Protector Forsikring ASA

OSE:PROT

Earnings Call Transcript 2017-Q4

[Sverre Bjerkeli, Chief Executive Officer]

A warm welcome to everybody to the presentation of the 2017 figures of Protector. I'm in pretty good mood this morning. We have started out with State of the Union internally as always with I am not quite sure 125 people present here some 50 meters away from where we are now. And there is a good spirit and good mood in Protector. And always when we start State of the Union kind of speech 4x a year, we would start with the DNA of the company. This is who we are. We are different. So when we recruit new people in Manchester, nowadays we do, we have 29 employees on board in Manchester. And we think we might double that number during the next 12 months. We always start the first [ intro ] with the sentence, we are different. This is the DNA everybody has to remember the 12 statements you see on the slide. Then gradually, we are educating ourselves to understand what's the meaning of quality leadership, target #2 and then finally, we have to [ lead ] these kind of statements. That's a never-ending story. And nobody of us really, truly understand the meaning of the 12 statement. But as long as we are targeting, defining, training and working towards these kind of targets, the company will continue to develop. I have pinpointed 2 words here on this slide today, that's on the main target because in Protector, cost leadership is a no-brainer. We are cost leader in the world. We'll continue to have that position for the next 5 to 10 years. I think we'll strengthen that position from 2020 and onwards, not in '18 or '19 but in 2020, but that's a no-brainer. However, quality leadership is not a no-brainer. It's hard work, smart work in order to deliver quality leadership. And as many of you know, we lost quality leadership in 2016 in Denmark, that's not a good story. And then we have to see how fast can we really fix that kind of problem, not being the quality leader.So when the spirit in the company was rather strong this morning, that's a lot linked to the figures as such. We always share figures with all employees, but it's absolutely also linked to the quality statement here because we are -- we think, it's rather easy to conquer new markets. If you are cost and quality leader, it will lead to profitable growth. And again that will lead to a Top 3 position in any segment. And the future test of Protector is whether that Nordic model which has proven to be a good one can be a success also outside the Nordic market, first in U.K. then later on in other countries. And as you know, in U.K. -- the U.K. insurance market is twice the size of the Nordic, accumulated. So we have a long runway to go in U.K. in order to continue the growth of the company. So let's have a look at the quality leadership statement through the presentation and start at ones. Some of you have followed the company for a large number of years and some of you might remember that we 4 years ago stated that 18 months after starting to do business in U.K., we got the first client April 1, 2016, and 18 months after that its give or take now is around Christmas time, give or take. Then we had an ambition to be quality leader. So 4 years ago we gave that statement that we also gave the statement that our ambition is to be far ahead on #2, which we have never ever said in Scandinavia or in the Nordic countries. We have never given that statement because we haven't really had the idea that that was possible in the Nordic market because the quality [ in insurance ] market generally in the Nordic market is pretty good. While in our opinion, 4 years ago, it's not on that level in the U.K., so it's actually easier to take the quality leadership position in U.K. because U.K. insurance in some areas even if it's considered the most sophisticated insurance market in the world, don't deliver high quality. That was based on 1,000 pages analysis and a lot of contact with major brokers in the U.K. market 4 years ago. And here is the results, is one of the best quality surveys we have seen in Protector ever and as you can see that [ leads to ] #2 and #3, and #4, and #5 is huge. This is a very, very significant difference. And the story is even better because these no-name companies guess what, some of the biggest competitors of Protector, they are located here, down here. And at least one of them exactly there, this is a dramatic situation. This is basically the broker saying, we hate that company. If you score [ 28 ] is basically, you are a mess and I hate you. Not really hate. But hates. So this story is a strong story. It's a very important story. We couldn't know for sure 4 years ago that that ambition was realistic at all, [ big mouth ]. Is it possible to deliver? And today, we know that we have delivered. Remember, however, that this will be extremely difficult to repeat next year because when you [ grow ], you go from a project kind of status with a few people on board and a few clients, and only doing business with 50, 60, 70 brokers. And gradually, we will go to 29 people, which we are today, 55 people at Christmas time, and soon 100 people in U.K. and we will multiply the number of relations we have with the brokers and that is the next challenge. It's not an easy pick. But if you are consistent in what you're doing, if you educate and train your people, it's possible.I don't think actually that this kind of[ distance ] will be repeated the next [ 3 ] years. But if we are -- if we do continue to have the quality leadership, I will be happy. But again, we had an ambition to be far ahead of #2 also going forward, but not really is 20 points you see here. That figure means that on a scale from 1 to 7, basically everybody scores to around 6, some around 7, very few around 5. So that is kind of [ not 85 ] of the 100 people satisfied with what you're doing is everybody very, very satisfied with what you're doing then you score 85. A methodology is equal to a similar kind of surveys done in many market segments in Norway and in the Nordic market. So there is nothing special with the survey, it's standard, it's the way it's done. 85 is equal to survey. You can read about in the paper, and high scores are normally around 70. So if you are on 70, that's high, if you are around 75, you are normally on top in your category in that area.So welcome to the quality leader in U.K. So big smiles in Protector this morning. Important.The story is even better because I didn't really expect to back on the quality team [ top ins ] in their mark already