Welcome to everybody. My first question to you investors in Protector, which date is it today? It's not a very difficult question, is it?
It's Friday.
It's Friday. No, date, not day.
Date.
It's a pretty difficult question, I understand. It is October 27th, which is a historical day in Protector. Why? Because the growth rate of the company is higher than 50%. Of course, in previous years, we have seen quarters with higher than 50% growth, obviously. With the kind of size we have at the moment, to see a 50% or higher growth rate quarter versus last year quarter, I guess we'll never, ever see it again. It is a strong date when delivering the kind of growth we have in this quarter. We all understand that Q3 is not the biggest quarter in Protector, we are proud to deliver more than 50% growth in a quarter. The bad news is that I don't think we will ever repeat it again, even though we do expect a strong quarter volume-wise also in Q4.
As always, feel free to ask questions through the presentation, but we will also close with a Q&A at the end of the presentation. I will do most of the walkthrough of the company today, but I also have Merete Bernau here in the room, and she will talk a little bit with you about the cultural development of the company.
Right.
I'll introduce her with a couple of words when we are there in the agenda. I would like to draw attention again to the Grenfell Tower tragedy and the situation. Obviously, the DNA of the company is tested out in such a situation, which we do have in U.K. How does the market judge our credibility when working with the worst tragedy in U.K. since the Second World War? What does the market and the people we are working with in the claims handling situation or in other areas in U.K., do we walk the talk and continue to be open even in such a situation? Are we bold or are we committed? Our values are tested every week in U.K., and I would like to share a couple of comments with you on Grenfell Tower today as well.
I will not spend as much time as we did last time, but obviously give you a short walkthrough and an update on the tragedy in London. Let's start with the claims handling. It is about making sure that most of insurance payments are done correctly and are delivered to the victims of the tragedy and try to avoid unnecessary big spendings on legal costs. That's what we're doing at the moment. We have received around 70 liability claims today as we speak. They are reported in to a claims handling team working inside Kensington & Chelsea, and then, if necessary, coordinated with Protector representatives based in U.K. We are up and running in everyday type of situation and handling the different claims.
He who is working on a daily basis is Phil, which you see on the picture here, and managed by our claims Director sitting here in Oslo, Fredrik Messel. The process is key, so it is about establishing the right processes in order to avoid unnecessary legal spending and to deliver as quick as possible response to those who are in a situation where they need a quick decision from Protector as the insurer of Grenfell Tower. There are no actual news on the property side. The building is not released. We haven't been inside the building so far, and we don't expect to get our opportunity to get closer to the building before quarter two next year. It's a criminal investigation going on, and it is still a lot of work to do internally in the building.
We are not doing anything, actually, but we are prepared to do what we have to do when the property is released. Then it will be taken down, of course, which will take a lot of time after it has been released. On the liability side, however, the different structures are up and running, and we are capable today in order to handle any situation that do arrive from the different type of claimants in this area. A victim rehabilitation scheme with the necessary specialist has been established, and there is a dialogue with the victims and/or their representatives on a regular basis now. The claims handling activities, they are up and running in a demanding environment, obviously. Risk management and underwriting-wise, it stated here that 96% of all similar risks in U.K. in our portfolio has been inspected. That figure is today 100%.
This file is a couple of days old, and we are today on 100%. We have been outside and inside any critical risk in our own portfolio at the moment. We have introduced new technology for our clients, developed a new app that they can use themselves when they are doing their part of the totality. To consider similar risks or other type of property risk and liability risks in the different portfolios we have. It's up and running. It's daily work. We have good communication with our client, and we are obviously learning how to evaluate a risk seen from an underwriting point of view and how to price risks for the future, and also how to support our clients in order to improve the risks in that area.
In my opinion, both the risk engineers in Protector and the underwriting team, managed by the two guys you see here on this screen, they are doing what they have to do in order to make sure that we have a credible underwriting procedure up and running, post-Grenfell. In order to rebuild the credibility towards the reinsurance sector so that we can have competitive prices on the reinsurance contracts going forward. As you know from the Capital Market Day and from quarter two presentation, we had a renewal date in September 1st for the casualty reinsurance panel. The timing was not very good. It was very close to the Grenfell Tower tragedy, and it has been a busy summer and a busy autumn in order to renew the reinsurance contracts. They are renewed to acceptable terms.
