Protector Forsikring ASA

OSE:PROT

Earnings Call Transcript 2020-Q1

[Sverre Bjerkeli, Chief Executive Officer]

Good morning, everybody. Good morning. Welcome to this kind of rather unusual quarterly presentation. There are basically no people in the room. And you know I appreciate to have you close and have the questions directly. But we have received some questions before we went online now, and feel free to pop more questions during the presentation. Some of the questions will be answered throughout the presentation. And obviously, there's room to do that at the end of the presentation as well. Since we gave an update to the market, April 15, I will try to focus mostly now in this walk-through on what has happened and what is kind of new information, which is released today relative to what we have said earlier. We will also spend a bit of time on the investment side, obviously. And our Chief Investment Officer, Dag Marius Nereng, will join me and hold that part of the presentation. You know that I normally would like to prefer to start with the DNA of the company. This is who we are. We are different. And obviously, in a COVID-19 situation, we are also challenged by this very strange situation we all are into. I'm happy that we do have a DNA. And what we are trying to do is to inspire our people in Protector, everybody basically working from home now, to live the DNA even from their home office location. The highlights for the quarter is obviously heavily influenced on the financial situation in the world with a NOK 450 million loss on the investment side. But in the longer run, it's more about the technical development on the combined ratio side, which is more important. And as you can see on this slide, relative to the investment side, we have already got back around NOK 300 million, or to be more precise then, NOK 324 million on the investment side after end of the quarter. So especially on the bond side, we have had a very strong comeback with an accumulated positive result, close to 1 percentage points on the bond side. And obviously, we have also got some of the potential losses on the equity side back again. So NOK 324 million is up from NOK 180 million, which was the kind of investment result April to date, April 15, when we communicated with you last time. The combined ratio for the quarter is 98.3%. And that is possibly the most important figure in the presentation. I'll come back and comment a bit more on it when we do look into the different countries and the claims ratio as such. If we go to the volume side, we have a 4% growth in Norwegian kroner this quarter and 0 growth in local currency. The growth is kind of influenced positively on the significant price increases we have in the Nordic market. And on the negative side, it's influenced on the client churn, which is slightly higher than normal. U.K. is not a big quarter, quarter 1. And as we have updated you on, we had a very big client in U.K. that increased their deductible, which meant that we reduced the annual premium to half, which is kind of a GBP 4 million reduction, give or take, in U.K. It's not really an issue, and we are pretty happy with the fact that we are on a 0 growth situation or slightly on the positive side in Norwegian kroner at the moment. Our expectation for quarter 2 volume-wise is negative growth in the Nordic market but a pretty strong growth in U.K., and they may balance each other out. And I guess we have some questions on the volume side. If we do, Amund, please give me...

[Sverre Bjerkeli, Chief Executive Officer]

We haven't given any kind of precise guiding for the volume side in 2020. We have a long-term target now sized 5%. We may be slightly below at the end of the year this year on the volume side. But in the longer run, you should expect us to come back on an acceptable growth part again simply because U.K. is doing very well and U.K. is growing. We will lose some volume due to the COVID-19 situation but not very significant. If we move to the claims development, it is an acceptably good quarter this quarter. And when you add cost to the claims development, we end up in a combined ratio sized 98%. The important thing when you compare with last year is that last year quarter 1 was influenced by reserve gains in the quarter, around 7%, or 6.9% to be precise, while the figures in quarter 1 this year is not influenced by any losses or gains on the reserve side, meaning that underlying reality is even better than the improvement from 99% to 89.7%. So we are pretty happy with the first quarter when it comes to combined ratio. And here, we have kind of a question.

