Warmly welcome everybody to quarter two presentation in Protector. As you probably have guessed, we would like to spend a lot of the time in this quarterly presentation to focus on the tragedy in London and the Grenfell Tower fire. I will spend half an hour, possibly slightly more, on the Grenfell Tower situation and give you an update on the tragedy we have seen in U.K. Henrik Høye , the person in charge of establishing Protector in U.K., will complement my presentation on parts of that presentation. We will divide the time a little bit, and then when finishing the Grenfell Tower update, I go to the more normal presentation, but spend less time on the situation. Of course, it's a terrible tragedy we have seen in the U.K.
According to our colleagues in the U.K., the worst event since the Second World War, the environment around the claim is extremely special. It is a difficult environment. At the same time, it's a kind of an environment where we are reminded who we are and what we do, and that we also, as an insurance company, as a part of the society, should work as hard as possible in order to do our small part of this totality in a best possible way. The 14th of June, the fire started, we all saw the news early in the morning, the communication inside of Protector started to go rather early in the morning.
We had to send a message to the stock exchange before opening, Henrik and myself talked a little bit on phone in order to establish the necessary internal organization in order to handle this dramatic situation rapidly in as good way as possible. Of course, the first thing which is in our mind is to establish the claims handling part of the totality. How can we support our client in U.K. in the best possible way? That's the first focus. We had three meetings internally on the first day. We sent our Claims Director, Fredrik Messel, to London that first evening, and our claims manager in U.K., Julia Kenny, down from Manchester in order to meet the client on day two. The first client meeting took place on our initiative in day two.
Here is some kind of a time event of some of the actions taken the first two, three weeks. You can see that gradually, of course, we are involving a lot of external parties in order to handle the situation as good as possible. You will see no names on the reinsurance side given in this presentation. They would like to be behind us and support Protector and not be in the forefront in any presentation. If you don't see any reinsurance names, it's because they have asked not to be a part of an explicit presentation in today's meeting. As we all know, it has been a tremendous involvement from authorities in U.K., many sorts of them.
At the same time, it has been protests in London, and some anger and bitterness, which creates a situation which is even more difficult to handle for our clients. The circumstances around this tragedy is some things that we haven't seen for decades. The last time we saw something which was close to the same drama was in possibly 1988 in Norway, where an oil platform out in the North Sea went upside down, and it was, I think, 188 dead people. The insurance company involved in that tragedy in 1988 was Storebrand, my company, the company I was coming from, and I was working in that company at that time. I wasn't involved, of course, in any aspects of that kind of a tragedy. It's very seldom Europe sees such a situation arriving.
The kind of environment creates also an insurance settlement, which is a bit more difficult, not only a bit, but a lot more difficult than what you normally will see. The one thing is what the contractual situation is, which is basically rather clear. What does an insurance policy cover and what does it not cover? Normally, it's rather clear. In this kind of situation, there will be questions related to support the client slightly outside the explicit wording in a document. For good reasons, that's a possibility, and we will of course, also explore those kind of possibilities together with the client in that area. It's normal when it is very special situations arriving, and this is one of them. The most special situations Europe has seen in decades in that area. It's a difficult environment.
Of course, we as an insurance company are in the periphery of the totality, but we have to do our part the best possible way. What we do the first 2 days is to establish a project plan and a project set up. What we call phase 1 project goals, they are established. There are 4 projects up and running day 1. We will not distribute all detailed information which could have been filled up this page here, basically, because it's also some kind of confidential information in these kind of plans, which will not be disclosed to external parties. The first day is about setting up our task force, claims handling, reinsurance, communication, and fact find. In day 2, we are slightly reorganizing what we are doing, and taking away the fact find sub-project and establishing a risk management and underwriting project. Why?
We have to analyze quickly whether we have done any mistakes and from an underwriting point of view very quickly in order to communicate to the different involved parties, for instance, the reinsurance companies, whether we have done a proper job or not on the underwriting and risk management part prior to the fire in Grenfell Tower, in that area. A very important exercise, which has to be done in a few days. Henrik will explain a bit more about that part of the totality. The kind of information you don't see here is a structure which is well-known internally in Protector. It's about who, what, when, resource allocation, start time, end time on different actions in that area, how communication lines will go, critical success factors, et cetera.