Eight of the 10 reinsurance companies on the panel, they are still on the new panel. Two have left and four others have arrived. There are 12 reinsurance companies behind Protector going forward on the reinsurance side now. The capacity we have in the market, the size of the reinsurance contract, is similar to what we had before Grenfell Tower. It's tick. It's done. We have competitive prices, at least acceptable prices, and we can compete in the U.K. market going forward. It's important. It is critical for U.K. that we manage to get through that. As expected, it didn't arrive any surprises, even though it was a busy couple of months in order to settle the new reinsurance schemes and new reinsurance panel towards the market. On the communication side, it's not really too many situations arriving.
The media have still a low profile on the insurance side of this tragedy, which is fine, and we hope that will continue. Communication-wise, we are still open and out there in the market and trying to share our experiences from this tragedy with others so that we can avoid such an event in future. I have given a presentation in a big claims summit in the London market, and the claims director of Protector met 150 people in Copenhagen yesterday, risk engineers, in order to share and discuss what happened, what can we do in order to prevent such situations in future. Communication-wise, I think that we do what is expected. My summary on U.K. is that we are fighting every day in order to live the values of the company.
I do think that what we do has been received properly in the market, and I hope that our brand is still good in the U.K. market. Next time we will meet, you will know more about it, because as you know, one of the targets of Protector is to be the quality leader insurance-wise in the U.K. market. When we recruited the first 10, 15 people in U.K. some two years ago when we started, we said that our target is to be quality leader in the U.K. market. "How much time do we have in order to take that position?" was the question from the new recruited people before this ILAB. I said, "You have 18 months to go." 18 months started April 1, 2016, because then we had the first client on board. 18 months from April the first is what?
It's now, isn't it? The questionnaire, which is the basis for the quality survey, is actually out there in the market now. It has just been sent out, like we did in Sweden, like we did in Denmark, 18 months after the first client arrived in Protector. We will have this study summarized before Christmas, a few weeks before Christmas, and we will update you when we are giving the presentation for the full year a bit after New Year's Eve. We are keen to see how we are looked upon, say, from a quality point of view in the U.K., and whether the Grenfell Tower has influenced, for instance, in a negative way or not, or potentially in a positive way. Yes, a question?
Is it so that your statement now is that the charge for you will be still only GBP 2.5 million?
Yes.
Could you also give us a number of how much the impact is on the gross claims level now in the quarter?
Yes. I come back to that. There is a foil giving the two answers on the question, what is the gross reserve situation on Grenfell Tower, and what is the net effect profit-wise in the quarter? I come back to the question. I do have a foil updating you on that one. Okay? Quality-wise, we are keen to see what will happen when the survey is responded from the different people out there in the market, and we will give you an update at a later stage. Our ambition has always been clear. Quality leadership is one out of the two elements which gives Protector a competitive position in the market. Cost leadership, you know, quality leadership should lead to profitable growth, which again should lead to a top three position in the market. What about the figures then?
We are very satisfied with the volume growth in the quarter, which is 56 percentage points up from quarter three last year. The combined ratio is, I guess, in line with what you should expect, since we have guided on a combined ratio at the end of the year, 92, and we had slightly below 90 after the first half year. You should expect somewhat higher than 90 in quarter three and quarter four. In my opinion, 93 is in line with overall expectations and guiding, possibly slightly better. Slightly better, say from my point of view, in that area. We have a good return on investment quarter. As you know, we have received an investment grade rating. We are happy about that rating, and it is kind of needed in some client situations both in Sweden and in U.K.
It has been a situation, especially in the U.K., where we have lost some opportunities the last six months because we do not have a rating, and we think that this will support the company in getting access to more tenders and more possibilities in certain subsegments in the market. The solvency ratio based on the standard formula is one of the strongest ones in the Nordic market, up to 192.5. The growth is coming this quarter from Norway, Sweden and U.K. It's not a story about U.K., it's a story about Scandinavian growth coming out from Northern Sweden, but also what you could call an acceptable level of growth in the U.K. market. A bit of luck in Norway, a bit of luck in Sweden, kind of as expected in U.K. You shouldn't expect these kind of figures obviously going forward, not even close to it.