[Sverre Bjerkeli, Chief Executive Officer]

Okay. If we go to the next part of the presentation, what about large losses and runoffs? I have commented on the runoff side already. And when it comes to the large loss element of this quarter, there is a new definition of large losses this year, which we previously have updated you on. We have increased the definition of a large loss, up from NOK 7.5 million to NOK 10 million. And what we normally have done is to kind of cut off the large losses on NOK 50 million. We increased that one to NOK 100 million due to the change in reinsurance structure with a deductible sized NOK 100 million. So our expectation now is that a normalized large loss ratio will be around 8 percentage points. And in this quarter, we had 9.5%, which is slightly above what you could call a kind of a normalized large loss situation. These kind of large losses are also influenced by a couple of big storms, which have resulted in floods in U.K. They are called Dennis and Ciara. So they are kind of integrated in a large loss element and is what you could expect to arrive now and then. So in the large loss definition, accumulated weather claims are incorporated, like our peers do in the Nordic market. So slightly on the negative side when it comes to large losses, meaning 9.5% against the normalized figure sized 8%. On the slide here, you see one negative large loss, a green one sized SEK 24 million. That is normal to see some claims disappearing and/or reserve reduction on certain claims. So accumulated NOK 123 million in the quarter, a bit higher than what you could expect as a normalized large loss ratio. Nothing much to say on the cost side, it goes slightly up this year. Don't worry, we are still #1 in the world on the cost side and not very interesting to do too many comments on it actually. If we look into the combined ratio based on a country-by-country level, you can see that Finland is positively influenced by reserve gains and Denmark, on the contrary, with some kind of reserve losses. That is, it's kind of normal volatility. On an accumulated level, reserves are in balance. It's not really an issue. The important thing with the combined ratio development is the very strong improvement you see in Sweden, in Norway and the fact that U.K. continues to deliver good results. Remember, the combined ratio in U.K. also include a couple of flood situation, not very significant ones. But it's not kind of without large losses in U.K. Country-by-country volatility must be expected. The kind of accumulated comment from my side is that I'm happy with the start. And you may see this quarter to be some kind of a turning point for Protector when it comes to the combined ratio. We are in the insurance industry. There is volatility. We can't be sure. But certainly, the very significant price increases we have seen the last 18 months, they not only start to materialize, but they will basically have full effect now during 2020 with a slightly stronger effect in quarter 2 than in quarter 1. Price increases in quarter 1 was, on average, 13.5% in the Nordic market, which is obviously pretty high or even very high. On the bottom of the slide here, you can see a few comments about the future expectation. And my expectation is that the price increases in quarter 2 will be even higher than 13.5%. Then it will go slightly down or somewhat down in the second half year of this year. And then my expectation today is that price increases in 2021 will be more limited. Exactly how much, it's too early to say. We have to go for quarter 2 first before deciding on anything, obviously. But my expectation is based on the underlying improvement on the combined ratio side. And I do not think it's necessary with anything close to what we have seen the last 12 to 18 months in 2021, which mean again that the client churn will go down in 2021. And my expectation is also that the client churn will go down in second half year of this year compared with what you have seen so far. We will guide less precisely going forward, as you can see now. So when quarter 2 and quarter 3 and quarter 4 do arrive, we will not give you such a precise price update per country. We think it's slightly too much now, and we do not want to be so precise towards markets and our competitors anymore. The reason why we have been very detailed in this is to try to build some kind of credibility on what we're doing on the price side. Hopefully, that credibility has been built now. And we will take down the communication a little bit for kind of good reasons and more like comment on the price situation like other Nordic companies do at the moment. Is there any questions on prices or volume or profitability, Amund?