in 2017. Here, that's a surprise to me. We had a comeback kind of agenda in their mark. But we are extremely satisfied. This is more expected though that the first survey in Finland leads Protector to the top because the Broker Association had earlier on pointed to Protector. They have said, you're warmly welcome and we consider you to be the quality leader in the market. So the Broker Associations own survey in Finland have given the same result. So when we do ours that's more like expected, but of course, very good as well. So the part of the DNA, which is related to quality leadership is possibly the best year ever in Protector in 2017. So if you go then to the summary here. The highlights of this year. I am basically happy with everything except 1 figure and that's the net combined ratio size [ 93.1 ]. That is in the higher end after a poor quarter 4. I will be back to that and explain a little bit more, but outside that figure, I basically [ did ] everything. Not really worried at all about minor increases on the cost, you shouldn't worry at all . We do invest and we are a [ great ] leader and this is not a worry. And obviously, the return on investment accumulated [ 4.8% ] this year after a very strong quarter 4, is strong figure in that area. And basically higher than most of you expected in quarter 4. It's driven by activities in quarter 4.So the summary, I'm happy. We are growing 21%. We are quality leader in all markets. The cost ratio is as always great. The return on investment are I guess Top 2 in the Nordic insurance market this year. I think one will maybe beat us this year. But seeing the last 10 years, we continue to deliver strong return on investments. One [ weak ] figure. And what you can see here is also I guess in line with kind of communication I gave in the last couple of quarters and the last 3, 4, 5 years. The risk rate pressure in the market. You should expect the margins to be put under some more pressure especially in the Norwegian market where we have seen that rate pressure for the last 5 years. And since, we are delivering slightly higher than target, we guided on [ 92% ] at the beginning of the year. We think that it could be realistic that we are ending up somewhere in between 92% and 94%. Haven't given up 92% but are not giving guidance on a single figure like we very often have done, not always in that area.And the reason why it's slightly higher uncertainty about that kind of figure going forward is because the relative volume in 2 new countries is higher is U.K. and Finland. And it's too early to say, whether that profitability will be equal to the company's profitability. Obviously, we don't have critical mass today in these countries meaning that the cost ratio is a lot higher than in the more mature markets we have in Norway, Sweden and to a certain extent Denmark. So that kind of interval is linked to U.K. and Finland. We don't have critical mass at the moment. It will take a bit more time. We will have critical mass next year in U.K. You will see the cost ratio dropping extremely quickly next year in U.K. while it will take longer time in Finland because it's a smaller market, and we are growing with a slower pace in the Finnish market. However, that's not really important because the relative size of Finland is and will be very limited compared to the company here.So I'm happy. I'm not quite sure if you are, but on -- [ you also given my feedback ] -- the feedback to me. This is kind of also a part of the communication -- our communication to the market. We have 2 core businesses in Protector, insurance, investments. Many of our competitors have a statement close too. We focus on insurance business that's the core business of our company and we have something called investments. In Protector, we have 2 core businesses which is rather obvious if you are looking at the figure here, 75% are profit after-tax, [ the last ] 10 years is from the investment side.So building volume, building float, building balance sheet is not only equally important with a good combined ratio. It's more important. However, you have to balance. And we haven't discussed this before, I'd certainly be more happy as a significant shareholder in the company to see a combined ratio size [ 94 ] and 15% to 20% growth relative to go flat like the Nordic insurance sector, still growth, buy something and grow 2.5 percentage points and deliver a combined ratio at the lower stage, 92% say give or take or even longer because that will create a lot more value for the shareholders of Protector. You can't go close to [ 100% ]. That will be not at all good. But if you can manage to stay in that interval and combine that with 20% growth which we have guided on this year, it will be a tremendous value development of the company and is more fun for the people to working in such a company, growing. So there are more smiling people, more opportunities. The good people will always be challenged with new opportunities in a fast-growing company. You can give them these kinds of opportunities and the kind of older management like myself are not kind of blocking for development of the good people in the company in that area.So we deliver challenges and opportunities to young and well-educated people in Protector and that's easy to do if grow 20% a year. Obviously in that area. So to grow is fun and it creates value. And investments is core business in Protector. I'll be back [ slightly with ] some figures on the investment side here. So the growth is 21% coming out from Scandinavia, Sweden, Norway and of course gradually in all, you can see that U.K. is coming with NOK 210 million growth in '17 versus '16. The percentage points is extremely high but it doesn't really matter if you go from [ 0 ]. That we all understand that's not an issue. But [ NOK 200 million, ] that's okay. But we haven't kind of finished growing in Scandinavia even if we are slightly conservative on growth in Denmark still, you can see that Sweden is moving, you can see that Norway is moving slightly better than expected. But sooner, we will see Finland in 2018 arrive with some -- something which will influence on the company.This is our guiding for the year, [ NOK 4.996 billion ] that's a pretty stupid figure, isn't it, because if you are close to that figure at the end of year around Christmas time, I think we might find another client [ besides NOK 4 million ] so that we pass [ NOK 5 billion ]. Please -- you will run companies. Give my company for free than the [ NOK 4 million ] annual premium between Christmas and [ New Year