Good morning, at least for those of you who are in Europe, and welcome to Protector's quarter three presentation of results. I'm Henrik, and the captain of the Protector team. Before we start, the disclaimer is here, and if you trust everything we say and write, then you should at least read this first. Get to the results, but as always, this is who we are, our DNA, and we've had two sessions with 400 employees this morning speaking about how one team fits with our DNA. I think the big secret is that we always work on the DNA and our culture, and we take it seriously.
To the results, very strong technical results with a combined ratio of 82.9% in the quarter, giving us the opportunity to change the guidance for the full year to 88%. Obviously now three quarters of the year is over, and with the very strong third quarter, it is only right to reduce the guidance for the full year. On the growth side, there is a big number, 27%. It is very similar also in local currency, 26%. That is a figure that is inflated by some technicalities, and I'll get back to that when I speak about the volume and the growth later. On the investment side, we have lost money on the equity side, and had a good quarter on fixed income.
The positive message on the investment side is related to the development of the companies we are invested in, which is good. On the renewal side, on our portfolio, we continue to achieve rate strength, and I will get into some explanations about inflation, which is a hot topic these days, when I speak about the claims development next. The board has also decided to pay out NOK 1.67 per share as a dividend according to our flexible dividend policy and the quarterly assessments. If I get to the claims development here, you have seen that the Nordics have very strong results, and in particular Sweden, where most of the run-off comes from, but also a very strong underlying development.
There is not a lot of large losses in the Nordics, which means that it is a bit of luck on the Nordic country results. The opposite is for the U.K., where we've had some large losses, in particular on motor and very large personal injury losses, so above what would be a normalized situation in the U.K. Those are the two outer areas of the claims development. As you also have seen, if you adjust for the run-off gain in the quarter, we are closer to 88% combined ratio. I'll speak about large losses next as well. To the hot topic of inflation and especially on the property side with material prices, I want to give a general comment first and then get into an example, property.
I'm reminded as I speak here that I should have said, remember to ask questions during the presentation so that we have them for the end. Back to inflation. In general, we obviously have a big attention on understanding what inflation is, and that's complicated. It's complicated because it's predicting the future and there are very many different opinions on what the future will be. We use all the sources that we have and make our best judgment of what inflation will be. We apply that to our portfolio, both the composition of our exposure. I'll give an example on the property side later, but also on the composition of our claims, how much is labor, how much is parts, and so on.
One important assessment that we need to make, obviously, is that we can have whatever view we want on inflation, but what we can do about it is also dependent on the market. What does the market do? We can guess much higher than all our competitors and lose a lot of volume, or we can guess a lot lower than our competitors and lose a lot of profitability. I guess that the most important is to have a best estimate and then apply that intelligently in our market engagement or in the market. If I go to the property example, on the exposure side, our portfolio is between three quarters and 4/5 properties. The rest has been business interruption. Business interruption is not about material price increases.
On the claim side, there is somewhere between, dependent on the portfolio and the type of claim, whether it is fire or water, total damage or partial damage, 15%-25% material cost. I think the competitors, at least in the Nordics, have said something similar, and it's a big range, I know that, but we have more precise information for the different types of segments. That means, given the exposure situation and then the claims split, we have to apply that to our pricing, which is the initiative we can do, the action we can make to mitigate inflation risk, and then ensure that we are above what inflation is.
That's a property example, and then the rest of our portfolio is motor, it is personal lines of business, it is liability. On motor, there is also a personal injury component, which has different inflation than what the material price increases show. The impact of 30% inflation on certain materials and property does not mean that we should increase prices by 30% to have the same profitability in the future. The most important message I can give to you is that we work both locally in each country, but also across the countries to share analysis, facts, understanding, and market practice as one team to mitigate the inflation environment we are in. Who knows if it is temporary what we see now or if it will continue and last forever.
We have our view, and we think that the price increases we are achieving in the market are roughly right or possibly slightly above what we will see of inflation. If I move to the large losses, we have a quarter with slightly higher large losses than what we would say is a normalized situation. That comes from a cloudburst in Sweden, in Gävle, and but more significantly, personal injury claims, as I mentioned, in the U.K., which is also driving the U.K. result. You should expect some volatility when it comes to large losses, obviously on a quarter level and on company or country level, but also on an annual level.