This quarter it was on the right side, and some other quarters may be on the other side then. We have known for many months that the quarter will be good, that is kind of expected and communicated to you earlier. It's not a surprise. It's, again, I would say, in line with expectation. The accumulated growth in NOK is 18.9%, and in local currency it's slightly above 21%. The underlying growth rate is slightly better than what you see in local currency strongly on the growth side. Here back to the kind of questions you had there, Guy. The gross reserves has been increased up from GBP 50 million to GBP 75 million. As I told you after the quarter two presentation, it was a lot of uncertainty relative to the reserves. You should maybe expect that to go upwards.
It has done. It's not a surprise. It could go higher, going forward. It's also possible that it could go down in future, but it's more likely that it will go higher than lower. I would expect no changes on the gross reserves in quarter four. That's my expectation at the moment. As you can see on the slide, the financial impact in Protector Forsikring's quarter three's result is 0. This reserve increase is fully covered by previously communicated net reserves from overseas and will fully be picked up by the reinsurance world in that area. This figure is of course, far too high, but the underlying reality of the company is much, much better.
You should take out the Grenfell Tower tragedy and do your evaluations based on our figures exclusive of Grenfell Tower, at least on the gross side, while the net claims ratio is slightly better. I wouldn't worry too much if I were you about this kind of reserve losses in quarter three. As you can see, we have a stable reserve developments year-to-date, and there will be small changes between the different quarters. Nothing special. It's a handful of products that have some kind of reserve losses in this quarter. I don't expect that to continue going forward. We think that our reserves are prudent. In the capital market day in August, we went through with you our reserve history, which has been spot on the first 13 years.
No signs about anything arriving, neither on the positive side nor on the negative side, when it comes to the kind of reserve losses in quarter four here.
Excuse me. Just one question on the reserve loss. I remember you had this particular product, which was this heat pump in Sweden you have a very high market share in.
Yeah.
These products, if you can mention some of the products, is it so that you have high market share in all of them or is this one, let's say, a significant market share for these products?
On the heat pump insurance area, we're very niche oriented, very low cost type of product. We have a significant market position, higher than 50% in that very small niche in the market. The kind of reserve situation we are looking at the moment, has nothing to do with that particular product in Sweden. It's not important. The volume in it is still on the lower side, even though it's growing here. That niche product in Sweden doesn't really influence on the figures in quarter three in any significant way. Okay? Yep.
The repricing of the reinsurance, will that affect your view on the combined ratio going forward? Like if they're much more expensive.
The question is whether the renewal on the casualty contract side in the U.K., reinsurance one, whether that will influence combined ratio going forward. The answer to that is no. We have renewed the contract to acceptable terms. The most difficult element in the renewal situation was the change in the Ogden discount rate. That was the big challenge, not really Grenfell Tower in that area. That influences the full market. Reinsurance prices, casualty in U.K. is going up, and that will be reflected in pricing towards the market. They will go up. Our expectation combined ratio-wise, is that this situation does not influence on our expectation for the combined ratio development in the U.K. market in future. It's obviously a valid question, relevant. I'm happy to say that answer is no, it will not influence on our expectation, combined ratio U.K.
Where do you book it then?
Say again.
Where do you book it then if it increases and doesn't affect your combined ratio?
I increase prices towards the market. If I pay more for insurance, I ask more from the client, and they accept. It's pretty easy, isn't it? It's just increased prices. How difficult can it be? In the market No, seriously. In the market-
It takes 12-24 months to increase your prices, doesn't it?
Say again.
It takes 12-24 months to increase prices, doesn't it?
I don't have an immediate effect on the reinsurance either. Insurance prices takes 12 months to go through the cycle, and then you have the earn out situation. The way we pay a price for reinsurance is equal. That is equally balanced. I will not pay reinsurance price today upfront, I will pay as I earn my premium. It will take before the increased prices in reinsurance kick in, that will take 12-24 months before those prices have been put into work in that area. The technical two sides of it, they are equal, which again, it's hopefully obvious that it's the way the market is working here.
Thank you.
We have a, as you know, a very leading cost ratio. The volume growth in Norway is very strong. In the Change of Ownership area, as you know, in Norway, the market is cooling down and the prices is going down compared with previous month. We have had some help from the market price development the last years, and now we will not have that kind of support going forward. We might have a small decrease in prices going forward based on an annual view. Obviously, that will reduce the profitability slightly in the market. Our target is to take that kind of profitability back through improved technical surveys, which take time to implement. No big successes in that area so far, but we will get through with an improved quality on technical surveys in the market, and that will support Protector in 2019 and 2020.