deal ], if you are friendly people, so please do that in order to help us to grow above [ NOK 5 billion ]. So my guess is obviously today, that we will pass NOK 5 billion annual premium -- gross written premium in 2017, That's my guess. So I think that the risk you are missing regarding here is slightly more of the[ guiding not soft ]. And the reason saying that is because January 1 renewal a lot better than last year.So the -- and U.K. is moving, so 2 reasons why. But 1st January -- January 1, has been better than last year, significant better, so the speed we are entering is higher and that's not related to U.K because the January 1 renewal date in U.K. is as you know, kind of a normal month, it is April 1, which is the big one in U.K. And July 1, is a big one and October 1 is a big one and even December is pretty sizable in the U.K. market. It's not about January 1 in U.K, it is in the Nordic market in that area. What you see is that the different countries is kind of supporting the volume development of Protector. We will not give a precise guiding on each country. Why would we? Because there [ really volume ] volatility in certain countries still but we will be at a bit more specific on U.K., where that's the growth you arrived from here. A bit more than [ NOK 800 million ] in growth which is only slightly higher than previous year. And if we continue to grow at 20% a year, 10 years from now, how big we will be then? Also, you can do your math. 20% a year [ x10 ]. Let me give you a clue. Look at that figure and that figured that 10 years divide that to that and then you can multiple. It's around 6x the size. So if you grow -- this we are not growing exactly 20%. We are slightly higher than 20% a year over the last 10 years. I'm not saying we are growing 20% a year next 10 years, but I'm saying if you do, we will have in 10 years time we will be 6x the size today. If we grow 15% a year, which is more in line with the medium, long-term guiding of Protector, we will grow 4x in 10 years, meaning that we will be NOK 16.5 billion annual premium 10 years from now. How do you price such a company? Price earning [ 16 ]. It's a joke, isn't it?So if you believe the growth story, I should never ever of course as a Chief Executive comment on the stock price of Protector, but I can as a shareholder can buy because I'm on that list. So obviously, you have to run and buy a hell of lot if you believe in the growth story. And that we can manage margins acceptably. Okay. A small piece of advice. At the same time, we are diversifying what we're doing. So we are going from a more longtail oriented portfolio to a bit too heavier every year focus on not focus, but a shorttail type of portfolio. This is not really planned. We do not have a target to go that direction. We would be happy with a lot of longtail volume in our books. It's slightly more risky with longtail term, but it creates a bigger balance sheet, it creates more flow and it will support a higher future return on investment. Because the [ bag of mouth ] will be bigger, it's that easy. That's the mantra of Warren Buffett when he do write his annual letter to his shareholders every year in the section where he is talking about his insurance companies which are, as you know, among the biggest in the world. So it's not really a target to grow [ 61 ] to be as high as possible. So we take on board the volume we think will deliver profit to Protector including slightly higher longtail risk like workmen's comp in Denmark. We are pretty close now to have a workmen's comp reserves in Denmark size [ DKK 1 billion ]. That will yield return on investment every year, obviously, I mean support the Danish business profitability going forward.So I will argue that we are reducing risk profile gradually the last 6, 7, 8 years, but then I will come back and comment on the company risk as such at a later stage in the presentation, where I actually -- we do -- will argue the opposite kind of view then. I come back and explain that a bit later.Claims development, that's kind of 1 of the 4 messages today in this presentation is that the claims ratio in quarter 4 is in the higher end both in Norway first and then in Denmark. It's nothing special. It's no significant changes on the reserve side. It's insurance volatility. But obviously higher than what we expected a quarter ago. I wouldn't say weather. It has been some. But we are not that influenced by weather. So it's not really important in that area, it's group life Norway, it's [ Moto Norway ]. We've had 1 big liability claim for own account in Norway in this quarter. There are some claims coming out medium-sized in Denmark. This is normal insurance volatility, get used to it. But [ poorer ] in quarter 4 than expected and communicated to you.That's the reason why we are [ 93.1% ] and not around 92%, even if we saw that spot 92% exactly 3 months ago, would be not very difficult, but I expected a bit higher than 92%, but nothing of significance nor change of guiding but a bit disappointing quarter 4 claims situation related to -- claims volatility in Norway first and then in Denmark. Nor kind of underlying worries except from the fact that where it has been under pressure in Norway for the last 5, 6 years. And you shouldn't expect an equally good combined ratio going forward like we have seen the last 6, 8 years in the Norwegian market. But again, I would say if you deliver combined ratio between 92% and 94% and are growing 20%, you are creating a tremendous value. When I breathe, please ask questions. I -- sometimes I breathe. Even if I can talk a lot rather quickly as you probably have heard. Cost ratio not really comments, slightly higher than expected, who cares. We are world leader on costs. But this is however pretty important. I wouldn't expect any cost improvements on the cost side, even with 20% growth going forward now.We do invest in future growth. And in 2019, you will also see a change of -- possibly a change of reinsurance structure that will influence the cost ratio especially than the net cost ratio of the company here. So I will say, stable cost ratio 2018, 2019 and then boom, 2020, it drops quickly, with some significance in that area. So the visibility on the cost side in Protector is I will say extremely good. Stable, stable boom, 2020 [ gone down ]. Even if possibly in 2020 spending some money on setting up the next country which I guess we do in 2020, but even including a new country that will not be cost on a level which will spoil my expectation of a significant cost improvement in 2020.

