Q4 is out
investor-presentation-fy-and-q4-2025-prot.pdf (2.4 MB)
It was certainly pleasing to my eye, and I believe the market’s opinion won’t differ from this. Q4 highlights:
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Growth 12% in local currencies.
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Combined ratio 85% vs. 84.2% Q4/24, so slightly weaker. the UK and Sweden improved slightly, while Norway and Denmark weakened. France, as a new market, is a drag on profitability (CR 121.8%).
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Loss ratio rose 0.9 percentage points to 73.5% and the cost ratio improved 0.2 percentage points to 11.4% despite the ramp-up in France (where the cost ratio is 22.8%)
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Investment return 2.1% vs. -0.4% Q4/24. Equities yielded a nice 7.1% in the quarter and bonds a stable 1.2%. Note! Q3 equities yielded -1.9%, so there is naturally some volatility. Equities’ share of the result before tax is ~24% for FY2025.
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EPS an impressive 8.5 NOK
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Quarterly dividend 6 NOK (NOTE! dividend distribution is reviewed quarterly and Protector may even skip dividends in some quarters if there is better use for the capital elsewhere.
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Solvency after dividend is a strong 197%, as firepower is needed for growth in France. Solvency requirements also rose because Protector reduced its reinsurance coverage.
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Reinsurance retention level has been increased, meaning Protector gets to keep a larger share of the gross premiums. This boosts revenue growth and profitability in the long term, but correspondingly increases the volatility of the technical result, as a larger share of large losses is borne by Prot.
2025 highlights:
- Growth 14% in local currencies. Growth was steady across all markets, meaning the UK is no longer the sole growth driver.
- ROE an impressive 42% (cf. Inderes’ forecast for Sampo 26.7% in 2025)
- Combined ratio 84.7% vs. 88.1% FY2024. Clearly the biggest improver was Denmark (117.6% => 86.6%), which has been a headache for a long time. Evidence that corrective actions in the insurance industry can be made very quickly. In Denmark’s case, the loss-making workers’ compensation portfolio was sold off and no new contracts are being made.
- Cost ratio rose 0.5 percentage points to 11.1%, mainly due to France. Loss ratio decreased 3.9% to 73.6%.
- Investment returns strong at 7.3% vs. 4.9% FY24. Equities yielded 20.3% and bonds 5.2%.
- Renewal rate 95%, meaning customer retention is very strong. Evidence of the effectiveness of the company’s strategy: focusing on the broker channel, precise risk selection based on own strengths in each market, and cost efficiency. The company reached the top spot in broker satisfaction surveys in every market. France was not yet included.
Outlook:
- January 1st (key policy renewal date) growth 25% in local currencies, of which France’s share is 47%. This means that France will double its size with this sale alone in FY26.
- On the flip side, France’s weaker profitability will drag down the CR at the group level with its larger volume. It took 3 years for the UK to become profitable. And that was a good performance! So nothing new here, but of course France’s profitability must be monitored.
- France’s loss ratio was high at 97.1% FY25. It would be interesting to hear comments on why this is. The customer base was small last year, so individual claims could already explain that.
- I will try to update my spreadsheets in the coming days and post my own forecast for the current year.
I expect a significantly positive share price reaction today.