Earnings Call: Q4 2018

Feb 1, 2019

Warm welcome to everybody to our presentation of the 2018 annual results. As some of you know, we are in these days kind of celebrating our 15th birthday. So the company now has grown to be 15 years old. And as you have seen during the latest months, we have done one change in what kind of market we target for future. Since we have decided to leave the change of ownership niche area in Norway. We entered that market segment July 1, 2004, and it has been an important part of Protector's history. However, it has been unprofitable, as you know, during the last at least 3 years, 2016, 2018, and this small bird called silver gray silverfish appeared and worsened the results rather much during the autumn and winter. So it's kind of a first change ever in the history of Protected moving out from a kind of some kind of a significant segment. However, this segment would have been around 7% to 8% only of our business in 2019. So the volume drop related to this withdrawal from this market is very limited. Actually, what we have communicated to the market is that we on a company level, we'll grow. And exclusive of that business, we still we'll see a double digit growth going forward. We will look upon the further accounting and do the figures based on a discontinued basis. So in the coming quarters, we will give you an update on this exit area of one line and redo the key figures of the Protector. Also historically, we have started to do that today so that you better can understand who we are and where we go in future. So there are kind of a double set of slides here in this presentation. I will skip them, many of them, when I walk through. And the presentation will focus on the commercial and public sector in the presentations to arrive after quarter 1 and quarter 2. So to start with the summary, it has been a poor year for Protector with a combined ratio as high as 107. This figure is, as you know, more or less exactly what we anticipated when we guided the market before Christmas here. So in this figure, a very important technical figure here around SEK107 is basically exactly what we estimated before Christmas. So no surprises in today's presentation when we are looking at the figure here. The company growth has been 15%, somewhat lower than guided at beginning of the year in 2018 due to two reasons. 1, we started to reduce our exposure in change of ownership during 2018. And secondly, when profitability issues arrived in certain markets, our risk appetite was slightly reduced. Price increases did go up. And a consequence of that is a higher client churn. We lose more clients. And the hit ratio for new business will slightly go down. But again, even in such a situation, obviously, 15% growth is still a pretty good growth figure. Our solvency ratio today is around 175,000,000 which is based on the standard formula as always. It is probably a very strong figure also relative to peers. Some of them has been out in the market already and communicated their solvency situation. So we have a solid balance sheet despite the fact that we have a poor 2018 behind us. As always, you are more than welcome to ask questions. That's possible to do also during the presentation. Of course, it could be easier if we take it at the end of the presentation. There will be questions. It is open for questions through the webcast also. So feel free to pop questions to us or do them now or save it for the Q and A session at the end of the presentation there. You see a kind of a symbol here in the right corner. This is a falcony, the fastest moving animal on Earth, which can potentially fly up to 3 90 kilometers an hour. It's a symbol internally in Protected for the very important strategy number 1 project in Protector related to claims handling. And as you will see during this walk through, will comment on the development on these four projects, which is running below this symbol, the Falconer symbol here. Only stating here that claims handling efficiency has increased with around 15% during 2018. The question is whether it is possible to increase efficiency that quickly without losing quality. That's the key question and throwing money out in the market. And I'll come back and comment more on that one later in the presentation. But it's an important area. This is who we are. It is the moment of truth. It's when we meet real claims, whether they are small and many or very, very big and complex. And as you know, we have both types of claims in Protector. The I. M. Best kind of rating on Protector is maintained. And we are I have got questions this morning, but also earlier the last 2, 3 weeks, whether we have any kind of issues relative to our solvency position, this rating relative to clients and markets because we have earlier discussed the fact that we have to be there in the market as a solid long term alternative for big, big clients in the U. K. Market. And the message on that is that it has absolutely no kind of interest to protect oil, whether the solvency ratio is 190 or 175 or 160 relative to the client question. As long as we have an investment grade type of rating, we are in a position to win any bread and butter client in the U. K. Market. It was a certain segment that previously had a formal A rating requirement. When we come back to that kind of segment in the market, put an investment grade type of rating on the table and discuss it with that segment, the representatives from that segment. They