[Unknown Analyst]

Just be specific of that point when you are done talking about expectational cost level you are talking about the gross cost ratio?

[Sverre Bjerkeli, Chief Executive Officer]

Yes, both. So basically I'm talking about the gross cost ratio. But also the review changes on the reinsurance side is my expectation. And then the retention will increase a lot and commissions from reinsurers will drop a lot. And that will influence on the net cost ratio. But the important thing with the cost [ dialog with yourself ] is the gross. Don't care about the reinsurance side. There are no free lunch out there in the market. It's the gross cost ratio. So what I'm saying is that 7.5% will potentially be 7.5% in '18 and '19 and then drop a lot in '20.There is another gross cost ratio hidden in any insurance company's book and that is costs related to claims handling, which we have to book as claims costs. So when I'm talking about cost improvement 2020, I am both talking about the cost that you see on the cost level that's 7.5%, but also the cost on the claims handling side which will improve the claims ratio not the cost ratio.If it's the only company in the Nordic market communicating both figures to the market. And we are not very good on cost ratio within claims handling but have a target improve that with 40% the next 2.5 years. We've started to go that route 12 months ago. I'll talk little bit about it, but cost improvements is gross, and we will come back and explain you a bit more the totality of the cost situation. We are world leader on cost. 7.5% is apple-to-apple compared with our competitors in the same segment with the same distribution channel. We'll stay stable. The [ other ones ] might improve [ 0.5% ] next 2 years, so they will get slightly closer and then we'll start moving again in 2020. Second half of '19 something like that. Is it bit clearer, Vegard, your question. So what about business units then? Commercial sector, Norway, doing well. We said a year ago single-digit growth and now we're in the higher end. So we're happy with that and we have a challenging hunting season as always but rather good one. So January 1, 2018 will be good volume wise in that area. We do have good profitability, but we have done some prices increases like other companies, January 1, 2018 because it's necessary and that will continue to go on. An example is that there are a couple of products now in the public sector where we are market leader together with KLP where the rates are unsustainable. They are not high enough in order to make money in future. It's not possible even not for Protector. With a third of the cost level of the main competitor. So they are obviously losing money in the segment that is a fact that has been for last 5 years and we have been profitable, but [ not ] that parts of that segment is moving towards a red territory, meaning being unprofitable.So here, we had to do 1 out of 2 things, possibly a combination going forward, increase prices and or increased deductions or get out of some product areas in public sector. So we might leave. Could take the volume down NOK 100 million give or take which is totally okay if needed because volume is okay, if you [ add ] money on it, if not, it's not. So then you should just walk away. We have a huge segment in Denmark we had stayed away for the last 6 years, a segment which is perfect match for Protector. Unprofitable rate stay away. Next year, unprofitable rate stay away. Next year, unprofitable rates stay away. Next year, unprofitable rates stay away. Next year, wow, something happened. 2 competitors are withdrawing from the market. The 2 market leaders. Guess what, they understand they have lost money. They walk away. Now January 1, 2018, we take onboard someone in that segment for the first time in 5 years.So I think that we have the necessary discipline in order to walk away from unprofitable volume. Obviously to define what's profitable is not always very easy. So where we have the competence to understand or not that's a continued challenge obviously especially when entering new countries. But I think, we are pretty good in balancing volume and margin. And it's slightly tougher in the Norwegian market as we speak here. And here is the quality story in Norway. #1 both in claims handling and on total. However, not really on a level where we are totally satisfied. We are #1, but the distance to #2 is too short, so obviously we have an agenda for improving that, and the good thing is that we saw that coming. So a year-ago, we knew that the quality survey will be slightly lower in 2017 / January '18 than when this survey is done. So we have seen it and have taken actions in order to improve and my expectation is that that figure will go up next year in that area. So the good story is that we are #1. The challenge is that the distance to #2 has been slightly smaller and shrinking unless make it go [ apart ] again in that area. And the questions to Norway, commercial sector, yes.

[Unknown Analyst]

In group life you talked about earlier. So what type of reason is the why you lost money or [indiscernible] combined ratio on that.

