Good morning to you in Oslo and also you watching on the live stream to the presentation of the Q3 2023 results for Protector. Now the picture is updated, so I can't joke about that anymore, but I need to make this work. This morning, we met all employees. Obviously, not all employees physically, but the Norwegian employees here in Oslo, and then live stream to the other business units and countries. We discussed the challenger and the definition of the challenger in three years. We've had a process where everyone has been involved in some way to give input to what we think the challenger will be in three years.
Obviously, it has to do with people, it has to do with our brokers, it has to do with processes, so efficiency improvements, it has to do with quality, that's on the margin improvement side, and it has to do with investments. None of those are new. We've had them for many years, but it's about setting an ambition together with the team, and it's energy in defining the challenger in three years. Then to quarter three results, combined ratio of 91.6, okay, and I'll get back to the underlying realities, which are better. Then a very strong growth driven by the U.K., but also the Nordic or Scandinavian countries at least.
The profit for the quarter looks lower than if you calculated the combined ratio here and added the investment result, but that is due to tax elements then. Of other highlights that I will get back to, we've had a storm in Norway that affects the Norwegian profitability result, Hans. We have also decided, due to big opportunities for growth and large growth previously on the insurance side, but also a higher probability of good investment possibilities going forward, not to pay dividend this quarter, despite the fact that we have a good dividend capacity.
If I go to the claims update here, it is a mixed bag for the quarter, with Norway being very poor at 101% gross loss ratio. That is due to more than normal large losses on the property side. One is the weather, Hans, and we've also had a couple of fires in the public sector. Parts of the Hans effect comes from our share of the natural perils pool. That's NOK 56 million for the quarter. But we also have business interruption or loss of profit type of losses that are consequences of the weather that are in the Norwegian figures there. Some schools and leisure halls in the Norwegian public sector in particular.
Sweden and Denmark look a lot better than what they did per first half year. There is improvement there, but there's also an element that we need to remember. This is one quarter. It is volatile, and let's wait until we say that profitability is back in Sweden and Denmark. The motor side is definitely better in Sweden, a lot better in Sweden than what it was per first half year, and also in Denmark. We also have very little large losses in those countries for the quarter. In the U.K., we both have large loss, run-off loss. The run-off loss that we have on the company level is basically coming from the U.K., and it's related to large losses.
We also have large losses in the quarter, so U.K. is underlying better than it looks here, then. In total, you can see that it looks similar on the quarter, 2023 over 2022. If you adjust for the large losses and run-off, you'll see that quarter three 2023 looks better than quarter three 2022. The reality is that the underlying reality is more the same, so it's very similar. That is due to a lot of smaller products, especially in Norway, being poorer than what it was in 2022. If we look at the product side on the run-off and large losses, it's a property-related large loss, Hans on one side, and then also in the U.K., property-related.
Whereas the run-off and those large losses is both a property loss and a liability loss. As we always say, even though we end up at something that could be a normalized level, we have not yet calculated exactly what the normalized level is with the new accounting standards and a change in the mix of the portfolio. We will obviously do that for the full year, but 7 is not a bad estimate now either. Even though we are at 7.8, slightly above that normalized level, there is volatility in these numbers, of course. The run-off gains we have in the quarter, they are related to the Scandinavian countries. All the Scandinavian countries have a small run-off gain, so run-off losses then made up by the U.K. loss.
To the growth, first, just to the comment on the Finnish numbers there, it's a workers' comp and a technical element there that makes that negative. It is not important. It's a small, small country and a small quarter. We have growth in Norway and Denmark, so even though it's a small quarter, we have a momentum in the growth there, especially in public sector for Denmark, and in Sweden, it's about motor facilities. It's a motor growth that we see there, but we are also cleaning up the portfolio through two schemes that we've had, so that has a negative NOK 30 million effect in the quarter. U.K. is still growing in quarter three a lot, and mostly public sector growth, mostly housing associations and leasehold.
Leasehold is a single apartments in properties, so very little accumulation of large loss exposure on the leasehold portfolio. Low deductibles, a lot of attritional losses, escape of water claims. Housing is similar, but also with some larger exposure, so there is some large loss exposure. In total, this growth is giving us basically an average large loss exposure compared to previously. It's not changing the exposure in the total portfolio significantly. We have more property, of course. When it comes to the market situation in the U.K., which we have seen through all of 2023, we obviously know what 1st of October is, and we still have strong growth, not at these levels, but strong growth on 1st of October in the public sector.