said this is kind of accepted. We will change the requirements we normally have on insurers in this market. You are invited to compete in this segment in future. And we have done during the second half year of twenty eighteen after struggling slightly in the U. K. Market in one segment. In the first half year of twenty eighteen, lost some volume opportunities, not a lot, but some. These issues are solved, history and entering 2019, we can build any client structure within that type of segment. So this is nothing new from us. We have communicated this earlier, but the questions have kind of kept coming up. And that's the reason why I spend a little bit of time to make a comment on that kind of situation. So this slide here, number 6 here, is exactly the same slide. However, the figures are recalibrated to talk about Govee business only. And what you will see is that we, in 2018, had a 19% growth and a combined HSI is 98.6%. Some of you potentially saw the presentation and the results from a Nordic competitor called Trig, the Danes with a presence in Scandinavia. And if you should compare Trig with Protektor, you should have a look at corporate segment, TRIG. And what you could see is that their combined ratio in this segment, which is basically equal to protectors, was slightly north of 100 before runoff gains. And then I think I remember right when I had a kind of accumulated runoff gains, Site 7 or something like that during 2018, which made them deliver a figure in line with what we see here, slightly, slightly better. So what we can see is that in our segment in the Nordic markets, we and competitors are struggling at the moment with the profitability because 98.6 percent is absolutely too high. We are not satisfied with that kind of figure. And the same goes for at least 1 competitor. A second competitor will deliver figures slightly later. That is if then you should look at industrial segment. After quarter 3, they have a better position than protectoil. So my expectation is that they will do better. But at the moment, I don't really know. And what you should do is to have a look in the longer term, the last how do we do in the same segments the last 5, 10 years. And what we previously have shown you when we compared apples to apple, apple to apple in that kind of areas, same segment, you have seen that we are growing and we are profitable at least on an equally good profitability level or even depending on the period you are looking at slightly better on the profitability situation. Not happy with the figure. It must and will be improved. And I'll come back to the story again. Kind of guiding here is nothing new about it. This 96 figure was communicated in December to the market and this was communicated 10 days ago or something like that to the market. So there are no changes in this area. When it comes to written premiums then in Protektur, exclusive of the change of ownership segment, has been 2019 driven by Sweden and U. K. So Sweden and U. K. In 2018, as earlier communicated, has been kind of driving force behind that very, very solid type of growth situation. And you see the figures down here both in Norwegian kroner and in local currency. And I have some smaller comments here on the growth situation or the lack of growth in some segments, and I comment slightly more on each business area a bit later in the presentation. U. K. Is according to plan. We said higher than 500 entering 2018, the result is 1% higher. So higher is higher. So we had a bit of luck on that one possibly after, as you know, struggling slightly in the beginning of the year with volume development in U. K, but that picked up during the year. That one single very big client, which we have talked about with you is not a part of 2018. That has a renewal date January 1, 2019. So that belongs to quarter 1, 2019. So this growth is not based on a single very, very large client. It's based on a large number of new clients in the 3 main segments we are targeting in the U. K. Market. Yes? Could you say what to expect for U. K. In 2019? Yes. So I can give a comment on U. K. Let me do that when we reach the U. K. Part of the presentation. So I'd be slightly more precise. We have been more precise at an earlier stage and I come back to that when we talk about U. K. In the presentation a bit later. If you go back and look into history, we recalibrate our figures now based on Goveing business. And what you can see is that we haven't really grown 20% a year like earlier communicated. The kind of going forward business has actually been growing 25% a year the last 10 years. And that has been done with a 10 year accumulated combined ratio of Size 92. So what we have delivered the last 10 years, including what we would call a poor 2018 with a combined ratio size 98.6 is around 92. 