[Sverre Bjerkeli, Chief Executive Officer]

We have a lot of luck in group life in quarter 2. We have a lot of luck in group life in quarter 3. We have bad luck in quarter 4. It's normal product volatility. Even our portfolio which is rather sizable will not have a predictable quarterly claims ratio. It will not. On an annual basis, the group life result is poor but not very poor. And some price increases has been done entering 2018 with an acceptable success already in that area. So normal volatility, underlying profitability, group life Norway, not according to where we would like to be. Have we done price increases? Yes. Did we lose market share? Yes. Did we take market share in other segments? Yes. In that area. But it's a constant kind of fight in order to balance volume and profitability. Next question.

[Unknown Analyst]

A couple of question on claims handling. First [ to lead you ] to the last question on costs. How much on your gross claims ratio is costs? And secondly, compared to your competitors in Norway, you don't have that much lead on claims handling.

[Sverre Bjerkeli, Chief Executive Officer]

No.

[Unknown Analyst]

What is from your perspective the main issue?

[Sverre Bjerkeli, Chief Executive Officer]

So the question is what's our gross cost ratio in claims handling. And that's the kind of figure that we haven't communicated to the market, but it's basically not a secret either. So that figure is depending a little bit about the kind of market we're talking about Norway, Sweden, Denmark, Finland. There are differences. And there are product differences. To simplify slightly above [ 7% ]. While for instance on a company level, it's running [ 5.5% ]. However, that is not necessary apple-to-apple because they have a huge consumer portfolio where claims handling is easier and more efficient relative to volume. So I don't know if -- a figure when we're saying slightly above 7%, whether their figure is[ 6%, 6.5%, 7% or 7.5% ]. Our internal view on that is that we are slightly behind peers on claims handling gross cost level. The reason why we have few products with critical mass in the Nordic market, but we have some, so you need critical mass in order to be efficient. We are building that efficiency product by product by product obviously in Finland today. We do not have critical mass to do efficiency claims handling. We don't. In some product areas in Denmark, we have not. So that's 1 reason. And the second reason is that we focus more on taking care of the client's money and over ours. Don't pay too much out. And we are [ caring ] more about [ clean desk ] and perceive customer quality.So we're above 7% on costs slightly behind peers which gives an opportunity to improve. And we will. You should expect that figure to go down to 5% not later than 2020 possibly in 2019. We are on our way. Efficiency increased claims handling, Sweden 2017, 16% as an example. The second question was linked to the fact that we have a good distance from ourselves to the market on the company totality. While we are kind of only slightly better or equal to #2 in claims handling. We are not disappointed on that kind of statement. We are very proud that we are seen to be the quality leader also in claims handling fighting with very good claims handling companies like if for instance who normally are very good in the claims handling area. So I will say that this is a big achievement, possibly bigger than in this area. We don't have critical mass in some product areas but we are quality leader anyway. That's not bad. Is it? And some of the competitors in Scandinavia, they have been very good for the last 15 years in claims handling. So this -- the level of quality in claims handling in Scandinavia is probably the best in the world. And to take a lead position in that market, that's something. So are very happy with being around or slightly better than some of the good competitors in that area like it.

[Unknown Analyst]

On the motor side, you said in Norway was little kind of like combined ratio. What have you done on pricing and what is your underlying price inflation or claims inflation on motor as you seen last year. [indiscernible]

[Sverre Bjerkeli, Chief Executive Officer]

