Hello, welcome to the presentation of the first quarter 2026 results for Protector. We always start with all the employees, and just before we started now, there was a moment of silence, and that was the same when we started with the employees. Then I had a conversation with some people on the first row, and I said that I'm quite good at awkward silence. The reason why I'm good at awkward silence is because I'm bad at small talk. I'm not uncomfortable when it's quiet for a couple of minutes right before we start. What we did focus on in that session is about our vision for 2030. In March, we met. It was about 550 out of 700 people in Oslo to discuss, have workshops on three elements that are part of our vision for 2030.
The first one is about people, the second one is about data, and third one is about innovation. It's about thinking differently. Back in 2021, we came out of a situation of poor profitability and that we needed more discipline in our underwriting and our profitability focus. We decided that growth was something that had to come second. It still is. Profitability is first, but we can now with a stronger profitability basis, be more bold and have higher ambitions, also when it comes to growth going forward. A lot of it is about being the challenger and redefining what the challenger is in 2030. It is something else than what it was before and what it is today. The Protector is developing, we're growing, and the world around us is developing. In that technology and AI is very important.
We have two targets, and they are the same as they were in 2025 for 2026. One is profitable growth, that will always be there. The other one is data. Last year, we focused on measuring data points and following up. We had targets on data points. This year, we're shifting the focus to the value of that data. We need to get something out of the data. An example can be that we want more recourse on the claims handling side. We need better data in order to get more recourse. Or on the underwriting side, we want more relevant and bigger inbox from the brokers, and we want to quote more of that volume. The hit ratio, that's more about the market, so let's not target that, but we want to see more relevant business.
We need more data to provide to the brokers, and we need to be the best one at providing data to the brokers in order to get to that place. Obviously, using AI will not be any value if we don't have good data. That's a prerequisite for getting value out of all the projects we have. We have solutions and functionality with AI technology in Protector today. There are examples in claims handling, and in underwriting, and all employees use it on a daily basis to become more efficient. We're yet to find the way of really changing the way we work. One focus area we've had is that if you're good at something, when you've done a process many times, and you are to improve that process, you do it with incremental improvements because you know how it's done.
What's important when you have a technology that can support you in creating higher value is to think about where you want to go. That's actually quite difficult if you're good at doing the process. I think that we have good processes, and we are good at following those processes. It's a big change to say, "This is where I want to go," and that's where we need to be in order to make change. We're focusing on the outcome and the target, and then we start seeing some change, some different approaches to how we do things. It's a big focus. We're still investing, and it hurts and it costs to increase data quality, quantity, structure, and availability. It costs resources and money to test and fail with AI solutions many times.
It's very interesting and it is a great opportunity to understand our culture in a new way and a better way. Okay, that was this morning and some insight into the cultural part, which is extremely important in Protector. The first quarter, the growth has been basically announced previously after the quarter four, when we talked about 1st of January, and what you can see is that the number is lower, meaning that February and March are lower than the January figure was. That's true for basically all countries except for the U.K. Combined ratio is very strong. I'll get back to that because you need to normalize it. There are very few large losses there. Maybe the most important figure here is the one that comes from the U.K., and I'll get back to that when I talk about the volume and the growth later on.
One piece of information here we always release, since we only work with insurance brokers. We have defined quality together with the brokers, and we do broker satisfaction surveys. In new markets, we have always done it 18 months after the first policy incepts. In France, we have now. We're not 18 months in, but we're close to 18 months in. We've conducted our first survey and we have very good results from that survey, both on the general sales underwriting service and on claims handling, the brokers we work with, because we only send it to the ones we work with. The others don't really have a lot of feedback to us. That's 40-something brokers that have responded to this survey, so fairly small. It's very early. For the first survey, we haven't had the opportunities to make many mistakes.
It is an indication that what we have delivered during those first 13, 14, 15 months, is something that the brokers appreciate more than what the competitors have delivered. It's a good start, but let's see when we do the next one, and it's even more important further down the line. To the volume. I'll spend the time on 1st of April, U.K., because I think that's quite important here. 1st of April 2023, we won a lot of business in public sector and housing in the U.K. The market was hard, meaning that the rates were higher, and some of that business has been out to tender 1st of April 2026, but not a lot of it. We've kept a lot of that volume in our books. What has been out to tender, we have re-won approximately 80% of.
That means that the portfolio that we have that has delivered and delivers very strong profitability is very stable in public sector and housing. That could have been different. I've previously said that we don't know when our portfolio goes to market, if the rates are too low, we won't win it back, or then we will lose it. What is for sure is that the rates will go down when it goes out to market because the rates have fallen in the market in general. We have a renewal rate in those sectors above 100%. That is, we're retaining most of the clients, and we have inflation, and there is some exposure growth for those clients. We even have some rate increases. The rate is above zero.