92 percent will obviously deliver 20% return on equity and growth is good, meaning that you don't only deliver a good and healthy return on equity. You kind of multiply the company pretty quickly. We haven't said and we will not say that we will continue to grow with that speed. But when growing bigger, even 14% is significant. And since we have plenty of room to maneuver in both in the Nordic market, but obviously in the U. K. Market, the growth story could continue for many, many years. There are no market reasons why you couldn't see double digits grow the next 10 years in protectors, only staying where we are. That's possible. The Nordic market is half the size of U. K. So U. K. Is twice the size of Nordic accumulated in that area. So it's obviously that the growth potential do exist. So today, we are not at all close to think that we are coming closer to the end of the growth story here. However, profitability goes first obviously, yes? If you have 14%, how much is price and how much is holding there? It's so the question is, if we have guided on around 14% growth, how much is price? As depending a little bit on how you calculate the figures here, because you can do it in slightly different ways. Give or take, 5%, possibly slightly more, but let's say give or take 5% is price increases on average. And the reason why the figure is not higher is because we are growing a lot in U. K. Where obviously, 1, all new business doesn't have any price increase And secondly, the very new and fresh clients in U. K, we tend not to have price increases very quickly in that area. 1, because it's difficult to judge whether the client is profitable or not after only 1 or 2 years. And secondly, it's not very good idea to go in and start banging prices just almost before you enter it. Of course, if it's a big lion with a lot of frequency claims, we will price up at once. However, if you could consider the client to have some bad luck, you could say price increases will be according to index or gross national product development or according to claims inflation in the market, be more careful in that area. So depending a little bit on how you calculate, guided 14%, give or take 5 percent as a price increase element of that, while the rest of it will be new business then. So if you exclude the U. K. And try and break down price and volume for the Nordics, what would that look like? Yes. You could do a simple calculation yourself on the back of an envelope if you're following with my presentation, 15 minutes. So if you can't do it, ask the question again after the meeting so I'll help you out on this stuff. So okay. So what I'm really saying that we won't exactly break down these kind of figures per segment we want. But there are some very clear figures what happened January 1 in this presentation. And if you say basically what happened in January 1 will continue to happen. That's a good starting point for your analysis in that area. But we won't go into details on exactly how that is distributed between countries and segments. But a good try and keep popping questions. Okay. So this is kind of a slightly some development still on the combination. What kind of product mix do we have and how does it develop? And what we're saying on the product mix side is that we are going to a slightly lower risk seen from a product point of view. That's the good story. The bad story of that is that lower risk is normally less float. That's the bad part of the story. So whether you should be happy or not with that kind of development, it's a matter of risk, appetite and how you consider the value of float versus the value of reduced risk in the insurance portfolio in that area. If you listen to Mr. Buffett, he would prefer these figures to go the opposite way. I would like to take more long term higher risk to get more float to invest that to a profit in the market in that area. So I wouldn't say that this is a deliberate development. It's not really a target for Protektory to reduce risk in the portfolio. It's not. We will seek profitability wherever it is. That could change in the future. However, in the market segments, we have a strong competitive position at the moment. It's we do consider this development to continue because we are more competitive in short tail areas at the moment than in long tail business areas at the moment. Werkmanskomp in Denmark is not on the top of the risk appetite list in Protected. Why? It's unprofitable at the moment. Wirtmanskomp Norway is not on the top of the risk appetite list of Protectoil. Why? Prices have gone down very much the last 6 to 8 years, which has been communicated to you several times. And prices can't go deeper down, in our opinion, because then it will turn unprofitable. It's not unprofitable as far as we can understand it today. This is difficult to calculate. We have still what we could call a very small margin, but a very small margin in that area. Prices must up in that segment. On the contrary, when we are looking at property business in U. K, we are pretty competitive in that area. When it comes to Motor Business U. K, which is to a large extent a short tail product with some liability elements inside, which is long tail. And these figures have been recalibrated slightly compared with previous figures to divide Motor Business in short and long because there are elements on the both sides in that area. So reduced long tail from 36% here to 16% is not necessarily good and it's not a target. However, it is a reflection of our risk appetite within certain segments in certain markets. But you should expect that to go slightly down and that to go slightly up. That's our expectation in the next at least 3 years to come. Be aware of the fact that there are you could argue that product mix development and geographical diversification reduces risk, at least in theory, whether it's true or not. It's not that easy. But you could argue it reduces risk. There is an element which is increased risk that is the change of the property reinsurance structure. So we go from a quota share type of contract surplus, we discussed that with you in the Capital Market Day in October to