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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome, everybody, to the Quarter 4 Presentation. The first kind of announcement I have is to introduce our new Chief Executive. So we have a nice picture of Henrik, that is probably Page 3 then, and he really takes my place as the Chief Executive in September when I, as planned and earlier communicated, will retire according to that kind of retirement plan we have or I had in Protector. He started to work in Protector in 2007. He is at the age of 38. As you can see on the screen, he has been in charge of putting up Protector as the public sector responsible person in the last 10, 12 years. You know we are a market leader in the public sector in the Nordic and we are big in public sector in U.K., as well. And we have kind of always earned money in that area. So he had qualified himself through public sector in the early days, then he have been very close to me, setting up Sweden back in 2011, very close to me and are working a lot more than me setting up Denmark in 2012. He has had positions in Norway when we established Protector in 2016. He has been a significant player. He has had the responsibility for U.K. for a period of time. So the Board took that decision last evening. And I am happy to introduce Henrik, and you will meet him when we might do a Capital Market Day in March, then you will meet him. And as many of you know, you have seen him before, giving presentations towards you investors here. The succession planning has gone for a long time. And we will work closely together up until September, and then Henrik will be in the lead position. If we go to the next slide, it's our DNA. This is who we are and I have a ring around this vertical 'The Challenges'. So you know very well that we met some challenges in 2018 and 2019, where we delivered rather poor on profitability, both on the technical side, the combined ratio side and on the investment side. And what I have communicated towards the market is that when you are lagging behind on the insurance result, it normally takes a year or 2, normally 2, in order to be back in the good shape again. That's the difficult story on an insurance company. The good story is that when you are on track, it normally continues to be on track for a period of time, again. So I'm happy to go to Slide #5. Let's have a look at the highlights 2020 and what you can see here is that this is all-time high when it comes to earnings per share. It is NOK 12 earning after tax per share. It's obviously driven by the strong investment result you have seen before. And what you can see is that the combined ratio is slightly south of 95%, meaning 94.8% as to kind of formal figure, slightly better, if you include change of ownership, the kind of run-off business, then we are 94.6%. And this is kind of in line with the expectation when entering 2020 then. Our solvency capital ratio is solid enough in order to start talking about dividend. It is 188%, so we are a very solid company, and we are now capable of both growing and delivering dividend to the shareholders at the same time. A pretty important element on this slide is the price increase in the Nordic market. You can see, as earlier communicated, that it has been very strong price increases, close to 14% in the full Nordic market. And as you understand, obviously, claims inflation is more like below 4. So everything else equal, it means that the combined ratio improvement is very significant in the Nordic market. At the same time, we have U.K. which are delivering healthy results. We, as everybody else, have been challenged by the COVID-19 situation. Operationally, everything is okay in Protector, so it's not really a big issue to us. There is a picture on the slide also relative to the landslide in Gjerdrum, a very tragic story. We'll come back and share a couple of words on that story a bit later in the presentation then. Okay, so everything good. If we go to Page #6, only a short comment on quarter 4. Quarter 4 ended on a combined ratio around 95%. And when we met last time, I gave the feedback to investors that quarter 4 will not always, but at least sometimes be around the 3 first quarters accumulated. So if you have a combined around 95% after quarter 3, your expectation should maybe be 95% for the full year. It could be surprises. We are in the insurance company. Reserve estimates are not very easy to do all the time. But in the last quarter, despite the fact that we had the landslide in Gjerdrum, and another pretty large claim in U.K. as well, that quarter also ended in an acceptable way or a good way when it comes to technical result. And as earlier communicated to the market, investment result in quarter 4 is great. If we go to Page #7, and please remember, put on your questions whenever you like, pop them through over our communication system. And then my IR responsible., he's in office together with me, we will share those questions with you everybody at the end of the presentation then. Volume update. You have heard the story before, at the end of January, we were after in the market saying that we did grow a lot in quarter 4, 30%, give or take. So a very strong quarter for growth. Churn losing clients, So churn is back to normal in quarter 4, and it's back to normal or even better January 1, 2021. So the high churn we have seen in the Nordics in quarter 1, 2 and 3, due to high price increases and some clean-up activities for the portfolio is now history. And the latest kind of clean-up situation was relative to Workmen's Comp in Denmark, January 1, and Workmen's Comp Norway for 2 different reasons. In Denmark, Workmen's Comp is extremely capital consuming, and we have lost money, and it is a risk. So we are leaving that segment basically 100%, not in total, but all single line clients in Workmen's Comp Denmark have been left also in January 1 here. So taking risk down, taking capital