As you know, the DNA of the company is this is who we are. We have nominated the Change of Ownership team to be our internal heroes in the company. I would like to introduce Merete, who is director in charge of the Change of Ownership segment and has been for the last, what, 10 years, Merete, in the company, and she is also the HR director. A couple of slides about cultural development is on your side. Please give a few comments, Merete.
Thank you.
We have to all for Merete then.
I'll say a few words about cultural. What is actually cultural? What do we do to work with our culture in Protector? We work with performance-based culture. Culture is everything we think, everything we do, the way we interact, everything around us every day. It's, funnily enough, not in the wallpaper or in the walls, as we say it in Norway. It's in us. We work with everything from the little things with every and each one of us every day, the way we say good morning, the way we dress, the way we address each other, the way we work in a team, or the way we develop individually. We believe that people is the biggest asset in our company. It's very easy to say. It's not always as easy to work with. We spend a lot of investment in our people.
Working in Protector is probably not for everyone because you need to like the development. You need to like to develop yourself, and you need to like to work in a team, and you need to have positive energy. I believe for those of you who have been visiting us, you will feel the energy in the people that work there. For those of you who haven't, I'll say welcome. Stop by and come and see us because the energy of the people there is unique and it's special. I think that's one of the things that makes us different and special. We give our leaders a lot of tools to work with their employees. Not only give them tools to work with and have meetings with their employees four times every year, and we give them different tools.
We evaluate the way and the quality of the leaders and the way they use their tools. It's not enough just to use tools. It's not enough just to have a sit down with your employees. It's the way you do it, the quality in the way you work with your employees. Everyone in the company knows our DNA. Every single one. You work in the company for a week, you know our DNA. For some parts of the company, it's even something you know if you want to work there in an interview. If you don't know our DNA in an interview, we're not that interested. Everybody knows. Not everybody knows all the qualifications or in the DNA, and we don't either. It's a development all the time. Good is the enemy of great.
Good to Great is one of the books we have based all our values, all our culture program on, is Good Is the Enemy of Great. We work every day to be a little better in everything we do. Also the culture. We have people that are very young in Protector. They come right from school. We talk to them about everything, about how much to drink when you go out meeting customers. How to dress, how to say good morning. How does your negative morning feeling affect the people around you? How can each and every one of us? We pick only the best people. We don't think that's enough, because the best people working together as a team will give us even more.
This is the most important thing we do, to work with our people every day, to have the best people, and that makes us the best company. We have our own training program. Probably not because it's the best ever program, but because we train on the things we think are important, and the program is based on what we need as a company to develop in the right direction. We have a saying that culture eats strategy for breakfast, and we think so. Now our next level is that strategy is a part of our culture. It's not something on the side of the culture, it's a part of us. It's a part of who we are, and the strategy is also based on our DNA and our goals and the quality and being better. The next leading program, it goes for 18 months.
We have a six-month break, and then we go back to a new program. Where we're working now is on our value change, digitalization, discipline. How do we work together? Do we meet in a meeting on time, every time? All the little things. Probably most important, we work on culture. We sit together many times during the year, and that's what makes us different. Any question?
Okay. Thank you, Merete. Just to give an example before Yes, a question. That's good.
To go directly to the culture part of things than to the Change of Ownership. On the cost side when prices are coming down, my impression is that you are more employee-driven than the remaining products. How much of the cost in the product are related to volumes? How much are more sticky costs?
What's the cost ratio in Change of Ownership department? Is that what you're asking about?
Yes, how much does it depend on the annual volumes?
Okay. The cost ratio is what, Merete? Around 16.5?
Yes.
Including change handling costs.
Yep.
It's booked differently, as you know. The cost ratio is 16.5, and the scalability in Change of Ownership is less than in the commercial and public sector. If volume goes down, the cost ratio will probably go slightly up. That's kind of a part of your question, I guess.
That's my problem, yes.
Yes.
Yeah.
If volume is going somewhat down in 2018 and 2019, you will see a slight increase in cost ratio, maybe one, two percentage points, which will reduce profitability accordingly. NOK 10 million annual profit reduction, if such a situation arise. It's not at all sure that volume will go down. Even if real estate prices is going down, this is about the turnover in the market. If turnover is on the same level or picks up slightly again, it's on a rather low level at the moment. If turnover is picking up, then volume will be stable. Our expectation is that there will be minor volume changes the couple of next years. You shouldn't actually see any cost ratio changes in that area. It's a rather irrelevant question. Not irrelevant, but it's not a significant question more than that.
