Good morning, everybody. It's still not 10:00 A.M. so I will not formally start the presentation, but I can give you a couple of words while waiting for more people to arrive. It's a pretty sunny day in Oslo today. We still have a COVID-19 situation in Oslo, so pubs are closed, and it's still boring. I do understand that it is opening up, at least in many other countries where Protector have a presence, in Copenhagen and Stockholm, even in London and Manchester. It should be possible to go at least to an outdoor pub then on Friday and hopefully celebrate the start of the opening process again in society. Hopefully. We do well on the COVID-19 situation operationally, so we are used to staying at home and doing our work, but it's boring.
It's not that interesting to talk to a camera like talking to you, so I hope I can see you physically then shortly. I look forward to that. As always, we have state of the union presentations during the morning. It's a good atmosphere, as far as I can judge it, among the employees in Protector, and I think it's fair to say that they are proud that Q1 result ended out very well. Good feedback from all employees. Since last year results were pretty strong, all employees are heading towards Rome in September. We divide them in two and celebrate the 2021 good results then together with employees in Rome in September. Two weekends will be spent down there together with everybody. It's a part of what we do in order to build culture in the company. I guess, Amund, it is 10:00 A.M. now, is it?
Then we are ready to go. A warm welcome to everybody to the quarter one presentation of the company. Feel free to ask questions through the chat function during the presentation. They will be received by Amund, I'll try to follow up either with answers through the presentation or more likely then at the end of the presentation. There is a time lag of 20 seconds each way, if you can pop your questions as early as possible, that would be appreciated and make it a bit easier then to make sure that we can respond to your questions at the end of the presentation. What you see on the slide there is the DNA of the company. This is who we are. We are different.
When we recruit people in Manchester or London or Stockholm or Copenhagen, we will always start with the kind of slide you see here. There are 12 statements on the slide. When we met in Capital Market Day a couple of months ago, we told a story relative to the history of the company. The main targets of the company is cost and quality leadership, should lead to profitable growth, which again, should lead to putting Protector in a top-three position in any market we enter. What we share with you in the Capital Market Day was a 17-year history and the status after the previous year then in that area. Our title for that Capital Market Day was We Have Only Just Begun. We have only started. We are only 17 years young.
This milestone today is kind of the first milestone after the Capital Markets Day. The question you asked yourself in the Capital Markets Day is whether we will continue to deliver on the promises and/or the guiding of the company. Let me share then the highlights with you then. I think it's fair to say that Q1 is a strong quarter. It is probably close to or even the historical best quarter in the history of the company. If you combine the fact that the combined ratio is 91.1% with a incredibly strong investment return leading to an earnings per share size NOK 7, I guess it's fair to say that you have never, ever seen such a Q1 in the history of Protector.
The only figure on the screen you see here now, which is on the weak side, is the growth figure, size 1.8. I'll come back and talk a little bit about the underlying reality on the growth side here, but that's kind of the weak point. Strong investment result, very strong combined ratio. Remember that seasonality-wise, Q1 is normally the worst combined ratio quarter. We have winter in the Nordics that influences normally on the profitability, and you will normally see an improvement through Q2 and Q3. Yesterday evening, the board decided then to pay a dividend sized NOK 1.67 on a quarterly basis. Meaning that a decision is only taken on this quarter. When we met last time, you were updated on the fact that we paid NOK 3 per share in dividend. This quarter is NOK 1.67.
No promises given for the next two quarters to come, but you may see then also quarterly dividend arrive in the future. I come back and explain the dividend policy a bit more, like we also did on the Capital Markets Day when we met some weeks ago then. Strong combined ratio, not as good as it should have been on the volume side. A fantastic investment result leading to earnings per share seven and a dividend to shareholders. You can see that seen from a solvency capital ratio point of view, the figure at 216 is that we are incredibly solid.
We have more capital than needed at the moment and are a lot higher than the target of the company, where we say between NOK 150-NOK 180 should normally be very good and that above NOK 180 we should, over time, pay back to shareholders one way or another. It's a good start. Let's go to the weak point of this kind of figures, which is the volume side. There are a couple of important elements here. One is that we have decided to exit some kind of workers' compensation volume in Denmark and Norway for risk and capital reasons. That kind of deliberate exit of some products in Norway and Denmark is leading to a negative growth size 6.5% relative to that. Meaning that the underlying growth reality is probably a lot better than the 1.8, which is reported in that area.