We have a project standard for getting up and running as quickly as possible when these kind of, or where special situations do arrive suddenly. This is obviously the most challenging situation we have seen since we started the company. To give you a short update on the claims handling side before going to the risk management area. There are basically two different claims handling projects up and running at the moment. The one here is the property as such. It is about the building. Taking down the building, potentially building up a new one, or do a cash settlement if that is a decision the client would like to go for. The property side is one part of the totality. We have a single reinsurer covering that part.
Many of you know who it is, but they will prefer, like the other reinsurance companies, to stay behind. We have a close cooperation with the property reinsurance company. Obviously, they have expertise that are made available for Protector in that situation. We do have in U.K., and we have had a lot of communication with the property reinsurer. First of all, it is about the communication with the client. The first decisions in the project has been taken, and expertise has been appointed on both sides, on our side and on the claim side. In my opinion, the communication between the client and ourselves has started off in a professional and a good way. It is a good thing that we met the client first time two years ago.
The person who is in charge in the Royal Borough of Kensington and Chelsea, Henrik and myself, we met him a couple of years ago. We established a good dialogue and have met many times since. We feel that we do have a professional person and organization on the other side, the administrative part of the claims handling entity within Kensington and Chelsea. I think that the dialogue between the client and ourself is good. We have met before. It is important. We hope that we together can avoid a situation where we have different opinions, but that we can cooperate closely on how to deliver what we should deliver in the best possible way. The property side is one element of the claims handling process. The other element, which is probably far more complex, is the liability side. Is the client liable for anything?
For something or a lot? There are questions related to it. Who others are to blame, if any? There are recourse opportunities. There could be other liable parties, and a number of them have been named in the press. There are, of course, not only a lot of people who are suffering deeply from the situation we have here now, but there are many other involved parties which could get insurance payments out from this kind of situation we have, but also many ways to go in order to try to recover money from potential other organizations that either have money or are not that strong, and you shouldn't expect too much in that area. The liability part is more complex. There are lawyers seeking people in order to represent them in a fight towards Kensington and Chelsea and/or the insurance company. It is a complex situation.
We have picked our legal advisor in U.K. We did that on day one, which is a company we know from before and had a relationship to before the Grenfell Tower fire started. Also the client have a well-respected lawyer on his side. It should be possible to work closely together. That's at least our ambition in that area. When it comes to the recourse situation, the legal situation is that if a settlement here goes above the maximum limit on the insurance policy, if it goes. It's not at all obvious, but it might be such a situation. In such a situation, the recourse money goes first to the client and then to the insurance companies in that area. A recourse settlement is not necessarily anything that will influence on the economy for the insurance company and/or the reinsurance companies in that area.
The U.K. law is pretty clear on that situation. If there is a large liability situation arising up from the tragedy, recourses will go to Kensington and Chelsea, not the insurance companies. That's the way it works in that area. Which makes sense in my opinion as well. It's a property claims handling situation. It's a more complex situation on the liability side. In my opinion, it's moving forward in a decent and proper way so far. There are outside the claims handling, which is in main focus, of course, there are three other elements. One is the reinsurance side, where you understand very well that a very large proportion of what we have reserved on the claim this morning will be paid by the reinsurance panel. The 11 companies which are behind Protector in this situation. Again, we have a good communication.
They have been updated in advance on the agenda today and on the reserve settings here. They are aligned with what we have to say to you today. Media-wise, we are, of course, in the periphery of the situation. There are not very many requests from media, which we feel is good. Our attitude towards media is reactive. We don't seek media, but open. We will always answer any media approaching Protector. BBC, The Times, Fox News, U.S. media, Norwegian, Nordic, they have been there. They have approached Protector, and as far as I know, all of them have been answered. We will continue to do that. There are only two people that will comment towards the media. It's myself and our regional manager in U.K., Mairi Olwen . Those two are those who have the authority to speak on Protector's behalf in that situation.
Reactive, open. Many of you know the values of Protector, the DNA of the company. We have four values. One of those four values is open, and we can't close down openness in this kind of situation. We have to throw that value away. We will always be there. Of course, many of the answers to media will be, this is client confidential information. It's too early to say. An investigation is ongoing. It is inappropriate to answer that type of question. Many answers will not be kind of headlines, which is good. If we can answer with concrete facts, if we can do that, we will do that. To me out there, we don't need too many questions, but if you would like to address them, we will respond to them.