a normal risk XL contract with a retention sized SEK100 1,000,000. However, we do have some cover. So if there are many big declines arriving in 2019, we have a protection below NOK 100,000,000, which is also kind of normal reinsurance structure in the market. What you should expect on the property side is more volatility quarter by quarter, and you shouldn't worry about it or you shouldn't be too happy when a quarter on the property side looks very, very good. So you could see property results very good or very bad in a quarter. Don't be too excited. Don't worry too much. You will see more volatility. In the longer run, it is our expectation that, that increased risk and increased volatility will lead to increased profitability. That's the reason why we do it, okay? So in the long run, which means 3 to 5 years, it will be we are better off doing it that way. And since Protector have a very solid balance sheet, it's not a balance issue what we are talking about. So you could pay a price to smooth out the technical result of the company. But at the moment, we are not willing to pay that price in that area. So expect slightly more volatility than what you have seen historically, especially in the property area. And the property area is around at least 25% of the business of Protected at the moment going forward, something like that I think. The acting CFO is behind here, has been the CFO for 10 years before. So he's now been from before. So Detlef is there. Claims development, poor. As we have communicated to you already, a small reserve gain in these areas, size 2, during the year, what we would call rather normal. So it shouldn't be difficult to see that, that kind of figure could continue. However, we are not like ENSEDIA with a fat reserve situation with a lot of reserves ready to be released. And I think they released SEK1.4 billion or something like that just before Christmas. Had nothing to do with dividend, I understand. Obviously not. It's an actuarial area we are talking about. But they have historical buildup research situation, which is very, very strong. We don't have that kind of history. And you should consider this to be around 0 going forward, possibly a bit north of 0. When it comes to cost development, I think it's important to say that the real thing is not the official cost ratio of neither Protector nor competitors. What you should look at is cost of railway, which is gross cost ratio inclusive of claims handling cost, exclusive of broker commission. Why? Broker commissions are neutral, seen from a competitive point of view. And they are paid in Sweden and U. K. They are illegal in Norway and Denmark. And when looking at the figures of Protektur and when looking at gross cost ratio going up from 8 to 8.4 why this curve is going down. You must be aware of the fact that this is driven by increased commissions in U. K. And Sweden. And where are we growing? U. K. And Sweden. So we grow where commissions exist and we don't grow where commissions do not exist. Obviously, the cost ratio is going up. Is it a bad thing? No, it's not. Is it a problem? No, it's not. Not at all. So what you should do is to try to wipe all commissions from Protector and all competitors and then have a look at the real thing, which is this one. The problem with this one is that claims handling cost is normally not communicated to the market. There are only 2 companies in the Nordic market who are explicitly giving that figure to the market. It is if the market leader and protector. So you can compare that if and protector. However, you actually, I think you can on a segment level as well. Yes. Yes, you can. So if you would like to have a look at cost ratios, you could look at this one if you could, but that could be either wrong or very wrong. You should try to look into that one. I gave a couple of more comments on costs here. Someone asked the question, are you losing your competitive advantage relative to the Nordic market? Not at all. On the contrary, we are improving the cost position of Protect Oil faster than competitors. Even if TRIG is good, they are good, but they are not even close to Protector. And Trig is not average. They are better than average in that area. So we can challenge anyone to sit down and discuss this for a few hours, and you will see this is correct communication from our side. But it's not very easy because portfolios are different, broker penetration is different, commissions level are different, definition of cost is different, is headquarter cost allocated or is it not allocated in that area? You can see they do not allocate headquarter costs out to business units, while as far as we understand, if Entrig do, as far as we understand, they do, not Jensite. And I don't think they have changed their last quarters in that area. So okay, our cost position is best in the world and it's improving. We have a target to continue to go down. And what you will see is that the real way is down from 10.1% to 9.4%, and it will continue down. And it will go down faster than competitors. We are good on quality in all markets. In fact, normally number 1. So the cost and quality position of Protector is not weakened through 2018. It is maintained or improved entering 2019. If you have a look at our strategy, this slide is exactly the same like 1, 2, 3 quarters ago. This slide changes once a year after a strategy process with the Board, which normally closes in June. And what you will see looking at these kind