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. A small comment on the U.K., basically saying that we are doing very well. It's a one-team slogan we are using. We have an office in London and a bigger one in Manchester. And you can see some -- a nice picture from some of the people working there. And the reason why we show it is because the U.K. team was kind of winning the price to be the cultural lead in Protector in 2019, which is an honor and something everybody fight for in Protector. You may say that Protector is more Protector in the U.K. than in Oslo. And it is a good team. They are growing. And on the bullet #4 here, you can see a couple of words, implementation of broker panels. That is kind of a type of relationship which is pretty normal in the U.K. market. And it is a fact that when entering 2020, we have been invited to and have accepted to join 2 new panels with big brokers in the U.K. market. And we do expect better access to new volume based on that fact. So it's kind of a modest statement on the slide here, but it is a pretty important statement. So we -- our brand recognition in the U.K. is going stronger and growing stronger and stronger. And our relationship with the brokers is obviously very good and improving. So a good kind of comment from my side to what's happening in the U.K. A comment on the Corona Momentum. First, I would just say that we have obviously organized a lot of new activities based on that kind of situation, HR issues, product issues, claims handling issues and obviously related to capital allocation, investment and results. My feedback is simply that I am happy with the way we can handle the COVID-19 situation. Obviously, there are practicalities about people working at home, but they are very, very minor relative to many, many other situations out there in the world map. So it's doable. We can do business as normal. And I think we can handle this at least equally good as kind of our competitors. It has obviously been questions relative to the risk side. Will we see significant losses and/or positive effects out of the corona situation? And my feedback is we will see a bit of both. And a kind of cumulative statement from my side is that we do expect kind of a neutral impact on combined ratio in the longer term, longer term, meaning this year, 2020, and the following years. So yes, there are some business interruption situations that may lead to some kind of payment, but that's not normal. It is very unusual to have coverages in the Nordic market, also in the U.K. market, that will cover any kind of business interruption due to the COVID-19 situation. You can't rule them out totally. But there will be very few. That's our expectation at the moment. Obviously, cars and vans and buses are driving less, which means that claims frequency is going down. That's kind of preliminary on the positive side. So we can see that. So in total, it's our opinion that these 2 situations will balance out. There is a situation where the Workmen's Comp product has been kind of expanded to cover COVID-19 in Norway. And there are some kind of movements in that direction in Denmark at the moment. We do, together with other insurance companies, have what I would call a decent and a good dialogue with authorities on the issue. And it is not expected to be any kind of significant losses arriving from that kind of situation. But there is some risk element in it. But in total, the COVID-19 situation, as far as we can read the picture now, is that it will not be on the negative side nor on the positive side. They will balance out. That's our expectation at the moment. And I think we had a question on the COVID-19 situation?