When it comes to then the underwriting and risk management part of the totality. First of all, we have an ambition to learn internally in Protector. How good are we at underwriting risks in the U.K.? Have we done what we should have done? That's the number one question. Could we have prevented the tragedy with discovering something in advance and giving a feedback to the client? Or could we not? That's kind of the internal questions we have, lesson learned from a very dramatic situation. The second element is then to share that kind of information with the client, with brokers, and with the reinsurance panel to see whether Protector still are considered to be a credible insurance partner in the U.K. market and in the reinsurance world.
The risk management and underwriting part of the totality is very important in order to establish a view on it. You are the expert, Henrik, so feel free.
Thank you. Okay. We have some problems with the presentation. Okay. Thank you. Local authorities or municipalities are fairly similar, have the same responsibilities, but they are different. The underwriting or risk selection is about finding those differences and avoiding the ones that are bad, the red ones. In doing that, this is an example on the property side. We evaluate about 100 different factors on each client, in order to assess if that client is red, yellow, white, or green, where green is the best and red is bad. This is one underwriter doing all that work. However, many people involving experts, risk engineers, and other underwriters, and management around the table in order to discuss both the details in those assessments, but also the totality in order to weigh those different factors. Some of the factors here are obvious. Claims history.
We look at claims history in order to assess a client, what has happened in the past. We assess publicly available information, there's a lot of it for local authorities. Demographics and financials and fire statistics, crime statistics, and all of those factors are parts of the total evaluation. On the property side, there is one thing that is obviously very important: understanding the property portfolio. The property portfolio will be assessed both analytically and benchmarked towards a larger data set, which could be the whole U.K. or Scandinavian local authorities. Similar clients. We will also go into the property portfolio by visiting sites physically and using technology or the internet driving around in a well-known car taking pictures of these properties. I'll get back to that.
The whole point in assessing the risk in this way is to both get discussions on the details by looking at this picture, which is well known for everyone involved. Also opening up what's underneath this picture and finding where to focus on the details. If a client is yellow on 100 different factors, that client is probably red. It has some problems on 100 different factors. That client is red. If it's white on all 100 factors, it is probably a green client. Tri-Borough, which Kensington and Chelsea is a part of, was assessed as a white client. One factor is especially important, and I mentioned it. It has to do with the properties. It's important also to understand that this is not object underwriting.
We don't go into each building and find out exactly how the construction is and the fire protection and what type of tenants live in there or what kind of occupancy that building has. It's a portfolio. We insure 155,000 properties in London. We don't have The level of detail in the information from the tender situation, and it is not possible to get into that detail. However, it is important enough that the most resources we spend in our underwriting process is visiting these properties. That's risk engineer driving to the different sites and logging different types of information. Some of it is the building class, the standard, which includes maintenance, and it has to do with security around the building.
Could be deviations from safety regulations such as waste containers mounted on walls, and also a subjective view on the neighborhood and the area the building is in. We have inspected 10,000 properties in public sector, Scandinavia and the U.K., and have a good database. All of this information is logged so we can benchmark each client towards that database of 10,000 different inspections. That gives us a view if it's better than average or worse than average on those different factors. Kensington and Chelsea was a situation where we actually managed to, it's large portfolio, manage to inspect 30% of the sums insured in the portfolio. In addition to that, we did street views of 30%. It's not 60% altogether because we did street view and inspections on some of the same properties, but around 50% of the portfolio has been seen, and we have pictures of it.
Very good results on Kensington and Chelsea. We actually knew that Grenfell Tower was refurbished in the underwriting process. That was seen as a positive element. I think it's also fair to say that when you assess 30% of the portfolio, that is through an assessment of what properties we should look at. That's the presumably worst part of the portfolio, or most risky part of the portfolio. Liability is a different evaluation, of course. More complex and the area which is most different from Scandinavian public sector. However, we have a lot of publicly available information which we collect and assess benchmark towards other clients in the U.K. The government does assessments of local authorities on health and safety, on education sector, and how they follow the regulations.