The more we grow and the more we diversify our portfolio, the less volatility you should expect on this side. If I go to the growth, I said it was inflated in the U.K., and that is due to a large client having changed inception date or renewal date, which means that it is counted twice in 2021 and will then, it was originally a January policy, now it was changed to a September policy, and that means that we have it counted twice in 2021, and it will then be a reduction in January 2022. That's approximately SEK 50 million reduction if you want to see what the underlying growth is here.
Price increases continue, as I also mentioned, and there are still a need for price increases in certain products and segments. One factor is the inflation, which I have talked about. We are in line with the guidance and I don't think we won't try to reach 10% in the last two months, so it's almost only two months now of the year just to get there. It needs to be profitable, and if we end up slightly below or slightly above, you shouldn't worry. Country-by-country metrics are there, as I said in the last presentation, for your information and to sort the numbers between the different countries, so I won't go further into that. The guidance is unchanged, except for the profitability, which we have set at 88%.
We're over to the investment side, which is a weak result in total for the quarter, but year to date is very strong. I also mentioned the good development of the companies we are invested in, and the bond side is good in the quarter. If I move on then to the more formal slides here, I won't spend too much time on the profit and loss, or no time on the profit and loss. The balance sheet, you can easily see that. When it comes to the solvency situation, the requirements have increased slightly due to insurance growth, as expected. When you see growth, the requirements increase and the split between the different elements of the requirements is very similar to what it was in quarter two.
When it comes to the dividend, I just want to remind you that what the board has decided is to pay out a dividend based on the 2020 result, and it is quarterly assessed based on that quarter's results to ensure that we are comfortable with paying out that part of the 2020 result. At present, we have paid out. On tenth of November, we will have paid out 2/3 of the 2020 result. That was a decision made by the board yesterday. We are at the summary, which has all the figures I have mentioned and discussed. I hope you have had the time to ask some questions, so we can get to that session now.
Thank you. One question on the very low claims ratio. How did you manage to get there despite the claim in Gävle? What is net and what is gross on that loss?
I assume the question is about Sweden in particular. As I mentioned, there is a run-off gain on the property side, countering the large loss or the Gävle loss. The underlying profitability in the Swedish portfolio is very strong. The gross and net is the same for the Gävle loss, so it's all for own accounts.
Thank you. Now that you have successfully implemented price increases and cleaned up the portfolio, and is it in a very good state, in terms of profitability, is it now time to start optimizing and focus more on growth going forward as 88 in combined may be too good?
I think it's a relevant question, but as we've said, we are looking for disciplined growth, and it will depend on what country we are speaking about, what type of opportunities we see. The market is still accepting profitable levels of rates, in our opinion, in the Nordics. In the U.K., the market is softening a bit after having hardened. We could have won a lot more volume in the U.K., just by reducing our margin, but that is not a good idea. We will continue being disciplined, but you should expect to see the combined ratio being slightly higher than what you see in 2021, due to slightly lower margin on new sales in where we see those opportunities.
Thank you. With the current dividend per quarter and high profits, you keep building solvency capital. Is it fair to say that building this buffer is to buffer for aggressive new market meltdowns, or should we expect more shareholder dividends or buyback programs going forward to get to your target area?
I mentioned one fact earlier, being that what we're doing now is to look at the 2020 result and pay out dividend based on that with the quarterly assessments. We have a process internally on capital management where we assess all types of different risks, both the ones that are in the solvency regime, but also any other risk that we can see. This will be a process that we do quarterly in order to assess how much capital we should hold and where we should end up. I think that with very good results, you should expect that we will either distribute or buy back shares.
In general, we have a process with the right competence involved and good discussions with the board on this.
There are some questions about U.K. and the underlying profitability. Can you say something about that and what you expect from growth and combined ratio next year and a bit longer term? Some more on the strategy if you touched upon it, but where do you see growth coming from in U.K.?
If so, the underlying profitability in the U.K. this quarter and this year has been affected by some large losses. We have achieved price increases in the U.K. in 2020 of approximately 6%. Half of that will be earned through 2021. Sorry, I said 2020. During 2021, we've had 6% margin improvement price increases, and half of it will be earned in 2021, and half in 2022. There is some improvement on the rate side. Volatility in the U.K., as we've said every quarter for a very long time, must be expected. You should expect to see some very good quarters and some poor quarters because the large loss element in the U.K. is bigger than what it is in other countries.