So what do we do with motor profitability because I said that the claims ratio in quarter 4 on motor side was high. However, on the full year, it's more like okay. So we do earn money in a multiple segment in 2017 in Norway. It's not really an issue. However claims inflation is slightly higher than normal inflation in the motor claims handling area because of more technical kind of equipment in any car. You have heard the story from the other companies. And we have lifted prices in motor sector equally. So basically all motor clients got a price hike January 1, 2018 based on the fact that [ real ] life claims average increase is higher than normal inflation in the society as such. That's basically accepted by the clients. As of the price increase penetration in motor business is accepted in the market. And at the same time, we do like we always do, if we do have some clients with a lot of claims, we increase prices every year. That's kind of a never-ending story. So I'm not worried about motor profitability. I am not worried about property profitability in Norway in general, not liability. But a bit more on group life. Health is in Protector extremely poor with the claims ratio far-far north of [ 100 ]. So we are more increasing prices with 50% each and every client in these days which is okay. And that product is normally separated from the other ones. If you lose it, you earn money. If you are getting through with the price increase, you earn money. [ But the ] thing is to stay cool because then you continue to lose money in that area. And the product is normally not bundled into a package, which is good.So I think that -- more than, more companies than Protector is losing money in that area. Only one I guess is on the healthy side in that market. I won't name that one.So there are as always good areas of all product profitability, poor areas of product profitability. Sometimes, you can act on a product basis. Sometimes, you will have a customer view if your client have 5 products then you take a customer view on the profitability not a product view. I wouldn't worry about margins in Norway going forward. They will be acceptable. But not as good as in history.Change of ownership. Back in black after a very poor year 2016, historical high KPIs. The cultural lead entity in Protector 2017 which has a tremendous status internally in Protector. A very strong corporate results, extremely strong in quarter 4. So -- but a challenging market. And as you know, real estate prices are probably going down, slightly going forward that will put pressure on the profitability going forward. So we need to take actions. We need to get new technology out to the market. If not, we have to exit some clients, significant sized clients, which again is not a worry in that area. But the relative size of the niche product you see here is going towards 10% of the total volume. So the importance of the area is relatively shrinking. A big product in history, but a more limited area going forward. But a very strong delivery from the people in this area internally in Protector. Quality survey is sky-high in the high 80s and 90s. You have never ever seen such a score before.Sweden, the story continues. Very strong growth, good profitability, leading on efficiency development in claims handling. Will continue to grow -- and at the moment. This morning, we nominated employees of the [ year ] in Protector. They will have a treat to [indiscernible]. The Island 78 degrees north. If you haven't been there, go there. It's a beautiful place to go, spectacular to be there around March 8, and that special date is not only the Women's date, but this is the date where the sun returns to [indiscernible]. That's the day you should be there. And we will be there at that date. So for the first time in months, they can see the sun, it's a party time up there. And the manager of the year, this year again is the country manager in Sweden. So he and his wife will be invited to [ Swalbatiget ] with other -- with 29 other internal winners. And there is buses to do [ deer ] hunting and I'm possibly not allowed but at least go to [ Braunsberg ] hope to see the northern light and you dig into a ice cave or go into ice cave and see an underworld ice cave which is a beautiful view there. Sweden is doing very well. Any questions to Sweden?And here, it is the quality kind of, this is what we like. Not only on top of quality, but increasing business to #2. Increasing business. A new standard. Setting a new standard in the market. And again, #1 with a rather high score in the claims handling side and I guess that is competitor #1 here, is if as I remember. They are good on claims handling, most countries in the Nordic market. Denmark, a bit disappointing in Denmark I would say. When I met you a year ago, I said that this figure here would be around 0. Okay. What I didn't catch totally, I apologize is that we have some very good return on investment last year in Denmark, because some bonds spread had done very much and gave a return on investment which was in higher end. So we are actually -- the return on investment in Denmark, you will see the detailed figures in the report we have sent out. The return on investment in Denmark is actually [ NOK 20 million ] in absolute terms, lower than last year. My expectation was [ NOK 10 million ] higher because the reserves is growing everything equal. It should be NOK 10 million higher. So I could argue that I was pretty good when I guiding NOK 1 profit in Denmark last year, but I was missing. But that's more related to return on investment actually, than -- that the combined ratio is slightly above [ 100 ]. Because with the claims ratio of workmen's comp sized 100, exclusive all claims handling cost is pretty difficult to get below 100. In total. It's not impossible, but that's -- half the volume is pretty difficult. So I'm not totally satisfied with the speed of the turnaround and I had expected slightly better combined ratio than what you see here,[ 102 ] gross and [ 109 ] net. So there are obviously as always when you have problems slightly more surprises than you anticipated and the cleanup takes the bit time. But I will say, we are at least halfway in the turnaround process. We are on total quality again and the new management looks professional and competent and is guided by the country manager in Sweden, not by myself, because he is better than me. [ Got to ] Denmark to the right direction. And he is more qualified than I am to support Denmark to improve in that area. So I do believe in Denmark still NOK 30 million is nothing. The reserves is growing close to [ NOK 1 billion ] now. It is at the end of last year around [ DDK 900 million ], I guess. You don't have to look, it's DDK 900 million. So the reserves is getting closer to NOK 1 billion. So today it's around NOK 1 billion give or take, it is because the premium has [ arrived ] from January 1. And you are getting kind of a mature balance sheet in Denmark. And my expectation is that, that market continue to improve. However, there are still profitability challenges in some product areas, especially in the workmen's comp area. So we might continue to increase prices. And or leave more clients. The number of clients we have in workman's comp today is lower than last year. The volume on premium is higher, why because average rate has increased, we've increased prices. So we have less risk to a better premium. Everything else equal, we'll continue to improve. So the balance in Denmark is not to walk away from a lot of float and an unsecured profitability situation. Do not walk away too early. To go the safe route, you have to balance that, it's not a big issue, it's not a big volume, it's not a big risk reserve situation, so I wouldn't worry too much about Denmark but it's fun to talk about Denmark because Norwegians never [ money ] on Denmark, I know that story but we are different, so we will, even if you have money lot of times that you will not and I am older than you, so I know better you have said. And then you are older than me. That's right. But okay, but in insurance business, I am better than you. So we still believe the story in that [ market ]. Do you? So no other tricky question coming. Well better you have a difficult question for me now. Smiling.