The rest of the year is more motor business, which is a softer market. So there's more competition, more lower hit ratios for us there. You should expect still growth in quarter four for U.K., but not at these levels. Going forward, I think we are naive if we think that no one comes into this market, and so unless we do something completely wrong and understand it completely wrong. But that's hard to see, especially on the attritional type of clients, escape of water claims, which repeat itself year after year.
I think we are naive to think that a market situation where we have hit ratios, like you saw 1st of April, of above 60% in the housing and leasehold sector will not continue for a long time. There will be competitors coming in. We hear some rumors. We haven't seen anything in action yet, but it should normalize the market situation in the U.K. public sector over time. I can comment. We've seen the other numbers, the growth numbers and the loss ratio numbers on the previous slides, but I can comment on the cost side, which looks stable or even a bit up, both on the quarter and year-to-date level.
As I mentioned in the half-year presentation, we grow where there are commissions. We grow more where there are commissions, which is included in that number. If you adjust for the commission level, then you have a 0.7% improvement on the over-quarter side and a 0.5 percentage points improvement on the year-to-date. In a way, we should expect that with the very strong growth. There's not a lot of efficiency improvements in that number. It's, we're growing, and we can take more volume per FTE. Over time now, you should expect to see efficiency improvements because we see potential in that the next two years. It's a strong cost level, and especially where it matters the most.
Public sector, attritional type of clients, motor, we have a very strong cost position in all countries, maybe except for Finland. Now I have a black screen. Oh, we're back to investments. The quarter is, as you've seen, very poor on the equity side or a big loss there. That is something we've said several times, that it's a short period of time, even year to date here. The more important element is that the underlying development of the companies, which we comment on, normally, we have said that that has been good. Now we say, okay, so there is a slightly deterioration in the underlying development, but still okay.
As you also have seen on the next slide, you see the future expected development of those shares is up 10 percentage points since last quarter. A lot of it because the value has decreased, of course. The bond portfolio is, the yield, running yield is slightly reduced in spite of the reference rate increasing, and that is because of risk reduction then. Both the spread is coming in, and we have a shorter credit duration than previously. Parts of it is due to the high-yield bond portfolio, the fund portfolio that has decreased. A strong result on the bond side in the quarter. Just want to comment on one thing here.
We have previously mentioned that we do the interest rate steering or matching, and that's not a perfect matching, so there will be some mismatch elements to it. This quarter, that helps us slightly. These two, the net income from investments, net insurance finance income or expenses, if we were perfectly matched, they would have been lower or worse in this quarter. However, we didn't say anything about that in quarter one and quarter two, then it was the other way around. In total, year-to-date, it should have been a bit worse. That's just a comment on this element, and it's not straightforward.
We have a pragmatic approach to the interest rate steering, and the most important is that we don't take risk on the solvency side. That's the purpose of the steering. On the balance sheet, the equity is then only affected by the result, and the requirement is up on the insurance side due to high growth, and down on the market risk due to the reduction of the equity portfolio and the reduction in the bond portfolio. In total, we are at a similar level as previously, but adjusted for then the poor total result or the contribution from the result. Yeah, so you see that here.
The ratio between the insurance risk and the market risk is then slightly changed towards the insurance risk in the quarter due to the very high growth. Back to the summary and open for questions. Thomas?
Can you just comment on the tax line this quarter?
Yeah, we have Ditlev here. I think it's better to have.
Sure. Can we have that back, please?
There's a question about the tax situation.
It's because of the loss on the equities.
Vegard Toverud. The board commented on the opportunities for growth and also, as I understood it, investment opportunities in the financial market. Is it possible, without saying what the board or explaining what the board thinks, but is it possible to give some more detail or color to what you see, both in terms of growth opportunities with them impacting the solvency and also investment opportunities?
Yes. Now everyone has heard that question, so I don't need to repeat it. On the insurance side, it's a combination of the situation we have in the U.K. Like I said, it's naive to think that the new entrants or the market doesn't come back. But we are in a situation where we have access to a fifth of that market every year. If there is little competition, it's a big market, there will be a lot of volume. That can continue for some time.
In addition to that, we have hardening and hard markets in Scandinavia, and we're in the broker market, where we have come back on top in most other countries in quality surveys, and there is a positive growth, yeah, environment. In addition to that, we have low churn, high renewal rates. We have a high starting point with the addition of possibilities for new sales. On the investment side, it is more about the uncertainty in the market, and that we are closer on certain classes and certain areas to where we think we can have the right return versus risk.
There's nothing in particular or specifics that I want to comment on, nothing we have done, so.
Is it possible to say something about the time horizon for it? Because the first on the insurance side.
Mm.