of communications during the last year is that normally many of these top 8 kind of strategic areas to consider improve, they stay the same. So the FalconE has been there for a while You will see it for a while. You will see it during 2019, I guess during 2020 and possibly even longer in that area. But obviously, there could be other things coming up and something with slightly reduced interest from the company. The most important strategic initiatives from 2017, but now from 1 year later 2018 and looking forward, it is the FalconE. The FalconE consists of 4 different areas: clean dust, never ever be late, okay? Very easy. Never ever be late. That's not difficult, is it? It's efficiency, fly faster. It's reduce and recourse, take care of the client's money and the company's money. And it is customer quality, perceived customer quality measured at on the client side. You could measure quality asking brokers or you can measure quality asking clients, I mean, above. And the robot here is working not for free, but close to for free and is testing out the way that you are asked questions through the net every day. So nothing special about the small robot you see here. Rolls Royce ahead of target. Kleendesk on target. And here is the exact figures. You can see how many days have you been delayed according to the quality standards of Protecto. That can be it is monitored on a daily basis. So I can enter the management information system or see whether we are clean today in Finland or in motor claims handling Denmark or wherever in that area. And in Protector, it's kind of crisis. If you are not clean up to a level of €8,000,000,000 €5,000,000 or €90,000,000 That measure must be taken at once. Instant customer feedback, good scores, efficiency up 13% in this area. So it's delivering. I would say in a total comment on the Falcon is that delivering better than target and very, very good actually in 2018. Norway, price increases will continue in 2019. On average, they are up slightly above €8,000,000,000, January 1st. And January 1st is a big renewal date, as you know. Net combined ratio around 96.5 percent, gross around 5 percent, cost ratio. This figure triggers around 10%, obviously it's around 5%, up give or take. It's not Costa railway, which I showed you a bit earlier in that area. A very, very big property claim where reserves have increased in during quarter 4 gives a very poor gross combined ratio. It's obviously then most of that kind of claim belongs to the reinsurance world. That's the reason because we have a big difference in these areas. Sometimes you pay money to the reinsurance world, sometimes you get back and this is kind of getting back in Norway after many, many years where we have paid for reinsurance without taking too much benefit out of it in the Norwegian market. Sweden, profitable growth continues, however, at a slightly poorer level than what we normally see in Sweden. So we would normally see and are targeting a better figure than 95.4 percent. However, price increases and further improvement in other areas, Rolls Royce areas, claims handling, will, in our opinion, bring that figure further not further down, but down again in that area. That's our expectation. Denmark, back in black, but with some elements of good luck of a little bit of luck in 2018, a little bit of tailwind here. But I'm very happy with the kind of turnaround you have seen in Denmark the last 18 to 24 months. The renewal situation January 1 was better than expected. So we only lost around 250 clients when we introduced the highest price increases ever in Protected actually in that area. The result here is below target. However, what is happening when you increase prices very quickly and in some situation a lot? Let's say you increase some clients with 40% or 60%. If they stay, that average figure will be pretty high. If they walk away, that kind of potential price increase do disappear. So when you compare these two figures, bear in mind that this was an estimate based on different assumptions. Real life is different and it's not necessary for that is 9.4 percent which also goes the other way around. It's not obvious that 5 percent is better than 4 If you are not penetrating the right clients and losing, in theory, you shouldn't really it doesn't really matter. If someone is priced up 5, 10, 15, 20, 40, 60 because we think that individually, it doesn't really matter. But the average price increase will differ in different situation in that era. So my comment is that I'm happy with that figure. It's not really 2.6% lower even if it is. This means that the quality of the portfolio is not necessary from 98% percent because 98 percent is a bit of good luck. So you should think that you are starting slightly higher and then you improve in Denmark. Yes, a question? How many How many do I have? We have SEK 700,000,000. So this level, we got a figure here, let's say, 2,500,000, something like that. If you multiply with €300,000 it's around €750,000,000 but so give or take something like that. But the real figure is higher because you have a large some affinity type of deals with a large number of clients grouped into one deal. So it's a matter of definition as well, whether 100 bakeries is small, are they 1 or 100? Percent? It's a matter of definition. So let's say we are losing in real life 5%, 6 percent more. But again, small, big, etcetera. So this is around NOK 45,000,000 to NOK 50,000,000 Norwegian for Alme, which is 6%, 7% of the