We log them, we evaluate them, and if there are recommendations from the authorities, then we ask questions about how that has been addressed. We have a good view of how an outside in assessment of the different local authorities is. Kensington and Chelsea was very green on these factors. It also goes for other factors, such as the ones I mentioned on the property side, demographics, crime statistics and others. On the liability side, some of the most frequent claims are highway claims, and what they call slips and trips, so smaller, high frequent claims. On highways, there is a body in the U.K. who assess or does assessments of repudiation rates on highway, which means the number of claims that are stopped before they become any problem.
That's an indication of routines and processes within the local authority. Kensington and Chelsea is better than the U.K., 15% better than U.K. on that area. It also indicates that they have their routines and processes in place, and that they run their responsibilities in a good way. In total, on the liability side, this client was assessed as a green and good client. When it comes to risk management post this incident, there's two things to say because there's an obvious question. Do you want to renew this client? Would you quote similarly if you knew of this incident? Our answer at the moment is yes and yes. However, we need to learn. We need to learn on an area which is unknown for very many people. Tower blocks, in general, have fires.
You've seen statements from a lot of fire experts in the media. This should not happen. If you have a fire in a tower block, that's one flat, it takes 30 minutes before it moves over to the next flat. By that time, that fire is stopped. A tower block should be a good risk. Now we know that there are occasions of that not being a good risk. We need to learn from that element. We also see that there is a tremendous force from different parties now, strong parties. Sverre mentioned that earlier. We cannot interfere with those processes any more than on areas where we know that we have the expertise and that we can make actions happen quickly. We do know through facts that the U.K. standard is better than what it is in Scandinavia.
They take care of their buildings in a better way in U.K. than they do in Scandinavia. We've seen that from more than 10,000 inspections. In addition to that, after an incident like this, there will be actions. The risk will be better. Of course, we need to plan. We need to change our routines and processes when we underwrite and risk assess clients. We have obviously already done that. We look for tower blocks. We go closer in understanding how those tower blocks are built and maintained. We believe the risk is better. We will have experts from the reinsurance world and other areas who will help in finding the right actions to take and to prioritize and not do everything at once. These local authorities in the U.K. have enough pressure and requirements on them in this regard at the moment.
We have a preliminary plan on risk management post Grenfell ready today. We will discuss that with our partners in near future, and we will have a final plan mid August for risk management initiatives. Then it is about our situation in the U.K., where the most important thing to say is Kensington and Chelsea, yes. U.K., yes. We still believe in our operations in the U.K., and we will stand firmly behind that. Of course, learn from this incident. In a way, I think we are in a good position to get that information early and learn quickly.
Okay. Thanks a lot to Henrik. The kind of final statement here, we are here to stay, has not really been discussed internally in Protector, neither with our board. We have had board meetings, obviously related to the situation here. It has been absolutely no question asked about our strategy in U.K. I think Henrik's walkthrough is a strong one. It's a good client. The underwriting methodology is working. The client is better than London average. London is better than U.K. average, and U.K. is better than Norway and Scandinavia. Most of you didn't think that, I guess, because you thought that this might happen in U.K., but it cannot happen here in Norway. Then you are wrong in that area. I think that's pretty important to understand that you are up against a very, very special event in U.K. It could happen basically anywhere.
It could. I think that we could open up for Grenfell Tower questions if you would like to now, and then I go to quarter two, the rest of the presentation. There are also potential questions popping in through the webcast. They could be taken now as well if they are related to Grenfell Tower. Feel free if you have any questions to the Grenfell Tower situation, then we move on. Okay.
Is the safety in U.K. is that, as you say, how can you explain that this place or the building is correct, that it was dangerous for fire? Just some comments around that, and is it all these assumptions correct, or are they wrong, or what's the case here around this?
Why does it really happen, if the U.K. situation is better than the Scandinavian situation? It's far too early to respond to that question. There are many investigations going on in the U.K. now with a lot of competent resources involved. I think that we have to wait for the final conclusions in order to evaluate this fire in a prudent way. The second part of the question is how can we know that the situation in the U.K. is better in public sector than in Norway and Scandinavia? Because we have systemized our information. We know claims frequencies, we know consequences. We have inspected 10,000 buildings. No one else has done that in Scandinavia, no one in the U.K. Our information is structured and systemized and available, including available for authorities in Norway if they ask for it in that area.