Seems to be more on a yearly basis, or that you can manage the capital over some quarters. Whereas, if you see some opportunities in the market right now, it could be more of a quarterly basis, and therefore also the decision to withhold quarterly dividend. Or am I taking too much conclusion out of this one decision?
I think you're taking too much. Remember, we did the same last quarter 3. I think you're putting too much into it. This comes from evaluating lots of probabilities that are slightly higher. The total of that makes us think that, and the board think that now it's okay to utilize the flexibility of quarterly payouts and then see how that develops. Because if it continues to develop, then it's right to be there.
Thank you.
On that decision.
Hi, it's Thomas again. In Motor Sweden, you talked about the improvement there, so what happened during Q3?
Well, first of all, some of the very unprofitable parts of the portfolio, they're out. The consumer scheme that we had, parts of that is now out of the portfolio. That improves the profitability. We have had price increases along the way. This, as you know, the first quarter was poor as well, and then you have time to get some higher price increases than originally planned through. Then there are some elements of, which I mentioned, luck or less large losses on the motor side in Sweden. So, yeah. So it's a mix of actions that have effect and some volatility.
It's going in the right direction, even adjusted for the volatility.
Motor in Norway, what's the outlook there?
It's obvious when, on the motor side, when the results are so poor, that it is possible to use those claims to increase prices significantly. The price increases first of January 2024 will be significantly higher than what we thought they would be coming into 2023. There will be a double digits and higher on average price increases on the motor portfolio in Norway from first of January 2024.
Thank you.
Sverre Bækkevold, Valoren Invest. Could you flip back to the volume slide, please, Henrik? I have a couple of questions to the volume side, and the first one is relative to Sweden. You are stating that you are taking out NOK 30 million in a quarter, and then it's three more quarters to go. Should we read that as another NOK 90 million down? And are those evenly distributed between quarters, or is it differences? Size and distribution of... how should we understand the Swedish cleanup situation when it comes to volume?
They're not exactly evenly distributed, but it's not, it's not very far from. The total size of this is about what you indicated.
Thanks. A second question that's incredibly more interesting, actually. That is related to a figure on the screen there, which is 107.
Mm.
You have a renewal rate size 107, which I think Protector never, ever, ever seen in history. If I do a top-of-my-head calculation on that and say that your client renewal rate is very good, let's say it's 92, that will end up to an average price increase around 15 in that area, which not only influences on the volume development going forward, but on the profitability side. How wrong am I when saying that 15 might be an acceptably close to the truth figure?
You're not very wrong. It's a good price increase quarter, strong price increase quarter, but it's also a fairly small quarter in the Scandinavian countries. It will not have a lot of effect on quarter four profitability in Scandinavia. The U.K. is where we get the highest price increases as well. You need to have a very pessimistic view on inflation in order to not get a profitability improvement from the price increases in quarter three. That's correct.
I have one question on the combined ratio side. You may flip to the combined ratio situation. It's not possible to see one of the most important points there on the cost side because then you have to go to the quarterly report.
Yeah
Deeper down on page something, 20 or whatever. Thanks a lot for updating us on commission level relative to cost internally in your own country. We did the mathematics yesterday afternoon, and we can see that you have a cost ratio, exclusive of commissions, year to date, sized 6.5. What you see on the screen here is 10.8 down there. There is a huge cost difference there, which is interesting, and thanks for getting these figures and the transparency you have on it. It's incredibly interesting. My question is, if we look at the Nordics, you have a cost ratio close to six, and it looks like it has flattened out in the Nordics.
In U.K., you have 7.2, and if you weight those two, you will get to 6.5. You talked about efficiency gains and the probability to improve. Does that count for Scandinavia as well, or have you reached the bottom around 6? Obviously, you can go lower than 7.2 in U.K., I understand that, because you are dropping very rapidly in U.K. Where should we think efficiency improvements could end up in Scandinavia and in U.K., and how fast do you think you can move on it?
I think that there is one element that you could also add to that cost ratio, which tells the true story, which is a number we've shown previously, and that includes the claims handling cost. That's the number 6.5 is excluding claims handling cost. That's in the claims ratio then here. If I speak on those terms, the situation is fairly similar. It's a slightly better improvement, so there is some improvements on the claims handling side also, obviously, when we grow quickly. There is still lots of potential for efficiency improvements in Scandinavia as well.
Timing-wise?
will be visible improvements on the efficiency. I think the three-year period, over the three-year period, there will be visible improvements on the efficiency." * Is "improvements" correct? Yes. * Wait, "I think the three-year period, over the three-year period, there will be visible improvements on the efficiency.
Thanks a lot for your kind answer, and congratulations being world leader on cost and still improving.
Thank you.