When it comes to the strategy and where we think we will grow the most, we have public sector and housing in the U.K. where we will quote everything, but we will not price below what we think is profitable. There we see all the business that is in the market due to the public procurement process, and that depends on what the market thinks. We may be wrong, but at the moment we think that most of the prices are too low and we're winning less than 10% of what we quote. I think we will be patient and disciplined in those sectors. Commercial sector, it's about gradually getting relationships with new brokers and new broker houses.
We're on the panel with three brokers at the moment, and have access to a lot of good business, but we will expand obviously.
Very good. A lot of shareholders are hoping to see Protector emerge in new country. Is that a longer-term goal still?
I think absolutely. As long as we continue to prove that the formula or who we are and what we do works in the countries we are in, I believe that to copy that to other markets is a good way of doing it other than trying to do something completely new. Do what you're good at. At the moment, we are focusing on becoming better at what we are good at in our home markets. That will also prepare us for that type of a project in the future. When? I don't know.
If we look at the combined ratio now and the targeted or the guiding for the full year, would you say that you are a bit conservative, Henrik, on the combined ratio estimate for Q4?
I guess that is if that equates to something around 95 combined ratio in quarter four, and that is slightly on the conservative side. Remember the run-off gain that you see in quarter three here, and I think this is a strong result regardless. There are some uncertainties. We've talked about inflation. Now it has not hit us yet. We would rather be on that side of it than the other side of it.
Yeah. Do you see any changes in the competitive landscape either in U.K. or the Nordics lately, also with the Tryg RSA deal? What about the cost leadership position you have?
The change in the competitive landscape, I touched upon that with the market. It is a disciplined market in the Nordics, more fragmented in the U.K. and some capacity is coming into the U.K. market as we speak. On the cost leadership position, we are obviously. It's the first out of the targets we have, and that's obviously in focus. I think that our competitive edge is more important to understand in the different segments we are in. As an example, in public sector, who do we compete against and what is our competitive edge? There I know for a fact that the cost leadership is, or the cost advantage is very big.
I think you should expect that our cost advantage will continue and improve when we have invested in data quality and quality in what we do, becoming better at what we do. We can start looking at other markets or other countries.
Could you explain the capital allocation process and what are the conditions or prerequisites to give a green light for share buyback?
Well, the process itself is about, of course, understanding the numbers in relation to the requirements and the formal reporting. I think more importantly, starting from the other side, understanding our risks and what risks do we need to account for. Then when we have identified the different risks and the size of those risks, it is about seeing if there are solutions, instruments such as the reinsurance market or put options or yeah, could be many type of instruments that we can use to reduce risk if the cost of that instrument is attractive.
That's the process we go through and the decision and the conditions that are needed to be on the table in order to have approved a certain type of capital allocation is I guess logic and the result of that process. The answer should give itself.
Yeah. How do you attract the best or the right people in the insurance business? What is your key value proposition, compared to your competitors?
I think that is difficult, of course, to say how we attract the right people. It's about our culture. I think the most clear example is in the U.K. where what we do with a non-hierarchical structure and the opportunity, the empowerment of people, the opportunity to make decisions if you know something is very different from what people are used to. When we present that in the U.K., the ones who like that will be interested in speaking with us, seeing if there is an opportunity. The ones who don't won't because it is so different.
It's about our culture, explaining what it is, and then getting a response if that is something people want to do. Yeah, recruiting people is difficult, and it's more about developing once they come here.
Great. Final question. What is it like, Henrik, to become Chief Executive Officer of Protector? Are there any surprises so far?
I think that I've been very lucky to take over a company with a tailwind. The results are good and that gives some room to evolve and develop what we have done for many years. Going from a period where there was a lot of cleanup necessary in especially the Nordics and a very new U.K. unit to a phase where we have more normal operations and the target is to become better at what we are good at. That is good, and I'm enjoying that especially because the atmosphere in the whole organization as one team has been received very well. There is a lot of energy around preparing for the future.
I think every employee in Protector will be proud of what we have done. They will also see this as just the beginning and a lot of opportunity in the future, and that's what excites me. I'm very happy, and I've been positively surprised by the parts of the role after I started. All right. Then I think we are done with the questions, and thank you very much for attending. See you again in quarter four results in the new year. Thank you.