Our opinion is that when we are saying what we are saying, it's not a statement, it's fact. I can document with figures. We knew it before the fire, and we have looked into it after the fire, and we haven't really changed opinion on that. There is another question here? Yes.
Just from the media reports following this tragedy, it seems to be a huge discrepancy between the regulation standards and the real standard of the building. Can you comment a bit about that?
Not really. The kind of the standards which are in place in the U.K., in other parts of Europe and in Norway, we are not really experts on the different formal standards, in that area. We have a kind of an acceptable competence in the area. It's not really up to us to respond to these kind of questions others have to do. We are there on the spot. We see these kind of buildings. We systemize information, and we can evaluate real world. Then others have to evaluate the standards, whether the standards in Norway are better or worse. That's not what we are commenting on. It's what we actually can see from claims statistics for many, many years with large portfolios, and what we see on the street when our risk engineers are out there and systemizing the kind of information we have. Other questions?
Yes.
When it comes to the gross claims level of GBP 50 million, what kind of assurance is that this is enough? It's a lot of legal claims coming up. It's a lot of uncertainty, et cetera. Is this the best guess at the moment, or is it so that this is a very good guesstimate?
Okay, it's a question about the reserve setting. I'll come back to that. I do have a foil on that, so I'll comment there. I first take other potential questions on Grenfell Tower before going to the reserve stuff. Are there any other? Is there any one coming from the webcast so far? No?
No more comments.
Okay.
No, I can add one.
Yeah.
This is a big portion is reinsured, and if same situation happens again, do you still have the same reinsurance as covered as good as you are now?
Yeah. Okay. I respond to the first question on the reserve side. The next question is that if it happens again, do we have the same kind of cover behind us? I take the first one first. We are not at all sure about the £50 million reserve level here. Not at all. There is a lot of uncertainty related to that figure. It must not be seen as a figure that we do not expect will change. It will change. This is what we have estimated as a fair gross reserve setting at the moment. Both the client, the broker, and the reinsurance panel is aware of that kind of settlement, which we are communicating now, and they have had the opportunity to give feedback, even if it's our job to set the reserves. No one else.
We haven't received any significant feedback from any of the parties. They do respect that it's our job to set this kind of reserves, and it is a lot of uncertainty on these kind of figures. Some of the press coverage in U.K. on the matter is on the stupid side. They are extremely high and much, much higher than what is even theoretically possible to calculate out. Some others have had more fair comments, which differs from what we are saying now, but then we understand what they are saying in that area. Preliminary statement, a lot of uncertainty. Seen from Protector point of view, the net claim GBP 2.5 million will not change. That will basically be the same figure, whether the reserve estimate is too high or too low in that area. Seen from Protector point of view, the situation is clear.
The answer to the second question, whether we have reinsurance in place today for a potential similar situation arriving tomorrow, and that answer is yes. Any more questions about Grenfell Tower? Yes.
Just to follow up on the reinsurance side, you may get on it later. Is it so that it is an event which reinsurance also sees as likely out on the tail? It's likely that you will not have a big leap in your reinsurance premium, or is it so that this will actually increase your reinsurance premium going forward?
It's speculation which is too early to comment on in that area. I think you have heard one statement from Henrik, is that we consider the client to be prudent. Okay? Good risk. Still it is. That says something about the kind of renewal terms we will give to that client. If the reinsurance world consider Protector to be prudent and credible, I trust that they are professional people, will judge the situation equally, how we judge the client. The relationship is rather equal. Client, Protector reinsurance world. To give a very concrete answer on it's not really possible. It's speculation. If you have any significant information on the matter, we'll come back and update you. We do not expect anything very special to arrive in that area, but this is a judgment that the reinsurance panels will take.
We have different renewal dates on the different programs. These kind of price issues will be discussed not at the same time, but at different timings. Yes. Some in a reasonable timeframe, other ones more into the future. Any more questions on Grenfell Tower?
Yeah.
Yes.
Just on the renewal dates. Because you lock in some reinsurance when you enter the U.K.