[Dag Marius Nereng, Chief Investment Officer]

Thank you, Sverre. So this is one of my favorite slides, showing the development in the asset under management. So it's been steadily increasing in the last years. So this consists of the company's equity, the Tier 1, Tier 2 debt and the float. And if we translate this NOK 12.1 billion into how much it will be per share that you own in the company, this is almost NOK 150 per Protector share, not the NOK 31 that we're priced in at the moment. So we invest NOK 150 per share in the bond, in the fixed income and the equity market. And you will get that return minus the interest on the Tier 1, Tier 2 debt plus the insurance results. So -- and the big news in this quarter is that as of today, the bond portfolio now yields 4.2%, around 4.2%, compared to 2.1% at the year-end. And that is 93% of these assets under management. And we also have 7% invested in the stock market. I will speak more on that later on. A large loss this quarter of NOK 452 million. Year-to-date returns has improved with NOK 324 million in April. So the loss is now down to NOK 128 million. Our equity portfolio had a weak performance in the first quarter with a negative -- with a decline of 33%, excluding the put options. That is despite that companies that we own have no oil price -- have no direct exposure to the oil price or the COVID-19 situation. At the end of the quarter, we had a good protection from our put options. We started buying put options in 2018 to secure the downside in our portfolio. So that cost us money in 2019. But this year, we got some money back. And the prices at the quarter end of our options was more or less at the market at that time. Our discount to intrinsic value is at a record-high now. That hopefully bodes well for the future. And returns of the equity portfolio in April was, yesterday evening, 13%. We have NOK 11 billion invested in our bond portfolio, which yielded 4.3% at the end of the quarter before cost of risk. This is an increase from 2.1% at year-end. We added NOK 1.7 billion in our high-yield portfolio during the quarter or during March, which more than doubled the high-yield portfolio. End of April, as I also told you, but I have to repeat it, our return is 1% year-to-date in the fixed income portfolio. And to put that into context, at year-end, the yield was 2.1%. We have now moved 1/3 into the year. So our year-end expectation for us at the end of April was 0.7%. And we have now a return of 1%. So we're really proud of that. Covered bonds and cash make up more than 50% of the bond portfolio. In the last weeks of March, we bought these 5, I would call, solid credits for more than NOK 600 million almost in 1 week. They have returned or increased in price with 15% to 22% since that period, and we have taken profits in some of them. But increasing our high-yield exposure also carries some risks. So we have 4 credits which we have downgraded in the quarter. They're all first lien. And we expect to get a recovery of more than 70% of today's market value, if they default. We have a very low oil and oil service exposure in the portfolio, 2%, compared to the 21% in Nordic corporate high-yield market. And the same goes for real estate. The last 3 years, we have done a large reallocation in the bond portfolio. Our AAA portfolio has gone from just about 10% end of 2016 to about 52% year-end 2019. And the credit duration, we have decreased from 4 years to 2.2 years. We have removed all BBB risks, which gives a very poor return, taking into account capital consumption on those loans. We have decreased our -- overall our high-yield exposure from 30% to 16% year-end 2019, increasing to now to 28% at the quarter end and increasing even more in April. Duration of the high-yield portfolio was also down from 3 years to 1.9 years. And we have shown a high discipline on credit quality at historically low compensation for risk-taking. So we have witnessed a few investment ideas that have kind of reached our hurdle rates, and we acted on that. So we have low risk going into this turmoil. We have delivered consistent positive returns for both the total and the high-yield portfolio the last 5 years. We have delivered more or less the same returns as comparable crossover funds with significantly less risk and capital consumption. And of course, it's hard to say that, I think Sverre stated, that we have less risk in our portfolio all this time. But it's hard to show it. But of course, on this slide, you can see that Sverre was totally right on that. So when the market turmoil started, our portfolio outperformed the market with a substantial margin. The last 3 years, when we had the low appetite for high-yield bonds, we prepared for a situation where the prices were more right. So we did the analysis on the companies, we studied the loan terms and was ready to activate when opportunity arose. Then it happened. So this started in the high-yield market, Monday, the 9th of March. The same day, we sat down with all relevant parties. And that's being very easy in Protector because we are -- the investment department is located literally next door to Sverre's office. So -- and then we called the CFO, Ditlev, and Chief Risk Officer, and we talked about what do we do now. How does the stress test look? What is the solvency situation? What is the risk of a hit on the insurance results? And then we discussed our way forward and set up at least daily meetings going forward then. We saw flow-driven forced selling in the bond market. And the prices in the high-yield market was as much down as in the stock market. So very early on, we concluded that the opportunity for capital allocation this time around was in the high-yield market and not the stock market. So we started bidding carefully in the market. But it was low liquidity, so we only got some money invested. But in the week starting Monday, the 16th of March, witnessed extreme movements in the foreign exchange markets with the Norwegian kroner falling 10% in a day. And that happened in several days that week. That led to high-yield funds getting margin calls on their currency exposure. So they had to be forced sellers in that market. And there was a lot of liquidity. And the Norwegian government also informed that the crisis fund was to be established. So we then decided to buy aggressively in what we believed was very solid credits. We were one of few buyers those days with a lot of appetite. And we were more or less dictating the prices. At the end of March, the markets calmed down, and we couldn't get hold of much volume. We then started to buy Nordic high-yield funds to get even more invested. And in April, we have continued to buy high-yield funds. This has more or less kept our yield on the bond portfolio intact, even if you had the large profits in April. Bear in mind that the yield is before cost of risk. And now with more uncertainty in the market, we will expect to have losses in the portfolio and even more so because we have bought high-yield funds, which have more of an average rating of B+, which carries a lot more risk. So expect substantial losses, but we think we're in a very strong position going forward. I'm going to leave the word back to Sverre to summarize the investments.