The rate, if you adjust for inflation, is above zero in public sector and housing in total for 1st of April 2026, which is a very strong result, and it could have been very different. The new sales is another story. The rates have been falling, and we have seen approximately half of the volume as we saw last year, which was similar to the year before. We have quoted slightly less, so there have been some clients that we don't like, that we don't have risk appetite for. The hit ratio is slightly lower. Very similar for local authorities, public sector, and quite a lot lower on housing associations. That's due to pricing, competition coming back into the market and pricing being lower.
The result on Public Sector and Housing, it's a very strong result, and it's driven by that not a lot of volume has been out in the market and that we have had discipline in the underwriting, and it's strong discipline to end up with this result. That's only the limited segment, Public Sector and Housing. Commercial Sector is much bigger. We have a much smaller market share, and so that's where the potential is large, and that's what's driving the growth. That's where we have the new sales in 2026. It's still a softening market in the U.K., especially on property, but it's flattening out somewhat. We are able to convert some of our quotes to wins more than what we have done before, and we're also seeing more and quoting more.
We have the real estate segment, which I have talked about before. We have opened that segment, but I've also said that I don't expect us to quote a lot of business before the fourth quarter of 2026. We are quoting some business, both some in the smaller segment of the real estate segment and also some of the larger clients. What we see is that rates are low, as in commercial sector for now, but we are converting some, so we have some hit ratio on what we are quoting. Don't expect a lot to come from that segment, or we don't expect to quote a lot before fourth quarter inceptions. The market will be what it is.
We may not win a lot in the fourth quarter, but we are more confident today with more data and more knowledge about the real estate sector that this is a segment for us. It's very similar to the housing sector, where we have had very good success. Low deductibles and cost advantage is very important. I forgot to say before I started that I see that they're speaking in the front here. I forgot to say that questions during the presentation are welcome and better during the presentation than keeping them all for after. If you have any questions, the volume side, please.
Thank you. Simon Skåland Brun, ABG Sundal Collier. Just on the sort of lower than expected tenders out there, and I appreciate that being on the public sector and housing side, but do you have any reflections on why that is? Because just intuitively, given all of the comments on price pressure and a softening market, if I were to sort of renew my insurance, it feels like this is the time to do it.
Mm.
Now instead, customers are sort of exercising their options to automatically renew on what seems to be a bit old terms.
Mm.
Why aren't more sort of using this opportunity? Is that a negative read to sort of expectations for the even better prices going forward? Or what are sort of your reflections on that?
We don't really know, but there are several reasons that drive it, and one is that some of the capacity, the public sector and housing is in a way a bit of a strange market because it's mostly when new capacity comes in, it comes in through the existing, the incumbent insurers. Zurich Municipal is one very large player, or it comes through MGAs. These MGAs are not really, they don't really or necessarily have the credibility and the trust from the brokers to be placed business with. They are waiting with bringing it out to market. The local authorities, they are looking to have a reform in the U.K. to merge some of the local authorities and become more efficient or at least that's the ambition.
There is some uncertainty there, which makes them honor the long-term agreements or an optional year in the long-term agreements. Then obviously the insurers are doing a lot to keep the clients, so they're doing something on the renewal side in order to avoid competition. We do that, and our competitors do that. I think there are several reasons why you see that type of a lower tender volume in the market. At the same time, your last comment or assumption, that's an interesting one because we have higher uncertainty on inflation now, and it's a dangerous combo with softening rates and higher uncertainty, and it only goes one way then on inflation.
To expect that the softening will continue in that type of an environment with post-COVID learnings not too far away, then at least I think that that's a way of discrediting the market and our competitors, because the right thing to do would be to now change.
Thank you. Just a quick follow-up on that. Let's just assume that those volumes are sort of rolled over to potentially coming out then in 2027, both in terms of the market, but also you mentioned the portfolio composition of a lot of volumes being won in 2023 and 2024. Given the sort of dynamics with three- to five-year contracts, will then 2027 be a sort of very important year with a lot of volumes, both from volumes being basically postponed into 2027, but also on your portfolio with a lot of tenders and a lot of sort of contracts having to be renewed then in 2027?
Well, both 2027, 2028, and even 2029 are important renewals of that portfolio. In a way, we've talked about this before and we have some estimates of how that volume will be tendered, but we don't know exactly. Let's say that we expose 20% in 2027 and maybe a bit more in 2028. Then the rest, we've had some exposed now, obviously, but then the rest in 2029. Then it depends on the market, how that is. The rates we have from there, and this is also something I've said before, they are not something that we expect to be in the portfolio over time. That will normalize. In a way, those market conditions are better if you have a cost advantage. When there is a bit tighter margin than when the margin is very high, because then everyone earns money.