If you combine the two, you could argue that the underlying reality here is closer to eight. Again, this is in a quarter where U.K. is a small quarter. We think still that U.K. will kick in with more volume delivered through the year. We are also saying here that in U.K., the volume development is on the weaker side. This quarter is not that important. Some of you know that April the 1st is a pretty significant volume date in the U.K. market, and the volume development on that date has also been on the lower side. Pretty poor, I would say. COVID-19 is slowing down the market. Obviously, it is competition in the market. I think that the volume development in U.K. will be through the year, somewhat lower than earlier expected.
On the positive side, we are seeing that Sweden is growing with NOK 100 million. Norwegian or Swedish, doesn't really matter, it's basically the same, in Q1, and we can also see that Sweden continues to grow entering the Q2. The volume mix may change a bit more towards Scandinavia, where the volume and the renewal rate on the client side is very solid, where we are supported by price increases, and where we can see that new sales is picking up in the Scandinavian market, lagging slightly behind in U.K. compared with the kind of plans we have. We have, Amund, before the meeting started, received a question relative to volume development, and I covered that one.
The question is referring to, and I guess I can take it, Amund, a previous statement from my side where I say that the first NOK 1 billion is the most difficult one in the U.K., and my expectation is that we will double. The question is relative to the statement here where we are slightly on the weaker side when it comes to volume development. My message back to that U.K. volume question is that we will double from NOK 1 billion to NOK 2 billion. That's for sure. I think we are past NOK 1.2 billion at the moment. When is the question. It's not that important. It will, in my opinion, maximum take three years. We could deliver that in two years. The important thing is that the growth should be disciplined and profitable.
It is a fact that COVID-19 is slowing down the situation slightly in the U.K., while COVID-19 possibly is supporting us a bit more in Scandinavia, where we have a mature and sizable portfolio there. Hopefully, that clarifies a little bit on the status when it comes to volume development in U.K. Do you have any other questions relative to the volume side at the moment, Amund?
No.
Okay. We are not that happy with the volume, but we are behind schedule. We haven't changed the guiding, and there will be stronger volume development in the next three quarters to come. We have finished the exit on the workers' compensation side. Scandinavia is doing better. It will be slightly behind on U.K. Possibly for a few more quarters. In total, you will see acceptable or good growth during the next three quarters then here. Let me go to the strong part of the story today, or the very strong part. That's the combined ratio size 91.1. As you can see on the screen in front of you can see that both the gross claims ratio and the net is going down with 11 percentage points. The improvement is very strong and even stronger than what earlier price increases could indicate.
The reason why is because we have been a bit on the lucky side when it comes to large losses in Q1 with a large loss ratio size two, while last year Q1 was six. A bit on the lucky side on the large losses. There will be volatility that will pick up in some quarters and be higher, obviously. We are slightly supported by the COVID-19 situation, especially on the motor side. We may see that continue for a couple of more months. That is supporting the figures a little bit in Q1. However, there are also some losses on the business interruption side. You may see them arrive. The situation is not totally clear, but we are at the moment slightly supported by reduced activity level in the commercial sector in the Nordics and in the U.K., at the moment.
On the other side, we have a very high cost element in Q1. If I go two slides ahead to the combined ratio type of totality. Claims ratio is good, but cost ratio is three percentage points higher than what you could call normalized. That is linked to the long-term bonus plan, because share price development is incredibly strong in Q1, that gives a hit on the cost side. On the claims ratio side, down 11, both gross and net, very strong. A bit of luck in the first quarter. Underlying reality, when you are looking at the combined ratio is still ahead of target then in that area. Slightly behind on volume side. Somewhat ahead of target when we have guided the combined ratio for the full year, and that is supported by a strong claims ratio then coming out from many of the markets.
If you have a look at what's happening between the different countries, you can see that Sweden is doing incredibly well in Q1. A bit of luck, some reserve gains, in Q1, also a strong growth in the market. Our competitive position in Sweden is very good at the moment. Sweden is in lead in Q1. Denmark and Norway is doing very well. U.K., slightly on the negative side. No worries. It will be volatility. It's one quarter. We are confident that U.K. will come back and deliver good figures seen from a profitability point of view, going forward. The important totality here is that this adds up to a combined ratio size 91.1. There are some reserve losses on workers' compensation in Denmark. On the other hand, some reserve gains on workers' compensation in Norway.