It could have been, because there is a point in the question that scalability is more limited in the area. You shouldn't be too afraid of it. Okay. Just to give one example before going into the figures. This morning, in this same room we have here, we have a walkthrough with all employees, obviously, as we always have when we release new quarter figures. We divide the team in two because the room is not big enough for everybody, and then we have a walkthrough. And one of the words in the DNA of the company is the challenger. Utfordreren in the Norwegian language. I talked for 15 minutes about that word. Okay. I went back to 2013, and I was doing some comments on today's situation. I walked into 2020. I told a seven-year history about that single word. It took me 15 minutes.
That's an example of what we do when we try to educate all our people in order not to remember the different words in the DNA, but to educate ourselves and them to try to understand what does it really mean, the word challenger. Today, 15 minutes, a lot of energy in the room. Most of the people in Protector today understand slightly better the word challenger compared to yesterday, which is important. I think that you as investors, you would have smiled a lot if you had been inside the room this morning. And I may share this secret with you, what we talked about, if you would like to. But it will take 15 minutes, and we will not spend 15 minutes on that single word today. But feel free to ask in a different environment, and we will talk to you about it.
We are happy to do it in that area. The challenger, 15 minutes, you will smile. You will like what you hear in that area. Sweden, another good quarter in Sweden. Any questions? Denmark, small quarter, slightly volume development, not really important. Poor start in quarter one 2018. We have lost one significant portfolio. We have one win, which also is significant, but those two combined is negative volume development. Today, we foresee a rather limited growth, if any, in Denmark in quarter one. Again, seen from a company point of view, that is not a problem. It's in line with what we have guided on earlier, that you will see a couple of years with a rather stable volume development, possibly slightly going down before picking up again.
The important thing is that the new management team in Denmark reestablish the culture of the company on a high level and delivers quality leadership to the market. That will take another two, three, four quarters. My expectation is that we will not take back the quality leadership in Denmark this year. It will take another year in order to get back. Our KPIs is developing in a good way in Denmark as we speak, it does take time. I told it before, repeating it again, it will take time. In the meantime, the combined ratio is around 100, slightly below this quarter, with 97.9, slightly above year to date, which also is in line with what we have said earlier.
As you have seen, us, and can see now again, the Workers' Comp product is still unprofitable in Denmark, further price increases will be issued in the market, prices will go up January 1st, 2018 again, in order for profitability. Most of these price increases has been accepted already. There are some downside risk on the volume, which is okay, in Denmark. Stable, acceptable or seen internally, good development in Denmark. However, it will take time before we are back on track as the quality leader and delivering profits with acceptable margins. We are on the right side. Year to date, we do have a profit in Denmark, so we are not current bleeding anything in Denmark at the moment. Any question about Denmark? Yes.
Could you say something more about why the combined ratio is above 100 in Denmark? Higher frequencies or why has it deviated from the initial estimates you had for this product?
It's not really deviating here. I said that you will probably see Workers' Comp claims ratios around 100. This is consistent with previous communication. No real development or expectation, which means that all other products must be profitable in order to get a profit, obviously, in that area, because a claims ratio above 100 means a combined ratio above 110. If that's half the volume, the combined on the rest of the product must be below 90 in order to get to 100 in that area. This is in line with expectation, in line with guiding. Prices are too low, and we have to go up. It's nothing wrong, neither with claims frequency, nor with the average claim size. It's something wrong with the prices. They must continue to go up.
We took a lot of it last year, we expect to take more on the pricing fee side, entering January 1, 2018. As you know very well, the reserve development is very, very difficult to predict because it's fast-moving, and it takes a number of years. The authorities who are a part of the claims handling process in Denmark, because we do not handle the claim totally ourselves. It's a different value chain in Denmark compared with Norway, and they are very late on delivering their decisions, they do delay all claims handling in Workers' Comp around Denmark with more than 2 years compared with the kind of quality we could have delivered to the market. This entity which the government has created in Denmark, it's not working. They are far too late.
We all suffer. It's not only a Protector problem. It's a problem related to all companies in the market. So a unit called Arbejdsskadestyrelsen, which is a public entity taking final decisions about whether a person is disabled for life or not. We wait and wait. It makes it even more difficult to consider the research development in that area. Again, the results are best estimate. They are complex to evaluate. We haven't seen any changes the last quarter, but it will take years before we know for sure, like in any Workers' Comp area. That's normal. This is business. This is the way it is here. You shouldn't be too afraid because the size of the reserves on a company level, they are not very big, and the volume in Denmark is not very big.