Say again, please.
When is the reinsurance up for renewal? More specifically in the U.K.
I don't want to go into details on the different reinsurance structures and panels and the different reinsurance renewal dates we have. They vary slightly, and there are also new opportunities. There are many ways you can build your total reinsurance program. You can build it exactly the way we have it today, or you can restructure the type of programs. There are different renewal dates, and we will not comment in detail, neither on the dates nor on the process, except from saying that we obviously have started that kind of communication. Building the credibility through risk management walk-throughs and through handling the claim. We have offered the reinsurance world to increase our retention if they would like to, which is a situation that likely will happen anyway. Pre Grenfell, our position is that our retention level is far too low.
We haven't really changed reinsurance programs the last five, six, seven, eight years, and we have quadrupled in volume since early days. Same retention level, four times the volume. Prior to Grenfell Tower, we have decided gradually or to go upwards then on the retention side. This could be a good timing on that. It's not obvious that reinsurance world would like to, because that means reduced volume and reduced presumed profitability on their side. That's dialogue we obviously have and have had with the reinsurers the last few years. So far, the feedback from the reinsurers is that they would prefer to have also low retentions because it gives them more volume and more expected profitability. Whether that changes or not now, we have to see. Okay? Is it the final question on Grenfell Tower, then? I think we have to continue.
We will finish at 11:00, as planned. Okay. I go to the figures then. The summary you see here is basically the same that Henrik gave. It's a terrible tragedy. The worst in decades. The claims handling part, which is the most important part, is up and running. We have good partners on our side. We are being the underwriting process, and U.K. is not an extremely risky area. It's better in public sector than Norway. And we do support the company. It is not a discussion. The summary for the Q2 is that the profitable growth story of Protector continues. We have in the quarter 23% growth. Growth which is in line with what we would have expected and in line with what we have guided. It is a good net combined ratio despite the claim in U.K.
The investment results is possibly on the better side then, depending on what you expected. At least I guess it's better than the market. It's a good financial quarter for Protector. The guiding is changed Volume-wise, it's about U.K., which is delivering a very significant growth in the quarter, and to a certain extent it's about Sweden. It's U.K. and Sweden growing in volume. On the Change of Ownership sector, there is a negative growth. We did cut the figures slightly early. You should argue that the volume here should be slightly higher. It's not really important. We are following the market. And could have been 15 million-20 million NOK more on the volume side, but that's not really a significant issue. The claims development is, I would say, on the stronger side, except from Grenfell Tower.
The underlying reality of Protector is that it is a good quarter, and we feel that underlying trend is good. There are small reserve gains on the portfolio, but it is rather limited, and it's not really significant. Not at all. The cost position is, as always, very good. It's higher than last year, but I also told you last year that the underlying reality was higher. You shouldn't expect that low kind of figures. There are some technicalities which is moving a bit up and down. We don't really have any comment on the cost side. It's very strong. In the commercial and public sector in Norway, it is a very good quarter, with strong profitability, a stable volume. The biggest client signed ever is signed in quarter two and will arrive in the quarter three figures. So a very big client.
You possibly remember last time we met after quarter one, I said that we have lost all the 10-15 biggest quotations around January 1st renewal, but also quarter one in that area. This is really the first big one that's on the right side. Of course, it's always difficult to judge whether we will earn money or not. As always in Protector, our opinion is that it will be some margins left for Protector signing that kind of contract. The very important element here is about the kind of two prizes we have got from the Broker Association in Norway, stating that you are best claims handler in Norway together with one other company, and you are best overall company in U.K. alone on the top position.
Cost and quality leadership leads to profitable growth, and this is another evidence that we are delivering on a high level when it comes to quality. The Change of Ownership area, we still have focus on the technical surveys. The profitability is okay at the moment, after, as you know, a poor year in 2016 with a combined ratio far above 100. Now we are on the right side in the Change of Ownership area. Sweden, a bit on the poor side in quarter two. This is what you should expect. Normal volatility on certain product areas or market segments. We had a very good quarter one in Sweden. My comment 3 months ago was that the underlying reality is not that good. Here we are slightly on the other side.
