Why we up until the end of last year have seen the necessity for strength and reserve situations in Denmark? It's 2 different products in Norway and Denmark. And you have a different claims development practices. It is a public entity who are really doing the claims handling on the difficult cases in Denmark and they have been delayed as you know, have kind of speeded up the last quarters here.But I think that the easy answer is that we probably entered the Danish market with 2 low prices on workmen's comp and with to a certain extent a portfolio mix, which was not good enough. So what we have done is to strengthen reserves, increase prices and kicked out a large number of clients. So what you have seen in Denmark, which then absolutely have improved the situation going forward is significant price increases and a remix of portfolio to the better in that area. So it's still too early to say that we have kind of a healthy workmen's comp portfolio in Denmark. But as I communicated to you on a previous slide, I said that you should expect lower price increases going forward in Denmark compared with history, the near history. And one of the areas is workmen's comp then. So at the moment, we think we have been through the worst when it comes to workmen's comp in Denmark. We could be wrong. We have to wait and see, take time. But at the moment, we are a bit more relaxed about our workmen's comp situation in Denmark that we were couple of years ago, which is good. Workmen's comp development for in Norway, right levels are too low at the moment. We are not hungry for more workmen's comp volume in Norway. So we could sell 0 for the next 12 to 18 months, I'm pretty happy about that. And we do increase prices somewhat in workmen's comp area in Norway. But we have reserved the last years a lot higher on the contractual side than the good years, 2010, '11, '12, '13, '14. So we have reserved them on a high level because it has been very pressure in the market. Final question? Sorry, it's 11 o' clock. Thanks a lot for your kind attention and have a nice day and a nice weekend now. Thank you.