It is 15% of the size of the company. What we are talking about now, Workers' Comp, is around 7% of the size of the company. It will not influence a lot on profitability, neither on the positive nor on the negative side going forward in Protector. It is an area of interest and uncertainty, obviously. Okay. More questions about Denmark? Finland, small quarter. A very good element is that I did visit Finland a couple of weeks ago and met many of the brokers in the market, most of them actually, in one event. The atmosphere was very good. We feel warmly welcomed by the broker society in Finland. The quarter one volume looks very good. We have a number of significant wins in Finland already. We do expect that Finland will support growth in quarter one next year.
Gradually going from project status in Finland to be something close to being called a company then. They do have support from Sweden still, but are gradually growing to be more and more competent in order to deliver whatever needed and whatever quality towards the market. You know, we went directly to the top quality wise in Finland, we are proud to say that we are quality leader in the market. The broker position in Finland is rather limited, it will never, ever be a significant market for Protector. Numbers will stay small for the next 5-10 years in Finland. Okay, if you double every year, a couple of years now, that will be at least a few hundred million NOK will come out from Finland during the next 3-5 years. It will. Here is the figures.
Good growth and a quarter three profitability, NOK 150 million before tax. Just have a look and come with any questions if you would like. Our balance sheet is stronger than ever, we are positioned for continued growth both in Scandinavia and U.K. There is a question. That's good.
If you look at the retention rates and the development there, you see the same on the chart.
Yes
Illustrated the lower growth in the net premiums.
Yes.
How would you consider that, what would you say is the likely growth in net premiums this year?
That's an extremely relevant question. I apologize that we didn't really put any information on the screen related to your question, because we obviously should have done it. What you see is that earned premium development is very limited compared to the gross premium development. The reason why is there are two reasons. One is basically the new reinsurance contract, not named. The new service-based reinsurance contracts will technically influence the net earned premium situation. It's a zero game on the bottom line. We cede volume without ceding money to that service-based reinsurance contract. The other element is that in this quarter, the ceding level is slightly higher than normal because we took on board a lot of property volume, and that's the only area where we had a quota share reinsurance delivering more to the reinsurance world.
There are two reasons why the net earned premium development is surprisingly low. No worries about it. It doesn't really influence the profitability of the company. The net profit at the bottom line will be basically equal. Of course, there are costs related to the service-based reinsurance contract, but that's inside the figures. They are implemented. The prices are competitive compared with any capital cost in that area. We have to come back to you after quarter four in order to guide you better for a future how that service-based contract will influence on some of the key figures here. Apologize for not being good enough in the communication around your important question. Have a steady look at the gross development in Protector Forsikring, because that is what will drive the company towards the future.
Reinsurance-wise, yes, we cede on the property side, not in real life on any other side. What you will see is that when we continue our growth, the earnings per share down there shouldn't be influenced at all by the ceding discussion we have at the moment. Yep.
Just to have some things to take this on. The reinsurance contract, how much volumes are you ceding, if you could say, just in this quarter, approximately?
Would you expect then, based on what you're saying about with the increase then property, would you expect the net growth to catch somewhat up towards the gross growth by the end of the year?
Is the current level of around 9% level what we should expect over by year?
The question is, what kind of ceding have you actually done in quarter three, and how do you consider this situation going forward?
I'm not really competent now to answer precisely on your question. We only saw the lack of information here, kind of very late last evening, this morning, and we haven't really had the opportunity to go through the figures in detail. Could you, on the spot, Vibeke, give a solid statement and educate me? The CFO is sitting in the room here.
It will influence the combined ratio and combined ratio with 0.7 percentage points.
Yeah. What she's saying is that before and after this kind of ceding, it's a 0.7% influence on the net combined ratio. If you didn't have this kind of ceding arrangement to the Solvency about reinsurance program, it would have had insignificant influence on the combined ratio. What about the volume part of the question?
For the volume, it's about NOK 70 million, NOK 80 million in the quarter.
70 or 80?
Yeah.