The underlying reality is slightly better or somewhat better than what you see in this quarter. On an accumulated level, Sweden is very good in the first half year. When it comes to Finland, seen from a company point of view, it's rather small. It's a small quarter. We really have nothing to say except from the fact that we still are warmly received by the brokers in the market, and that the digitalization of the company moves forward also in Finland. I'll talk more about the IT opportunities for future in the capital market day in August. You are warmly welcome to arrive. We'll not cover that topic today. Denmark has a quarter which is on the weak side. As I also said in quarter one, a very good quarter one, but the underlying reality not that good.
Now we are on an accumulated level, I would say, on track. Remember that we are reserving the Workers' Comp product with a claims ratio slightly above 100, which makes it rather difficult to get an accumulated combined ratio below 100, let's say 99.9. It will not be a very good year in Denmark, as we have stated. Obviously, the profitability improvements is going on, and it's nothing special with the quarter here, except from technicalities and normal volatility between the quarters. If you have a look at that figure, it might say something that we have a profit, operating profit before tax in the first half year, which is sized NOK 89 million. The work is done well in Denmark at the moment, and we look forward to welcoming the new country manager August the 1st. U.K. is about volume and Grenfell Tower.
It's far too early to say anything about the profitability, of course. The accounting figures in U.K. and Finland, they are linked together with Norway and will not be separated in 2017. It's too small business, too many products, too much volatility. It will not give too much value to follow Finland and/or U.K. as an independent entity so far. We will probably open up for volume and profitability presentations in 2018 U.K., not on Finland. That's my expectation at the moment. In my opinion, the cost and quality leadership of Protector continues to lead to profitable growth. Here are the figures. It's in your presentation. It's out there in the market. On the investment side, the quarterly result is 1.3, driven by return on equities, which is, I guess, somewhat above quarterly benchmark.
A bond portfolio return, which we feel is good in the kind of running yield situation we have in the bond market in Nordic Europe and in the world. A good quarter, but as you know, it will always be a lot of volatility when it comes to the return on investment. Our solvency situation is still among the strongest in the Nordic market. Very solid, also above company targets. Nothing special on the shareholder side. We would like to go through reminding you that profitable growth, seen from a technical point of view, plus return on investment, driven by a growing float, and a growing balance sheet, should hopefully continue to deliver good return on equity for the company. The final point is about the totality. It's a good quarter. We are growing. We are profitable. Grenfell Tower is a challenge.
Obviously, it is in our focus. There are no question about the strategy in the U.K. market. We have a minute or two for questions then. Yes.
Question to the combined ratio gain guidance for full year.
Yep.
It seems to expect worse combined ratio than Q4.
As always. The reason why is that the reinsurance commissions are booked to a large extent in quarter one and quarter two. They will not arrive in quarter three and quarter four, which means that the net cost ratio is much higher in quarter three and four compared with quarter one and two. From 89% today, as you, well, indirectly have pointed that, we think 92% is likely to happen. Yes, you will see a combined ratio above 92% in quarter three and slightly higher than that again in quarter four for technical reasons. Yep.
It's only technical reasons. You have not accounted for any worsening of the environment?
No, no. Another question?
Just on the underlying reality. How is the underlying reality on the claims side for the entire company? Because if you remove the reserve release one off gain.
Yep
You're at this 93 point something claims ratio in 1Q and 2Qs.
Is there any competitive pressure underlying here? Let's say you have a 3% net expense ratio or 2% next year.
Yep.
What will your combined ratio be then?
So far it's a bit too early then to comment on the next year. Our formal statement on that is that we expect 92 going forward. We don't have any other opinion. If we would like to change that mind, we will communicate that properly. Of course, we have communicated rate pressure for the last three, four years, especially in the Norwegian market, which still plays an important role in our accountings. It's not really increased the last three months since we met last time. A lot of that pressure is already inside the last year's figures. If you extract the Norwegian combined ratio figures the last three, four, five years, they are very good. Next question.
You mentioned on the slides that you exited two names in the portfolio as they reached your target prices. Could you tell us which companies that are?
No. We don't want to comment on single type of companies in a quarterly presentation. This is more like in the annual report and on the capital market day, where we will be back and give an update on the investment side of the company then. Next question.