total volume in that area, okay? Finland, not very big. Net combined, this is kind of okay at this time. Underlying reality, slightly worse. So stronger initiatives must be taken. But small business, it's early. Cost ratio is high. Some trouble opening a new market as always will improve how quickly. Let's see. It's not very important at the moment. It's more important over the U. K. The Falconer has hardly arrived. Only one of the 4 projects have started in U. K. It will gradually be 2 and 3 and then 4. Growth is according to target, a very, very strong quality index this year again, which is good. Exactly the same net combined ratio as in Finland, exactly the same. So it's not a mistake. They are equal. However, the underlying reality in U. K. Is better. And there are three reasons why saying that is that, 1, cost ratio in U. K. Sorry, this one, 10.5%, is at least 5 percentage points to 6 percentage points higher than what you could call a normalized cost ratio when you have reached critical mass. So cost will go down 5. And then reinsurance costs are too high. We pay more for reinsurance in U. K. Relative to risk. That's a fact. And after Grenfell Tower, it didn't really improve. We are working on it. It will improve. We will increase retention, and we will have better reinsurance prices going forward. However, not during 2019. So that is a subject for 2020. So costs will go down, reinsurance prices will go down. And then it's a question whether we gradually are getting up a diversified portfolio with an acceptable risk and an acceptable claims ratio. And what's happening when you normally enter a new market is that you do some mistakes. We did it in Norway in early years. Later on, we did it in Sweden. We did it in Denmark and in Finland and in U. K. That's normal. When you are new in the market, you do some mistakes. Claims ratio will be higher always. You could call it an investment, a learning investment. So the our challenge is to keep the level of learning lessons at as low level as possible, find out as quickly as possible what kind of mistakes have you done in that area. This is normal in that area. So there are three reasons why this figure gradually will go down. However, still, it's a small country. There will be volatility in the U. K. Figures. But you should expect that obviously to be pretty much better. So the Scandinavian totality is moving from profitable, but not at all good enough to improve. That's our expectation. However, you should not expect U. K. Or Finland to be below 100 in combined ratio already this year. That will not happen. And since U. K. Is growing bigger, U. K. North of 100 in combined ratio will influence more on figures. That's the reason why we will not rapidly go down on a company level when it comes to combined ratio. So the what you could call good or very good figures, you must have more patience than 2019. But our guiding towards market, it's moving in the right direction even if this relative bigger and bigger area will not deliver profit in 2019 in that area. Makes sense, doesn't it? Okay. Question? On the Swedish business, you have some Okay. So the reserve question is about Sweden. I don't see anything. It's minor. It's normal volatility. Don't bother. There are too much detailed interest in smaller reserve changes in different market segment. You should take a bigger picture, the company picture, and it's not really an issue in that era. Normally, we have seen some reserve gains in Sweden. Obviously, some smaller reserve losses. It's normal, fast growing company, a bit difficult to set them. We demonstrated very clearly in the Capital Marketing in October that our historically to date reserve practice has been prudent. You should expect that to go. Yes, on the second part of the question, it has been a lot of claims inflation in the motor area in Scandinavia and definitely in Sweden. Claims inflation, 8, a little bit depending on how you look at it in that area. So price increases Sweden are on the lower side when you look at 6 here. And more motor business will be priced harder going forward. We have picked up some price increases during 2018. So some of the claims inflation issues on motor area in Sweden and in Norway and I think also in Denmark, even if you have a smaller portfolio down there, has been picked up in 2018. So gradually, you will see an improvement better than this one in that area. But we should be a bit worried about whether this figure is good enough or not. However, claims inflation in the property area is more like 1 or 2. So obviously, this figure consists of different product areas, and price increases in motor in Sweden are higher than this average figure here, while other areas, liability and property, is with low inflation situation as a basis. So this is slightly better than it looks like. However, somewhat at the lower end here. So the next yes? So the question is the U. K. Motor segment, in general, it looks unprofitable. I agree. It is unprofitable. So why will we earn money on such a big client in this area? Remember that when you look at the UK motor business in general, you are basically looking at the consumer portfolio, which is very, very heavily influenced by consumers. We are not in a consumer market. We are in a commercial market, medium to large clients and this is the biggest we have ever had in our books. It is also a rather competitive market. But the good thing with a big client, they have around 3,500 vehicles moving