Yeah. NOK 70 million or NOK 80 million ceded to that reinsurance contract, which means that you would have been on NOK 820, NOK 830, something like that, on the earned premium there, exclusive of that reinsurance contract. Thanks a lot for your support there, Vibeke. You are expected to handle all difficult questions that I cannot handle. That's the way it works, and it worked. Okay?
Thank you.
On the investment side, we have an equity portfolio delivering slightly worse than the market, and a fixed income portfolio delivering slightly better. On these two pages you see kind of the accumulated development compared with different indexes. Here you see on the fixed income side, our development versus relevant indexes. What you can see here is that as we have updated you on earlier, we took risk down in the beginning of 2017 in the fixed income side, going gradually from a BBB+ type of portfolio to an A- type of portfolio today. It makes this relevant to compare Protector's development with a different mix of competitors. The basket you see here is different from the black basket, which makes sense because the risk profile of our portfolio has changed, and then we should change baskets to compare with in that area.
In the smaller words here, it's explained what type of basket we will compare with, compared with the risk profile of Protector's portfolio until the beginning of the year, and what kind of basket is more relevant now. We are trying to do this as honest and as good as possible. It's slightly difficult to do an exact kind of analysis of it. This is kind of our development compared with different baskets in basically the region, to a certain extent, and the Scandinavian market. What I'm trying to say is that the investment department in the fixed income side has done a good quarter, also compared to peers and compared to risk. That will change a little bit between the different quarters. The equity side got a bit behind in this quarter.
The last couple of years, we have done very well on the equity side as well. Put these kind of figures together, there will be a 1.2 percentage points investment return in this quarter. And as you know, it will be difficult to deliver good return on investment going forward because the fixed income portfolio is yielding 2.2%. We are not looking for a situation to take a risk in order to get a better yield at the moment. There is no good ideas we have in the market, so we will stay tuned with possibly taking more risk off the table going forward. We hope for a correction in the markets soon. A crash would be appreciated so that the market is bleeding and we can go on risk again and buy on a lower level. And we can handle a correction in the market.
We are more than solid enough. Since our float is growing, we would prefer a market correction. Do you agree? If you have long-term horizon, that's the best thing that could happen to Protector then. In short term, it will, of course, influence negatively. In the longer run, it will probably influence them positively. Dag Marius, our Chief Investment Officer, is smiling behind me and looking for a correction in the market then. We hope it will arrive soon then. No significant development on the shareholders' side as far as we are aware of. The summary is that we think it's volume wise. It's a historically strong quarter. The profitability is on track. U.K. reinsurance renewal is behind us, and we are positioned to fight in the market.
We are in the middle of the hunting season, obviously now, looking forward to the January 1st renewal, not only in U.K., but also in the Nordic market. Obviously, we expect significant growth in 2018, which will be guided in the second half of January next year. You have to look into our financial calendar. We will update that one and tell in advance when we will guide volume for 2018, normally around January the 20th or 25th or something like that. Any questions?
Yeah.
Yep.
On the new volume, will you target the combined ratio of roughly 92%?
Yep. Combined ratio guiding for future has not been changed. It has been 92, and it is 92. Until we say otherwise, you should expect 92, and we have nothing new on the agenda now. I wouldn't expect that to change the next quarters to come. I wouldn't expect anything to change. It could. Yep.
You have earlier said that you might be willing to accept a combined ratio of maybe up to 94. It's obviously up to the board to decide. Has that picture changed? Has that intensity-
What we have discussed with yourself related to that question, that we might accept a combined ratio size 94 in future because that will add more shareholder value, if that support for instance 20% growth. I think that situation has slightly changed, because the running yield on the fixed income portfolio is even worse than when we met in August, which means that underwriting discipline should stay at least as strong as earlier, maybe slightly stronger. Going forward, we will obviously earn You should expect less investment income relative to technical profitability development. Yes, it hasn't been a significant change in opinion from our side, because we have a longer view on the question, let's say five years or 10 years ahead. Basically, we believe in the same story, that we could accept a combined ratio going slightly up in order to support future growth.
In the short run, this market is moving towards slightly increased discipline because fixed income return is expected to be lower. That's the reason why I think that it's prudent to say today that my expectation for a combined ratio future guiding may stay at 92 for the next year. May stay at 92. We will come back next year, obviously, in that area. There has been some questions through the webcast system here. Vibeke, could you read the first one?
Yes. The first one is from Peter Testar. "Can you please explain more specifically the background for the runoff losses? What insurance areas are responsible, and have you reviewed the reserves in these areas to determine whether, as these mature, whether we should see future runoff losses?