The run of gains, can you say which country or which product it's related to? Secondly, GBP 2.5 million you have as a maximum loss on Grenfell. Is it so that the reinsurance takes everything else, which means that future claims handling costs, future expense costs on the tragedy, et cetera, is everything related to the reinsurance, or is it so that you could have costs coming your way?
The first question is about the reserves, where do they come from? The answer is Norway. The second is that do we think that our reserve, net GBP 2.5 million, will increase in future based on certain circumstances, and our expectation today is that they will not. Another question.
Is it possible to say how much of the cost that you are now using in U.K.?
The cost ratio.
Just how much costs have you invested in U.K. during the quarter?
This quarter?
Yes.
Not at all much. We have 20 people and some other costs, rather limited earned premium. 20 people times an annual salary plus 50% plus overhead cost, it's rather a small figure. It's not really U.K. driving costs higher than quarter two last year. Last year, the long-term bonus and incentive plan for management was on the negative side. This quarter is on the positive side. Those two deviations is influencing on the cost ratio. That's one of the significant reasons why we are slightly on the higher side now compared with a year ago.
Don't get me wrong. I think you were on the low end compared to my expectations.
Yeah.
The question is more, are we seeing the cost in U.K. now or are they coming on next quarter?
No. All costs in U.K., you have seen them. Nothing related to Grenfell Tower, which is not booked in the quarter. We do not activate anything on the balance sheet, which we don't have to. Some IT smaller investments in that area. All costs have been taken, and all net reserves have been settled, and we don't expect GBP 2.5 million to increase. I'm happy that you are happy with the cost ratio, even if it's slightly higher than in quarter two. Yes, another question.
Yes, could you give a comment on the competitive situation and Change of Ownership? Are there any changes there that influences the competitive landscape?
I wouldn't say so. As some of you might know, in the parliament, it has been a decision in order to look further into the real estate process legislation in Norway. To a certain extent, we feel that's on the positive side, because it could come something out which is good. It could be some different legislation related to the product. Theoretically, that could be on the negative side. It will take five, six, seven, eight years before you see a new law, if arriving at all. One company have announced that they will come up with some kind of an alternative product towards the market, feel-free. That has been tried before with no success at all. Another company tried a similar kind of activity, withdraw after a year. We feel that the competitive situation and Change of Ownership is unchanged. Yep.
For the Workers' Comp in Denmark.
Yeah.
Did I understand you correctly that you now expect a combined ratio of around 110% for the rest of this year?
Indirectly I said that, yes, because the claims ratio on [inaudible] is largely above 100. If you have the cost ratio of the company on that product area, you have a combined around 110. That's correct. On workmen's comp, half of the product portfolio. That's nothing new. It has only changed very minor. Not at all, actually. It's nothing new about it. On the other hand, we expect that the rest of the portfolio will perform better than in this year. As you know, the reserve setting on workmen's comp Denmark takes years before we really know the answer. There are upsides and downsides. We have to just move forward. In the meantime, our risk appetite is slightly lower, but not at all in a localized situation from the market. It's a question here.
You had a growth of 23% in Q2.
Yeah.
What is about the growth rate going forward, if you have something about that?
The question is, we had 23% growth in quarter two, what is going forward? We expect higher growth in quarter three and four because mechanically we are behind 20% because we were lower in quarter one. Quarter three and four, especially quarter three, we should expect higher than 23% growth. Our expectation today is that we will end the year accumulated on 20%. We will say we are on track, even if we haven't taken on board half of the growth so far, even if two quarters are passed. Quarter three, we'll be very strong on volume. Yep.
On workmen's compensation in Denmark, what did you find this quarter which you didn't find last quarter, so to speak? Combined ratio was pretty low in Denmark. What has changed between the quarters? Is it so that the new management there has?
No. We have to shorten now and close very soon now. Nothing has changed when it comes to workmen's comp in Denmark. New management is not even on board, and the actor will be the same. We have changed absolutely nothing. The changes on the combined ratio is linked to very good performance on other products in quarter one, and worse results, volatility, normal, on all other products in quarter two. We have changed no [inaudible] on workmen's comp Denmark, not at all. A final question. We are a bit after, and the music has started to play. We have paid for one hour only. We are the cost leader in the world. We wrap up now, I think then. Thanks a lot, everybody.