[Sverre Bjerkeli, Chief Executive Officer]

Okay. Thank you, Dag Marius. So what you are noticing is that we are kind of being very, very open on our communication. Open is a value in Protector, and we are very open on the communication on the investment side. We deliver more detailed information to you than any competitor in the Nordic market at the moment. We think it's good. And remember that Protector, they do insurance as core business. But we do also have defined investments as core business. It's a part of our DNA. So historical to date, around 60% of the profits of Protector have arrived from the investment side and the rest from the technical side. So a bit more information, especially in these days. I think I hope you appreciate it and find it valuable. My kind of summary is that we have taken money off the table for 3 years now. I said it to you in 2018, first half year 2019, second half year 2019. We take money off the table, off the table, off the table. It hasn't paid out until now. And then we have been well prepared to act rapidly when this kind of situation arrived. We are fully aware of the fact that the jury is still out and there is a lot of uncertainty in the market. But capital allocation in these days are even more important than in kind of normal days. At least we follow up on a daily basis and take fast decisions with all available people around the table, not only the investment team are now acting on their own in that area. So I feel comfortable today, and I think we have kind of a good position. However, there is a lot of uncertainty in the market. So to give a guiding on this, it's you to tell me then on the investment side. I think there is a kind of a question on the capital side. Is that right, Amund?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So if we go to the profit and loss statement, I think the kind of highlights from the profit and loss statement has been given to you already. So it's not really necessary to repeat on that one. When we go to the balance sheet, we have a solvency capital ratio based on the standard formula sized 142% at the moment. We have changed methodology to a volatility adjusted model, like many companies, as far as we understand, in Europe and in the Nordic market either have done or are doing at the moment. And it's kind of also a fact that we have had an opportunity to draw on the solvency-based reinsurance program. We haven't done. We don't think it's necessary. So we will not spend kind of the money to buy up more on the solvency side in order to strengthen the solvency capital ratio. As you would know now, when we take into consideration the fact that we have had more than NOK 300 million profits on the investment side in April to date, today, the solvency capital ratio is a lot higher than the kind of figure you see here now. We don't kind of calculate these kind of figures on a daily basis, obviously not. But it's significant, north of NOK 150 million, potentially closer to NOK 155 million. And you can figure it out yourself because it's pretty easy to calculate, actually. It was one balance sheet question, I guess, Amund?

[Sverre Bjerkeli, Chief Executive Officer]

So if I go to the long-term financial objectives. There's nothing much to say. They are kind of unchanged. My -- on the comment on the volume side, I guess you have heard it. We may see a pretty low volume development this year, whether it's 5% or somewhat lower, it's too early to say. So don't expect too much growth from Protector in 2020. But if everything develops like what we expect, and that's obviously a question, you will see some kind of growth coming back in 2021 is kind of my expectation. But this is a long-term guiding. It's not precise in the shorter run. And we are very comfortable to continue with the kind of guiding -- long-term guiding that we have given before. So here we are kind of at the end of the presentation. Is there any more questions, Amund, before I kind of close?

[Amund Skoglund, Executive Assistant & IR]

It's more on the combined ratio side.

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So these questions on the volume side is not -- it's more what you call minor. And we can come back to that investor and give some kind of feedback on the results. That's okay.

[Amund Skoglund, Executive Assistant & IR]

So it's about seasonality. It's from [ Kristian Solberg ]. I looked at Tier 1s of past years, Q1 was very often the lowest combined ratio quarter of the year. Does that mean that your combined ratio for 2020 is likely to be higher than 98.3%?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So that's a very relevant question. And the answer is no. The reason why you have seen in previous years that the combined ratio has been lower in quarter 1, it is mainly due to significant reinsurance commissions arriving in quarter 1, which is kind of artificially improving the combined ratio in that quarter. And then you kind of miss out on these kind of commissions in the next 3 quarters to come. Typically, in 2014, '15, '16, '17 and '18, we had very significant reserve -- no, sorry, commissions arriving, making the combined ratio look good. Now when we had changed the reinsurance structure to a normal XL-type of property contract, these kind of margins will appear gradually through the different quarters. So if you correct the combined ratio reported figures with reinsurance commission changes, you will see that the first quarter in the year normally is slightly worse than what we normally end up in during the full year. So my expectation now is that if the underlying reality continue to, kind of, prevail, you will see an improvement from today's 98% throughout the year.