Thank you.
We can go to the claims side, and we like to focus on the risks and the opportunities for improvements. That's on motor this quarter. Obviously, one quarter is short. We write and say that you need to understand that quarterly volatility must be expected both ways when it comes to growth and profitability in Protector, so see it over time. It is a fact that the underlying realities, if you correct or if you adjust the claims ratio for first quarter 2026 and compare it to an adjusted figure for first quarter 2025, it is a worsening. That's a fact. The reason for it is motor. Motor is poor profitability. Property has a very strong and stable profitability, and that's our largest product. There are not any other problem areas on the product side. It's motor.
The good news is that motor is very short-tailed, so you see it very quickly. It's also easy to understand that if you have many claims, more claims than you had last year as a client, and the broker understands this, and it's unprofitable, you can adjust prices. What surprised us was that the claims inflation, which is not only prices, but also frequency increases, was higher than what we have seen previously. There is something that could be volatility, but the way we see it is that we don't think of it as volatility and bad luck in the first place. We first try to find out if there is a reason, if we can find the reason, and if there is a systematic problem. That's how we started.
Parts of it's in particular from Norway and Denmark, as that's where the worsening is the worst or the biggest. We also grew. We had strong growth first of January in Norway in particular, and parts of that portfolio, the new portfolio is not performing well. We need to understand if we've done mistakes there, or if that also is some kind of coincidence or volatility. We're obviously already looking into it. There is something there that we need to understand, and there are actions we need to take. In addition, you have more uncertainty on inflation going forward. That's a focus area. As I said, the good thing is that this is something that we see, we can quickly understand it, and we know it's possible to do something about it.
We also know that we have very good processes of doing something about it on a client level, which gives good results on renewal, pricing and adjustments. We're not very concerned about it, no change in risk appetite. We still believe that motor is an area where we should continue growing. Any questions on claims development? When you look at the timelines here, you see on the large loss side that we're not at the 8% that we now have as a normalized level, but we still believe that that's a sensible normalized level. On the run-off side, I have mentioned previously that best estimate is important for us, both on the case reserving and on the actuarial reserving. Coming from a period with more uncertainty, you can expect that uncertainty ends up on the conservative side.
It could obviously go both ways, but that's some of what you're seeing now. On the cost side, which we haven't talked about, we talked about the growth and the claims development. On the cost side, there is a reduction. You'll see that broker commission is higher. That's because we grow in France, where broker commission is higher. But if you adjust for that, it's a slightly bigger decrease from last year, but most of it is due to the share price reduction and the long-term bonus plan that we have talked about before that has gone the opposite way. So there is no real reduction in cost quarter-over-quarter. Again, that's investing in data and in AI.
Obviously, at some point, we need to see that in the cost ratio, and I think we have good solutions and good process improvements that will drive a reduction and scalability on the cost ratio going forward. Investments, that's volatile, as you all know. On the equity side, we had a big loss in the quarter. The two most important things to mention is the increased yields. The yield has gone up due to the interest rate increase and the other thing is that in the equity portfolio, there was a mistake in the presentation that we sent out on estimated intrinsic value discount. Not that that necessarily is something everyone believe in, but that said 30, the correct figure is 37, which makes more sense when the equity portfolio had a loss.
The point on the equity side is that the underlying performance of the companies has been good. It's been okay for some time. We've had some poorer performing companies. Now it has turned around, so that's on a good trend, and so that's positive. Just as an example of the volatility, if you look at the equity portfolio today or a couple of days ago, year to date we're plus, and you could figure that out because we have the list of equities. The loss is gone and there is a positive return as of today, but tomorrow could be different. Any questions on the investment side? Yeah. In the profit and loss, the only thing that you see is that the tax rate is high.
That's obviously due to the profit coming from insurance side, and there's tax on that, and that the reduction of the profit comes from equities where there's no tax. Capital position. In the quarter, the largest reduction in the requirement on the capital side comes from a reduced equity portfolio due to the loss, so that has some effect. There is also some reducing effects on the requirement from the exchange rate, the Norwegian Krone strengthening in the quarter. When it comes to the dividend here, the most important factors for that dividend is obviously that we have a after-stress strong capital position, but we also have the U.K. portfolio. We have a high earnings capacity going forward. There's an increased yield in the bond portfolio, but the insurance portfolio is stable.
We know the earnings capacity from that portfolio, and more transparency in that following 1st of January and 1st of April in the U.K. The French market now has five quarters. We don't see any signs of that being mispriced or that we've had wrong clients coming in, so we're more confident in the French portfolio, even though it will be volatile. We see some good development in the French portfolio. Even though we see lots of opportunities for the future, we don't have, in the short term, i.e., a year, we won't have many new markets started within one year, and during that time, we have a high earnings capacity. Those are the reasons for the dividend.