around in U. K. Every day. And most of them are not small. They are from medium to big, distributing goods throughout in U. K. The good thing with such a big client is that if you have 3,500 give or take vehicles and if you have 10 years of claims history, you have what we call 35,000 risk years. And it's a pretty significant database and it's rather reliable. So you can analyze loss frequency and estimated average losses. However, it is a large loss component in the U. K, which is bigger than in the Nordic market, which is difficult to consider. But you have to set aside a certain kind of premium and or buy reinsurance and we buy reinsurance to a slightly high to high price. So how can we win such a business and be profitable? It's easy. We are the cost leader in the world. So if we are equally good on quality and underwriting, risk evaluation and underwriting and risk management, how to take care of such a client, then we will win. But be aware of the fact that when we say that we will earn money on that client that will be a very small margin at the beginning. Why? Cost ratio is high and reinsurance cost is high. But then we have to price on normalized cost ratios and normalized reinsurance. That's the reason why we have 115 percent in commodity today and are pretty happy with 115 percent. We will earn money, but it's a matter of definition. See, from a normalized point of view, good margin, the 1st year will be 0 or something like that because steel over cost ratio is too high and reinsurance cost is too high in that area. But he who will conquer this world at the end of the day is cost we do. That's we. Yes? On your combined ratio guidance, can you give sort of an expectation throughout the year? How do you expect the quarters to Yes. Okay. So the combined ratio guiding throughout the years, it will be very different distributed this year compared with last year. Why? We changed reinsurance structure. So the very, very big commissions, reinsurance commissions you normally see in quarter 1, they disappear. And some of that money will arrive later during the next quarters. But since we changed structure the 1st year, you will actually lose out some kind of reinsurance or profitability margins on the property product as such. So your expectation, if we reach guiding on 96,000,000 is that in quarter 1, we will start north of 100,000,000. That's expected. And then gradually, you will see improvements. Normally, you will see quarter 2 and 3 as the 2 best ones. This time, you actually could see quarter 4 very strong because the earned premium development will continue to grow every quarter. And the earned premium will be obviously at the highest level in quarter 4 in that area. So quarter 1 will be north of 100,000,000 then you will see some improvements in quarter 2, better in quarter 3. Normally, quarter 4 should be slightly higher. It could be more equal to quarter 4. This is not exact science. We do insurance business, but it's a very good question. Thanks a lot. And we probably should have said it in writing. So, Dieter and Anders, I think that we should follow-up the kind of verbal statement in order to manage expectations around quarters and that has nothing to do with Protector in 2019, obviously, but how is the combined distributed through the quarters? Thanks a lot. Okay. Continuing with the U. K. We opened up a London office in March. The first four people will be on board. It will grow to 10 during a couple of years. No hurry. And we will enter this building here. So this is the Leadenhall Building, and we will have nice offices as always. We have best locations in Oslo, give or take, in Denmark, in Sweden, very good locations in Finland. And this is the Lloyd's building. So it's 50 meters between the two. And it means that we have walking distance to Aon. Aon is actually in the same building, an 11 o building. So we have we are in the same building as Aon. We are walking distance to Velys, JLT, Marsh, JELF, Hovden, Lockton and any player we would like to do business with in that area. So you have to be in city and you have to be well located in city and price per person is obviously very high. It doesn't really matter, not at all. Small spaces as always in City, but a nice, good location, easy to take clients and brokers into your offices in that area. But we will go slowly in London. We will go slowly. That's the most important element. Investments, poor in a turbulent market minus 0.6. Normally, we will have hoped for and expected better, but the investment on the equity side has been poor. However, you should have a look at the history we have from in sourcing, which is very good. But at the moment, we are not delivering good on the investment side either. You must expect volatility. It's normal. We think it will come back. And obviously, there has been some gains in January like you all have had in that area. Bond portfolio done okay or good during 2018. Still we are not throwing money into the market and taking a lot of risk even if spreads are slightly better here. Figures, you have seen them. Balance sheet strong. Some potential harvest buildup. Small changes in shareholder structure. Long term target basically equal, €10,000,000 to €15,000,000 on growth, a bit more on the conservative side than €15,000,000 earlier, but you should expect double digit and a combined ratio size 94 the next 3, 4 years. However, higher the 1st year. So the summary is the Falcon is flying. It's a 4 year. We will