This is partly shared with the reinsurance partner we have. In total, it balance out. Reserves are flat on a company level. My opinion is that the underlying reality is that we have an acceptable speed in basically all countries. Finland is small, more volatile, could vary a lot between the different quarters because the volume is pretty low. There is still need for some price increases. Like stated on the slide you see here, we will do price increases on employee benefit type of products in Norway and on some other product areas towards some clients. There will be property price increases in Sweden. There is a need for motor price increases in Denmark.
What you have heard from the industry, the last few days, is that price increases is still on the agenda, and it will continue on the agenda, in the Nordic market, but also in the UK market. If we go to the guiding statement we gave some weeks ago, a summary is that we are ahead of target on the profitability side. We are ahead on the return on equity side, supported both by the technical result and by an incredibly strong investment result in Q1. We are behind on gross written premium, but underlying reality is stronger than what Q1 is indicating, and we are far, far ahead of target on the solvency capital ratio type of target. That's the reason why we can pay NOK 1.7 in a quarterly dividend towards the market.
If I make a small comment on the investment side, you have seen that figures are incredibly high. I had an analyst passing me a message this morning that we delivered a better return on investment compared with the NCD, the market leader in Norway, not in percentage points but in absolute figures. I can share it and smile a little bit. You won't see that happen again. Okay, a great quarter from the investment team, from Dag Marius Nereng and his team, following also a strong return on investment. As you know, in Protector, investment is core.
A significant part of the profitability of the company is expected to arrive from the investment side, and we are happy to see that even in a situation where the interest rates are on a historical low level, we continue to deliver over time better results than many others then. Remember, whether there are gains or losses on the investment side, they are normally unrealized, and there will be volatility, and you should expect more volatility from Protector than others because we, for instance, on the equity side, have fewer equities than what many others do, and it meaning that volatility will be slightly higher or higher in Protector compared with others then. If you don't like it, we are probably the wrong company to invest in.
If you support the idea that that will lead to a slightly better return on investment over a longer period of time, then you could probably stick to Protector then. On the bond side, it's another good quarter. It's supported by market developments, where the market is doing fine. We also have some kind of situation where we can act. There is some information on the slide here where we have taken a bit more aggressive approach towards a distressed bond during the quarter. We are allowed to, through the mandate, to take a bit more aggressive positions on the bond side, and that resulted in a good gain in this quarter, which is realized. Another day I may talk about a disappointment in that area.
In the long run, we think that if we follow the different bond papers properly, if we do the analysis right, to take these kind of actions should be allowed, and it should deliver then slightly better return on the risk we take over a period of time. What we are looking forward to is that interest rates is moving north again. We hope that that will happen. We will then a bit easier deliver better return on investment if the interest rate level is picking up. You know the story, and we may see that situation arrive during the next quarters to come, and we may see that Norges Bank is one of the first banks in the world to start to move. It's at least indicated by Norges Bank, Let's wait and see what's happening.
On the equity side, we continue to deliver good, both in absolute and relative terms. Obviously, it's not that easy to find good ideas at the moment. They are still out there. We are searching, and there is one new company on board which we have invested in lately, which we think is a good idea. It's possible. It's doable obviously. The discount to intrinsic value is pretty low. It's, in our opinion, around 15 at the moment, meaning that we have taken up a lot of profit. You should obviously not expect that much to be delivered from the equity side going forward. Who knows where the market is going? We think the market is pretty high at the moment.
We are a bit reluctant to invest more now, and we may sell down some kind of positions in the following weeks or months, but it remains to be seen in that area. The investment side is obviously supporting Protector on delivering profitable growth. When I do arrive to the profit and loss statement, I think I've shared this story with you, and there is one small comment that you can have a look at on this slide, is that the fact that the gross combined ratio is better than the net, meaning that in this quarter, we are sending money to the reinsurance world. The underlying reality is somewhat better if you are looking at the gross combined compared with the net. Net is 91.1. Gross is 87.8, but that's the way it should be in normal quarters.
Also remember that if a large claim hit, let's say NOK 50 million or NOK 100 million claim, then it could also be linked to the reinsurance side. Yes, we are a bit on the lucky side when it comes to large losses in quarter one, but if someone very big arrives, we will also expect some kind of payment back from the reinsurance world. At the moment, we pay money to the reinsurance world, which is okay, obviously, in most quarters. Sometimes we will get money back from the reinsurers. The balance sheet is incredibly strong. Here is the build of the balance sheet. When we deliver the kind of result we do, let us remind ourselves about the kind of distribution strategy of Protector. Priority number one is always profitable growth.