[Unknown Analyst]

I cover [ 10 or what ] some client in Denmark then I have lost billions and billions in Denmark, so I am kind of skeptical of that company already. So I hope [ you are up ]

[Sverre Bjerkeli, Chief Executive Officer]

[ Antilia ] as always also lost [ 1.3 billion ] in Denmark, yes and some kind of retail change from Norway I've tried because the CFO of that company kind of a friend of mine from[ school ] so I talk to him as well. So okay, let's wait and see, we will be back in black.

[Unknown Analyst]

Good that you are different.

[Sverre Bjerkeli, Chief Executive Officer]

Say again.

[Unknown Analyst]

Good that you are different.

[Sverre Bjerkeli, Chief Executive Officer]

We are different. We are. We are growing 20% a year creating tremendous value for shareholders so far, same management we continue to deliver that. Trust me. This is a surprise on the positive side, I didn't expect that to be so good already, it's not brilliant. That figure is rather low, we can see that, so it's not at all brilliant to -- in our standards it's slightly behind but okay you're #1 that's at least good then. Finland, it will be some volume in 2018 and it is onboard already January 1. Good date. A lot of new sales especially in the public sector in Finland, loved by the brokers in Finland. Good quality. We will soon be #1 in claims handling. Already #1 on totality. Poor guys down here. U.K. ahead of schedule. Nothing new about the Grenfell Tower situation actually. The total accumulated reserves are equal. The claims handling is challenging as always, but yes, we have a dispute on the reinsurance side with the property reinsurer that will probably go to arbitration. No formal letter has been sent so far, risk management and underwriting credibility has been rebuild. All tower blocks in our portfolio has been [ uprated ]. There are no tower blocks in our portfolio with an equal cladding to Grenfell Tower now that's done extremely quickly. Obviously supported by nervous owners and authorities in U.K. in that area. Prices going up in some sectors but price pressure in other sectors so that's a mix in that area, price increases, more aggressive rates, at the same time it's not unusual to see that. No scandal so far in the communications side here. The dispute, nothing new compared with what we said last time. We had a downside, don't expect that to arrive and there will be no solution before at earliest at the end of quarter 3 this year.The great quality survey in U.K. and also at rather surprising #1 position in the claims handling area and the reason why I'm bit surprised here is because we hardly started in source claims handling. So is meaning it's the third-party doing most of the work. We manage the third-party but obviously, we can do better in the major product areas in future here. So this is a bit of a surprise and some of the big competitors, they are down here. One of them there as I said a bit earlier. This is the way it's done. You could argue that [ 51 ] responses is not a very high figure, no it's not, give me a break. We are doing business with 109 brokers. Those are the people we invite to respond to. We don't do business with more than 109, so we can't ask the other ones because then they will -- they can't have an opinion on the quality of Protector. So but that number will obviously grow every quarter now 250 to 300 to 400, so there will be more people related to Protector that can be invited to give such a response.So the response rate is rather good, this is a high figure, 8 companies and this is good enough to have a pretty good view on the quality in other broker-based market in that area. We have 125 clients in U.K. now. This is the traditional public sector. This is a very new area, the hosting association area similar to the building society kind of setup you see in Sweden in that area. It's a tremendously big market, this market, possibly equally big as the public market in Scandinavia with it 100s of 1000s of [ flats ] either managed or owned by the public sector. This is a beautiful area for Protector because it's a large number of claims where frequency is an issue, meaning that the cost leader will take the market in future. It's impossible to fight Protector in such a segment. So at the end of the day, our market share here will be [ 50 ]. At the end of the day. Unless market is irrational which it has been for the last 5 years in Denmark. Okay. But [ supports our ] rational market, we will take 50% market share in that market during the next 5 years, my expectation big market. This is a real big one. It will take time. So what I am saying is that we are ahead of schedule. Quality is great. Cost is obviously not great at the moment but volume is higher than I communicated last year. Investment side, it is core, float is growing after insourcing quarter 4 '14 we do well. Our companies are decent price. They continue to grow and earnings per share in the underlying portfolio is strong, so we expect further return on equity to arrive in future even if we haven't been equally good [ at ] Oslo Stock Exchange in 2017. We don't worry about that. And the bond portfolio continue to do well but as you know, the running yield is lower and we should expect lower return on investment in the bond area here.Return on investment, 4.8%, 12% from equities after a very strong quarter 4, delivered a lot more than the market in quarter 4 but behind in quarter 1, quarter 2 and quarter 3 in that area. There is 1 element I should explain here because the retention rates here is [ 77% ]. Remember that we have kind of signed a solvency-based reinsurance contract that has no cash implication. So the float is better than what you see here. So we are not throwing cash away. We keep the cash on the solvency agreement. That's kind of 5 percentage points on this figure, so you should say [ 82% ] is equal to last year. So retention rate is basically not going down. And what you should expect is that retention rate will go up in '19 and '20. We expect a change of reinsurance structure. We will be back -- talk to you in quarter 3 about that kind of expectation in the Capital Markets Day and retention rate is in my opinion is expected to go up in 2019 and 2020 and gradually move towards [ 95% ]. So if you should update your spreadsheet, I would recommend you to put a retention rate size more like 85% in 2019 and at least above 90% possibly up to 95% in 2020 here. So don't worry. We're not giving float away and we're not giving profitability away here. Profit for the full year at -- up 17.2% and the balance sheet has never ever been stronger [ 200 ] based on the standard formula. A lot stronger than the [ Ncedia ]. Build up shareholder's risk. I missed on Denmark slightly and U.K. Grenfell Tower in 2017. This is my expectation now and my guiding is slightly increased risk since U.K. and Finland portfolio is growing. We can't say for sure that we will be profitable in U.K in 2018. It's too early to say and now the size of U.K. and Finland is growing towards 15%. So it will be kind of visible in the bps of Protector in 2018, so slightly increased risk if you are afraid of it, walk away. If you believe in it, there is a tremendous growth story coming then you should buy. Long-term guiding. Not changed. And a modest summary is that you are happy with everything, except the net combined ratio which is in the higher end. And then we have some questions. We are running a bit late, I apologize for that.