improve. U. K. Is the growth story of the future. However, it is the Scandinavian home market, which is still the highest priority and below that it's the claims handling side. So please pop a question. Yes? No, quarter 4 situation is that we are not as much influenced as many others because we have slightly a more conservative portfolio in quarter 4. So when spreads went out over a AAAAA portfolio, it was more kind of relaxed. We didn't have the same losses as others have in that one quarter. Nothing special at all in it. It's not the structure of our portfolio and what we have communicated to you that we have less high yield risk in the portfolio at the moment compared with an average for the last 5 to 10 years. Now a lot of new fund is coming in. How will you invest that? So to be very specific, what do you think will be the share of equity you will have in your investment portfolio? Okay. So we are around 10 at the end of the year. And we won't be too sure about what we are doing. We are looking for good IDs. There are more good IDs today than a year ago or half a year ago because it has been more volatility in the market. So we can see slightly more companies where we could expect a return on our equity size 20 when investing in that area. We are not taking down the hurdle rate. It has been communicated during 2018 to even increase. So I would guess that very careful increase from today's situation. But we will be more happy to go further if volatility increases in market and when we see that technical profitability in the company returns, which we gradually expect, as you know, during the next quarters to come. So you should possibly expect slightly higher than 10%, but not a lot higher. But we don't really guide on it, as you know. Any questions through the webcast? Karl has a question. What level of losses do you expect from the discontinued COI on a quarterly basis in 2019 and going forward? Okay. So what kind of level of losses on the discontinued? Very limited because if we have reserved correctly, in theory, the losses should be 0. There could be some minor losses on the technical side that is not unlikely to happen. However, there will be some investment income on that running business, which should kind of outline a potential smaller technical loss in that area. So I would say that you should expect 0 losses accumulated going forward in that area. But then you must also bear in mind that some of the investment income will not be allocated to the growing business in that area. So round 0 could be slightly better, could be somewhat lower, but shouldn't be a difficult kind of number of targets arriving in that not at all. More questions from the web? Andreas has a question. Do you have any plans for other markets as of now? No, no other markets as of now. We have said earlier, Netherlands could be the next country, could arrive in 2021 or 2022. We are not really moving. However, we are looking to recruit a couple of people from Netherlands to move to London or Manchester in order to potentially prepare for Netherlands in 2021, 2022 or later. But we are not in our fix the profitability issue in the Scandinavian area, make sure that the whole market is strong, have a reasonable good control in what we are doing in the U. K. And then discuss it with the board a year or from our 18 months from our, something like that. I would say, I would say no, but it's not an easy question. Remember, most of the weakening of the combined ratio has been expected and has been decided. We have communicated, I guess, 6, 7 years in a row that rate pressure in Norway do happen, and it has happened. And we have followed that market down. We are the cost leader, so we can follow. So that is planned weakening of the combined ratio. It has absolutely nothing to do with lost control of underwriting or losing anything. I think we improve on underwriting quality every quarter. So we don't see actually any issues in that area. I would say no. That's okay? A final question from the audience. I apologize, we are 7 minutes late. There have been one article in the media that a house with the insect has not fallen in price, although it was known. Also And also that they have come from poison to kill it. Yes. The change from the shift on this, the gray silverfish. 1, can you kill it? 2, can you resell the house without losing money? I would say on the last question, yes, you can. We haven't only seen 1 house being resold to the same price. We have seen 5. And we haven't seen 5 on the other side. So it's questionable whether you lose any value on the house at all even if you have a small insect in your house. You can have a mosquito or you can have a great silverfish. Does it influence on price? It's not proven. That's not at all. Can you kill it? Probably. Permanently? Probably. Can you prove it today? Some argues that they can. It's a bit early to say. We have a test house filled up with this bug and then we go in and kill and then we find out whether they are dead or not. At the moment they are dead, but we have to wait potentially a year before we can be exactly sure in that area. So we are testing A lot of other people and companies are doing it. It's not an issue. It's a small bug. The Swedes are laughing of us. What are you doing in Norway? They say crazy you, they say. But okay, we try to fight it. Kill it or through that you don't really lose any money selling your apartment. Okay. Thanks a lot for your patience then. Have a nice day.