At the moment, that growth, which will be higher in the next quarter to arrive, will not consume very much capital, meaning that we do have sufficient capital to look elsewhere. We don't have enough good ideas to put even more money at the investment side. We have more than enough cash in order to prepare for this type of situations. We haven't planned to do any buybacks at the moment. That is leading to another dividend after quarter one. The dividend policy says that if you are above 180, you should, over time, pay back to shareholders, and that leads to a dividend size NOK 1.67 for quarter one. You may see quarterly dividend arrive in the next couple of quarters. That's not unrealistic to see.
Over-guiding is a good technical result. I think it's fair to say that the eyes of the board will be more on the technical side than on the investment side, since that is obviously more linked then to volatility type of development. The summary of quarter one is a strong start of the year, a combined ratio size 91.1%, earnings per share NOK 7 after a fantastic investment result, and a dividend per share sized NOK 1.67. I hope you have enjoyed the presentation. With the kind of boring digital type of an environment we have, Amund, also only two or three people in the room, and others here, we can finish faster than normally then. I hope you have some questions, Amund.
Yes, we have. First, sales costs are up in all countries year-over-year. Is this driven by the growth in 2020, or is there anything else driving this?
The cost side is pretty high in quarter one, and that is mainly driven by the long-term bonus plan, which is linked to share price development, and that is linked to all countries. At the same time, the volume development now is coming out from Sweden and U.K. Those two markets are paying very often, or sometimes always, commissions to brokers. We pay commission equal to any other player in these kind of markets. The relative cost ratio of Protector is moving up also for commission reasons. That is no worry because it is neutral from a competitive point of view. We have said earlier that this will happen, and you shouldn't worry because it's neutral in that area. In Norway and Denmark, as many of you know, commissions to brokers is illegal, so that's not allowed.
Our relative portfolio development is linked to commission areas, U.K., Sweden, cost ratio will go up, no worries. The important thing about the cost development in Protector is that we have already adjusted manning to lost market share last year in Scandinavian market. Remember, we increased prices a lot. We lost some market share last year. That is improving as we speak. We can see that now. We can show that in figures now. Since we have lost some kind of market, we are kind of tuning in the number of full-time equivalents in the company. Costs are taken out, and in the Capital Markets Day, you saw Hans Didring, the country manager in Sweden and the kind of the number two in the company when I retire, and Henrik Høye will be the new Chief Executive Officer.
He gave a presentation on a project we call CL8, indicating that what we are targeting is what we call a real cost sized eight, and we are according to that plan and are doing well on the cost side. We are further on the cost. Don't worry. We will have a stable position on the cost side and could possibly improve that cost position relative to competitors slightly the next 12 - 18 months time. Thanks for giving me the opportunity to comment on the cost side.
One more on the volume side now. You still expect 10 growth from 2021, as I can understand, with Norway and Sweden compensating for U.K. and Denmark. How do you expect the growth to develop throughout the year?
Yes, we haven't changed guiding, it meaning that we still think that 10 is doable. However, we are behind schedule in that area. Let's come back after possibly quarter two and see whether guiding could be changed on the volume side or on the combined ratio side, where we are ahead of schedule. We are lagging a bit behind. It will be difficult to reach 10, but we think, at the moment, that Scandinavia, meaning Norway and Sweden, will compensate for part of the slowdown in U.K. You will see that happen in quarter two and also, in my opinion, in quarter three. Quarter four is more about U.K., because quarter four is a pretty small volume type of situation in Scandinavian market. The quarter four situation is more linked to U.K.
What we are waiting for and hoping for is that we are getting even more opportunities in U.K. than we do today. The COVID-19 situation maybe is smoothing up a little bit and support us a little bit. There are opportunities in U.K. There are big situation. They will arrive. I think that you should expect already in quarter two a good uplift on the growth situation acceptable in quarter three. Let's see then, it's a bit long horizon into quarter four. It's more about U.K. Let's wait and see then in that area.
Yeah. There's a lot of questions about the dividends and future dividends. Could you be more detailed on the winding down? Would you come close to 180 in solvency capital ratio? In how many quarters or years do you think?