[Amund Skoglund, Executive Assistant & IR]

You have one on new sales. So 87.5% renewal rate plus 13% price increases implies no new client wins. Did you not bid for many new clients or not win due to rates?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So it is a fact that the new win volume is lower than what we normally have seen. And there are 2 reasons why. One, there are competitors out there in the market who are slightly more aggressive than Protector. And I think that, that situation will kind of, to a certain extent, continue, however, will be improved when our price increases is going down in the second half year of this year. So I expect our win ratio to pick up again at the end of the year and certainly entering 2021. There is also one kind of volume situation arriving due to the COVID-19 situation. Because what we can see in certain markets like U.K. is that the brokers are gradually less active in churning clients. So they tend to renew with present company slightly more often than normal. So volume available for competition will be lower during the next quarters to come. That is to our benefit in the Nordic market. However, it is to our disadvantage in the U.K. market. So growth expectations will be slightly down, everything else equal, due to the COVID-19 situation. Any more follow-up questions, Amund?

[Amund Skoglund, Executive Assistant & IR]

Yes. One from [ Andreas Ohm ]. Did you say that you expect full year combined ratio to be lower than 98.3%, everything else equal?

[Sverre Bjerkeli, Chief Executive Officer]

I haven't really kind of -- it's not a firm guiding statement. But if history repeats itself, I'm saying that 98.3% will be better at the end of the year because quarter 1 is normally the worst quarter in Protector, when you correct for the reinsurance commission. So yes, you are right. No, formal statement, but everything's equal, that's kind of a reasonable expectation, we will end lower. Another one?

[Amund Skoglund, Executive Assistant & IR]

Another one from [ Andreas ]. If you say no significant price increases in 2021, does that mean you expect current prices are enough to get you to the long-term target of 94%?

[Sverre Bjerkeli, Chief Executive Officer]

Yes.

[Amund Skoglund, Executive Assistant & IR]

Yes. You almost answered it with your last sentence. But your quarter 1 combined ratio was 98.3%. How much of this was because there was lower motor claims due to COVID? And what would you estimate your combined ratio would have been without COVID-19?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So basically, nothing of the positive elements we can see on the motor side in quarter 1 is linked to COVID-19. Norway was kind of closing down March 13, Denmark, slightly before. And there is a time lag on reporting claims, which is normally between 10 and 14 days. So we have had a nice winter in Scandinavia this year that has influenced positively while the COVID-19 situation have -- basically hasn't influenced at all. So let -- if I should take a guess, 98.3% would have been 98.1% or 98.2%, something like that. However, you will see a positive influence in quarter 2 relative to that question. And then I leave the word to our Chief Investment Officer, talking a bit more about what we have done on the investment side. So Dag Marius, feel free.

[Amund Skoglund, Executive Assistant & IR]

On the yield or on the [indiscernible] again? It's just to clarify, I guess. You said the 9.2% is the yield. Is that the Q1 end or today? And if, is it -- just to clarify it.

[Dag Marius Nereng, Chief Investment Officer]

Okay. So 4.2% is the yield as of today. So it was 4.3% at quarter end and decreased to 4.2%. But that decrease is a lot less than you would have expected, given the strong performance in April. But we have increased risk during April.

[Sverre Bjerkeli, Chief Executive Officer]

Was there another one?

[Amund Skoglund, Executive Assistant & IR]

What return do you expect on the bond portfolio on a yearly basis, taking into account the cost of risk?