Yes. I don't think that is necessary to give a name. If you are asking the different questions, that was a good one. It could be a silly one. Don't blow the names out there in the market. The question is to the reserve side. I think I have commented it already. It has something to do with a handful of products. Don't expect it to continue to go forward. I will not go more into detail about exactly what type of product. Don't worry. The runoff situation year to date is zero, and that's what you should expect going forward.
Okay, another question. "Gross claims ratio has been rising every year since 2014. Are you worried about the quality of underwriting?
No, I'm not. We have had extremely strong underwriting results five, six, four years ago. They were not expected to continue. We are now going into a more normal level, where we are going towards 92 in combined ratio. It has absolutely nothing to do with underwriting quality, but it has something to do with how we use our competitive position in order to grow the book of business in Protector. If we had taken a more conservative view and tried to protect 88 in combined ratio, our growth level today would have been zero. That would have been stupid for the company and for shareholders. Overall, I think quality remains strong in my opinion, even though we have to prove that towards in U.K., and it will take some years.
If we know what we're doing in the Nordic market, hopefully we know what we're doing in the U.K. market as well.
Are there differences between how Protector and the Nordic U.K. competitors calculate cost ratio?
No, it's not. We calculate cost ratios equally. You can compare our cost ratio with competitors. However, it's not really relevant to see the [NC] cost ratio and Protector because they have a consumer-based portfolio, so it's not apple to apple. If you are looking into the same segment on the competitor side, like Tryg and If, you will see that Protector's cost advantage is equal as what you see on a company level. We are very good on cost in the same market segment, and it's accounted equally in the different markets. As far as we know, also in the U.K. market.
Last question. Does the lower investment return embedded in the bond portfolio lead you to require a tighter view on the pricing of insurance risk to compensate?
Yes. That was the question we had previously from the audience as well. Slightly more conservative, but not a lot, but slightly. However, we have a long view, 5-10 years in order to build the company, it will not influence a lot. Another question.
Your BBB+ rating.
Yep.
Is that satisfactory enough for your customers in the U.K.? Is it so that you wish you would go for a single A-, isn't it?
Could be slightly on the positive side to have an A-, it is satisfactory, we don't expect that to develop. It will stay stable for the next couple of years. The reason why is that we are growing that fast that this rating agency has indicated that if you keep up with the growth rate, we will probably keep you on BBB+ in that area, which basically makes sense. Whether we should have a slightly better or not, my personal opinion, I guess you know what I would answer to that. We are a much stronger company than a BBB+ company. However, it is good enough for an improved market situation. Some clients might say, hey, then we are out of business, this is improving our position. It was another hand here. Was it? Okay, well, one more.
Why is the Workers' Comp so difficult in Denmark? You have sort of the same products in almost every country, maybe except for one. Why is it more difficult there? Is it just because of these whatever you call it, that delays everything? Or is it so that it's a totally different market that they actually think different?
Why is Workers' Comp Denmark more difficult than any other product area? Basically, it's not.
No, no. Compared to other Workers' Comp in other countries.
Yes. I would say basically it's not. It is difficult in Norway. We didn't know 10 years ago what would happen when we entered the Workers' Comp Norwegian market. It turned out to be very good. We have been possibly slightly too aggressive on price. Workers' Comp Denmark is difficult to judge. It will take years before we know for a fact. Then when, but when we think we have been a bit too low on price, we increase them, and we'll be back on track. We take risk with open eyes, both in Workers' Comp and in many other areas. In some product areas, it take years before we know the answer. That's who we are. It's a part of the growth story of the company. Historically to date, we have demonstrated that we can balance that risk in a totality.
Something is going better than expected and something is developing poorer than expected. On average, it has been a pretty good story, hasn't it? Risk-taking, bit too aggressive, fix it, earn money, again, it will take years. There will be another kind of risk-taking situation in the U.K. when employers' liability product is getting into our books on a limited level. There is a similar situation arriving, which will repeat itself the next 5-10 years. It's a part of the growth story. It's impossible to be absolutely sure on pricing or long tail products in new markets before you enter the market. Impossible. It's difficult even for those who have been in the market for 30 years. Our cost ratio at the end of the day will benefit a lot. We can earn money where others lose. That's the competitive advantage of Protector.
Thanks a lot for your patience and for a lot of good questions and still have a beautiful day.