[Unknown Analyst]

What is the mix between long and shorttail in U.K. and what is the trend development in this recent trend and expectation going forward, what will be the key products growth areas in the U.K.?

[Sverre Bjerkeli, Chief Executive Officer]

So a product mix question about U.K. and long versus shorttail. We will be slightly heavier on shorttail in U.K. compared with company. And it's too early to say, what kind of product mix we will end up with because we are testing out all products in the market. But more shorttail because I guess, we will have more motor business and property business compared with liability business in the first 3 to 5 years. So higher than 61% shorttail business U.K.

[Unknown Analyst]

There was a 4 point reserve release in Q4, what product area generated this, and is there a further release assumed in the 2018 guidance?

[Sverre Bjerkeli, Chief Executive Officer]

So with the 4%, what I would call a minor reserve release in quarter 4 basically linked to workman's comp, Norway but also a mix of other products in that area. Now we don't expected any further releases to arrive in the coming couple of years.

[Unknown Analyst]

And what is the reinsurance situation in 2018 price and committed volume in the U.K.?

[Sverre Bjerkeli, Chief Executive Officer]

The reinsurance situation is acceptable in the liability area, good in all older areas. So we are satisfied with the total reinsurance package U.K. 2018, and we are not at all worried about 2019 neither in U.K. nor in the Nordic market reinsurance wise. So pretty good view and pretty good position. We are an attractive partner towards reinsurance world.Any more questions from the audience yes Thomas.

[Unknown Analyst]

(Inaudible)

[Sverre Bjerkeli, Chief Executive Officer]

So what kind of retention rate in 2018. Basically slightly higher than what you see in '17, 1 percentage, 2 percentage points something like that. So thanks for the question. I comment on '19 and '20 not on '18, so that's good. And there is no other question here.

[Unknown Analyst]

On the net combined ratio, you said something about in the higher end, did you mean in the higher-end of [ to the log ] before. I didn't get what [ your log point out. So I was ]...

[Sverre Bjerkeli, Chief Executive Officer]

I don't think, I said anything about higher-end in 2018. Did I? So we have guided on 92% to 94%. And at the moment, I'm not sure whether we are on the lower side or higher side in that area, so take a pick.

[Unknown Analyst]

I heard wrong. Apologies.

[Sverre Bjerkeli, Chief Executive Officer]

I think you did, yes.

[Unknown Analyst]

Do you have any installment premium when it comes to reinsurance program. As [indiscernible] normally give some kind of figure where they have a big buyer or something, used to have some reinstallment premiums.

[Sverre Bjerkeli, Chief Executive Officer]

Yes.

[Unknown Analyst]

Well do you have that program level, so having given the information about that in Protector?

[Sverre Bjerkeli, Chief Executive Officer]

Not really. So you are talking about reinstatement premiums which means for those of you who don't know the phrase that [ off the ] Grenfell Tower. You are basically [ auto ] reinsurance for that type of risk and then immediately there is a reinstatement, there is a new contract up and running in the same second basically. Then you typically pay 1 additional year premium or something like that. Normally that kind of figures are rather limited. So you shouldn't worry. They are kind of extreme limited interest. So even in the Grenfell Tower situation, the reinstatement premiums were not significant. They had some size. You pay once more, but it's not a big issue. So it's other elements improving -- not improving -- influencing more on the volatility of the profitability of the company than that one. But there is, if you have a big hit, you pay more at once. That's right. Reinstatement premium. You pay twice. It's kind of deductible. It could be seen as increased deductible. But you call it something different. Bit technical, not very big. Yes. Okay, so my summary after the summary is that have a look at this one. I think 5 to 10 years ahead and go home and do what you should do there. Thanks a lot for your attention. Thank you.