Obviously, we would have liked to have opportunities to use that capital at any time, but this is more a time element, and in the meantime, we will earn some more capital. That's it on the summary. Any more questions?
Just a bit more big picture, the developments in the different markets, and I appreciate maybe U.K. being the main concern or focus more than concern maybe, but just in terms of your competition, I appreciate that more in general, the underlying claims ratio is up, but some of it is due to frequency, but in some way, I guess pricing also has an impact on that. Where do you see your competition in terms of their profitability amid a market softening? Is this sort of like a timing issue that the industry will, on a relative basis, bleed out for a few years and then we're back to the 2022, 2023 situation in the U.K., where you had pretty much the market for yourself? Or is it a change in your competition? Are there more efficient players out there now versus before?
Just any comments to sort of ease our nerves that this is not, in fact, a structural issue, it's more of a irrational behavior type of thing.
I think it's interesting. First, predicting where the market will go. We don't spend a lot of energy on that because that's difficult. We don't see any competition that is different, rather on the opposite, where we see MGAs with high cost structures. There you know that one element is their commission level, and that commission level is, in many cases, almost all cases, double our cost ratio. Then there is a carrier behind, and there's other cost elements to it. Those are the ones who drives price in the U.K. market, if we focus on that. In the Scandinavian market, we don't see any large changes for the Nordic market.
The French market is a bit early to say. If there is a difference between the French market and the U.K. market, because they're large markets, there are many players, many of the same players. If there is a difference, it is that the brokers have a larger part of the value chain in France, which gives the relevant part of the cost ratio where we have an advantage, a smaller part to play. At the same time, we see a change in that. It's not sustainable that the brokers have that large part of the value chain over time. We don't see any signs of that. Obviously we're paranoid about our cost position in the areas that we need to improve that, because someone could come or competitors can improve.
We need to continue that journey of improvement, and we are focusing on that. That's important, but we don't see any signs of it. How the market cycle goes, the historical facts are that market cycles are long in the Nordics, they're shorter in the U.K. U.K. motor, the market cycles are, they can be almost quarterly, and that's driven by the consumer sector. It is contagious to the sectors we are in. In a way, it must be a good place to be if you have a consistent approach and a disciplined approach to underwriting and there are quick market cycles. You don't need to be part of the cycle that is unprofitable. If you stop there, and then you can be part of something that goes up, that must be a good thing.
It is, in many ways, irrational, and some of the segments we're in, we see irrational behavior now. There's no way we would, and maybe we're wrong, but some of those segments where you know that they're not excluding escape of water claims from their cover, our competitors, because then they wouldn't be able to win clients. Those escape of water claims, they won't change a lot. They cost GBP 3,500 per claim and the frequency of them, in general, you can predict fairly easily. When insurance is priced on the level of those claims, then you don't have anything for cost margin and large losses. Then at some point it will stop. In some of those segments, we think it will. Espen? Thank you.
Can you please elaborate on AI and what are the main opportunities and what are the main threats you see with AI coming?
It's an elaboration on AI and main opportunities, main threats. I think I said some words previously, but one example of a threat is that we have one distribution channel, and thinking about whether that distribution channel is present some time in the future and how that broker part of the value chain will be when you can use agents for parts of that work as a client. That is an interesting exercise, not because we necessarily could argue against or for that scenario, that brokers have a smaller role and that we lose that distribution. It's not necessarily believing or not believing in the scenario, but it's a very interesting exercise to do, both together with the brokers, but also for ourselves. I think the outcome of that is that we will deliver as we go, we will deliver better to the brokers.
If that scenario ends up being, then we're prepared for them not being there. That's agentic wording, marketing, and pricing that can be done. For the type of clients we have, remember that the average size of our clients is probably something like EUR 150,000. U.K. has very large clients. To use an agent to quote that is a bit more complex because the data it's not available like it is in the consumer sector where you have exactly the same cover and exactly the same exposure. Here there are very many tailor-made solutions. What we believe is that we can obviously get efficiency gains from AI solutions, we already do. We can do more quotes, we can do more claims per person.
In parts of the processes we have, HQ-wise, we can do a lot more on HR and compliance and all the requirements that come from the outside, much more efficient. That's kind of obvious that you can get efficiency gains from large language models. What we focus on is to increase the decision-making ability for Protector, that we are more precise in our decisions. That's more dependent on data than technology, because the technology is there. That's, and I don't know if it's answered your question exactly, but some words on that at least. No more questions? Thanks.