I think that 167 is there for a reason. I think you got the picture that the board haven't decided anything. It's not unrealistic to see that there could be something like that arriving in the next couple of quarters. That's possible. If you are putting the future development of the company with normalized expectations on investment side and a combined ratio between 90-92 into your spreadsheets, what you will see is that the dividend capacity in 2021 and 2022 looks very strong. In 2021, in 2022, and also in 2023, I think you will see a very strong balance sheet kind of develop here. I think that the kind of extraordinary high situation we have now could be paid back during the next two to two and a half years, two to three years. Remember, it will be flexible.
We will prioritize profitable growth. We will deploy money towards the investment side if that makes sense. We are not a company where you should expect a stable and increasing dividend. That's not really idea. As far as we can look ahead now, it looks like that the dividend capacity is either rather strong or very strong, both in 2021, 2022, and 2023 in that area. I think that fill in the figures in your spreadsheet and take that figure, take a gradual downturn to NOK 180 in 2023, and you can do the math yourself then. That's a possibility. I hope that helped a little bit, at least then.
Yeah. What would it take to start buyback instead of dividends?
Okay. That's a good one. It is. I think you could argue that the price for the share is pretty low actually at the moment, and that buyback could have been a good idea. Many shareholders of Protector are saying that, "You can send me dividend, and then I can take the decision myself whether I would like to buy or not in that area." For most of you don't really care, do you, in that area?
There are some shareholders in the U.S., for instance, where there is a tax situation which is a bit more on the negative side relative to dividend compared to buyback of shares. We have to look at that as well. I think the way the board sees the situation now is that it's unlikely to see a buyback situation arrive in the foreseeable future. I think that you should probably look for more dividend to arrive and not buyback situation at the moment. That could change, obviously.
Got three more questions. I draw the line there, we do them. Are you looking into new countries and in what timeframe?
Okay. The question now is new countries. We have a strategy meeting in the board in June. There are nothing immediate on the agenda. Since we, during the last couple of years, 2019 and 2020, have increased prices, improved profitability, we do feel that we are back on track. It is time to start thinking about further expansion. We have a long growth path in U.K., as you know, so we can grow for many years in the U.K. market. I think that during this year, we will gradually take back the plans for entering new markets. I think it's two pretty realistic scenarios arriving. One is to go to the Netherlands, like we earlier have talked about, and the other one is to go to more public sector markets in more countries in Europe. That's another alternative route to take.
That will be discussed, but you shouldn't expect any new entries before at earliest in 2023.
Yeah. Would you or could you comment on your priorities in your newly appointed board positions in a couple of Protector's holdings?
Not really very interesting. I'm asked by the Chief Investment Officer in Protector. I'm not saying that these companies are not interesting. Obviously, they are. We are, in some companies, seeking influence where we are significant shareholders. We can do that by talking to boards, or we can do that through election committees, or very seldomly, we can ask for a board position in that area. Now we have asked for a couple of board positions, and we will involve a bit more and see whether we can influence the future development of the companies. I don't think it will make a huge difference. Not at all.
Hopefully we can take over responsibility as a significant owner in some companies and see whether we can inspire them or involve in such a way that we can improve them. Hopefully that will lead back to a better either share price development or dividend development from the kind of companies we enter. That's the idea. It's a chief investment officer decision to be taken. We have been reluctant to play a too active part so far. Since I also personally have more time after some months now, that is more on the table as an option that we could consider at least.
The last question. For those out there, if you have more questions, please feel free to pop them to ir@protectorforsikring.no. The Bjerkeli family investment committee bought some shares back in 2017, was it? 375,000. The share price is now NOK 97. You said you would sell them at NOK 100. Are you still committed to that?
I think that basically the answer is yes, that I'm still committed to that. We have to call for a new meeting in the investment committee in the family of Sverre Bjerkeli. I think my wife will have the same position as last time, three years ago, in that area. I could argue for that interest rate must be paid, and it's a poor timing to sell any shares. Amund, as you know, I'm smiling a little bit. I invited to this situation by making that statement public. We have to have a little bit fun.
I think our investment committee may take the same position. You can't be sure, and you have to just wait and see whether we do that on NOK 100 or something higher. It remains to be seen. No promises given. We don't have investment committee meetings every day in the family. I won't share the dates with you when we have meetings in the family. You should probably expect something to be sold at a certain stage if we are passing that threshold.
Thank you.
Okay. Thanks a lot. Thanks for joining us. Have a great day, and I look forward to seeing you again in July. Thanks a lot.