[Sverre Bjerkeli, Chief Executive Officer]

We don't actually comment so precisely on that kind of situation. You know the running yield. We have updated you on the fact that cost of risk is higher today than in the kind of normal situation. So you figure out.

[Amund Skoglund, Executive Assistant & IR]

Yes. That's correct. How do you reconcile the NOK 2.660 billion cash as per end of Q1 '20 with the balance sheet?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So that's well spotted. So we have a significant amount of money invested in banking deposits at the end of the quarter and during quarter 1, simply because bank deposits, which are fixed for a certain period of time, not over a very long period, a rather short period, deliver a better yield than other investment alternatives, like AAA or AA kind of paper in the market, give or take, in that area. So that's the reason why the cash position has been higher than -- or a lot higher than normal in a quarter or 2 or for a short period of time. What you should expect now is to see a significant reduction on that kind of bank deposits. Because money is now put into play, where we think that the return on investment and return on capital consumption is a lot stronger.

[Amund Skoglund, Executive Assistant & IR]

Yes. One more question from [ Ruben Whistler ], how did large reductions in the solvency ratio in Q1 impact your decisions on investing and underwriting?

[Sverre Bjerkeli, Chief Executive Officer]

Okay. So I would say that the kind of reduction on the solvency capital ratio haven't really influenced any underwriting decisions at all. Possibly, except for one thing, is that our appetite for Workmen's Comp products both in Denmark, but to a certain extent, also in Norway, is even more limited than earlier on because it consumes a lot of capital and risk to interest rate is basically 0 or even worse in some kind of situation. So we are kind of continuing on reducing our risk appetite on the most capital-consuming products like Workmen's Comp in Denmark and in Norway. When it comes to other type of allocation situations, we feel that we have been -- we have a strong balance sheet. We do whatever we need to do on the stress side. We have a good downside protection from solvency-based reinsurance contracts and from put options on the equity side. So I think that we have a strong balance sheet and strong enough in order to maneuver and then to allocate more capital to the high-yield side, which we find very, very attractive in the kind of period we have had and still find very attractive today. Any more questions on the balance side? No?

[Amund Skoglund, Executive Assistant & IR]

No.

[Sverre Bjerkeli, Chief Executive Officer]

So priority, capital-wise, now is the bond market and the high-yield market. We have more opportunities on the equity side, obviously. But we do expect a bit more turbulence to arrive or possibly a lot more turbulence to arrive on the equity side. So we don't have kind of plans to aggressively go higher on the equity side at the moment. But no guarantees given obviously in that area. Bond and high yield, very, very attractive at the moment, but there are also other alternatives available, as you know.

[Amund Skoglund, Executive Assistant & IR]

Yes. You have one question about Storebrand. Storebrand had a big profit warning and high combined ratio. Can you help explain why do they differ so much from you and why you will not have that risk?

[Sverre Bjerkeli, Chief Executive Officer]

No, I can't. I understand they have delivered figures this morning. I haven't seen them. And if I had seen them, it's kind of not up to me to comment on our competitors' figures in that area. We are not equal companies. We are doing a lot different business. So I think that I've given my comments on behalf of Protector and then you will find out then and compare the two. So my summary is that we are happy with the combined ratio in quarter 1. It's not a very strong figure. The consumer sector in the Nordics, figures are brilliant. But in the kind of market we are playing in, where we and competitors have struggled for a year or 2 on the combined ratio, I'm happy with the kind of figures we see. It's a strong improvement, and the underlying reality is somewhat better than what you can see at the moment. Big investment losses with a lot of it turning back in April month, obviously. And it's obvious that the investment side and the capital allocation situation in the company, where how should we act in a rapidly changing market, is on top of our agenda still, obviously. So thanks a lot for joining in a kind of unusual environment. I hope we can meet next time personally, but it may take a bit longer time. So have a nice day, and celebrate the May 1 tomorrow if you would like to. Thanks a lot.