consumption down, but still, they are capable of keeping an acceptable volume still in that situation. So volume update. An acceptable development in 2020, 8% growth in Norwegian kroner; 2% in local currency, high churn, normal churn, low churn. Good speed entering 2021. All cleanup activities have been done now. So going forward, it looks pretty good on the volume side. And I'll be back on the guiding statement shortly then. Claims update on the next page. I think I basically skip the page very quickly and come back and talk a little bit about the result per country when I am cover -- I do a right a later slide, which is saying something about combined ratio per country. The only thing you can note on this Page #8 is that runoff losses are around 2.2% in the full year and large losses are 8.8% against a normalized level 7%. And we have had a positive COVID-19 effect, size 1%. So if you could maybe call these kind of 3 areas, not normal, reserve losses should normally be around 0%. Large losses should normally be around expectation. And COVID-19 shouldn't be there. So 2 on the negative side, 1 on the positive side, meaning that the underlying reality is probably better than 94.8%, which is the figure of 2020. If we go to Slide #9 and see on the large loss situation, you can see what I just mentioned. The kind of orange column on the right side there, that we have an 11.1% large loss ratio in quarter 4. So 2 claims of significant size. One is the landslide in Gjerdrum in Norway and the second one is a kind of motor liability claim in U.K., which is very significant. And those two, together with a handful of more kind of smaller large claims, adds up to a pretty high large loss ratio in quarter 4. But as you can see on the graph here, to say that we have a normalized large loss ratio around 7%, it looks reasonable, and we will be back on track in the Capital Market Day. And give an estimate on the expected loss ratio in 2021. My guess today is that, that will move upwards from 7% to 8%. Don't worry about it because it is an integrated part of the pricing structure we have here. So it does not mean reduce profitability but I think that we may see the large loss ratio normalize go to 8% when we meet in the Capital Market Day a few weeks from now. So that was the comments on large losses, run off and COVID-19. As other companies have reported, COVID-19 have had some losses. Business interruption is one area. U.K., for instance, but there are also kind of -- we are contracyclical as insurance companies, as many of you know. So when the wheels are turning slower in the economy that will normally lead to some kind of positive effects in an insurance company and vice versa, and everything is moving fast. There are more claims. That's kind of a normal situation. If we go to Page 10, we can see the combined ratio story. And on the upper part of Dutch line, you can see Norway, Sweden, Denmark, U.K and Finland. And they have marked ring around the combined ratio of Norway, 86.3%; Sweden, 92.7%, Denmark, U.K., Finland and Protector in total on the right-hand side. So what you can see is that Norway have delivered very well after a couple of poor years in Norway. There are some reserve gains in Norway. So the underlying reality is not that good as 86.3%. You can see Norway that we have 105% and 86%. So the improvement is not really 20 -- 20 percentage points multiplied with NOK 1.4 billion is NOK 280 million. It's not that strong an improvement. So underlying reality was slightly better last year, and it is slightly worse this year. But Norway, strong comeback, good to see. The new country manager is on board after I have had the position temporary in order to help turning around the Norwegian results and organization in order to be kind of back on track again here then. Sweden, coming back with a good quarter 4, delivering an acceptably good combined ratio and will enter 2021 with a good speed. So also in Sweden, Hans Didring, his team in Sweden, a strong team, normally always delivering good results are back on track. And my expectation for Sweden is that you have had a bit of bad luck in 2020, Norway, luck, Sweden on the other side. Those three is kind of okay, then as it should be, I guess. But my expectation and the underlying reality in Sweden is slightly better than what you see here. So I would expect a combined ratio below 90% in 2021 in Sweden. The poor results here is arriving from Denmark. And my comment is that the underlying reality is a lot better because we can see here some reserve losses on the Workmen's Comp. That is kind of decisions taken 5, 6, 7 years ago in Denmark. It's a long tail product. Again, some reserve losses in Denmark on that one. And also a couple of claims on the liability side, which is linked to history. So the underlying reality is a lot better. But we still have some activities to do. There are some uncertainties of how fast we can be back with a healthy combined ratio. I think it's possible to deliver below 100%, possibly around 95%. This is will be volatile, obviously. But it's not as bad as it looks, and underlying reality is stronger, and our organization is fighting to get back on track to deliver profitable growth. And they will do. We have a new country manager on board, Anders. Welcome on board, you have been here for a few weeks, together with your team in Denmark and with support from Hans and others in Sweden. You are working close together with Sweden. I'm absolutely sure that Denmark will be back on track. U.K. is growing pretty much, or even more than pretty much. You can see on the top line here that the volume development is close to NOK 500 million. That supported somewhat by currency changes. So in local currency, it is not that strong. But obviously, it's a good growth in U.K. and that is compared with a very strong 84.9% combined ratio. Again, like Norway, a bit on the lucky side, don't expect that good figure going forward. So my expectation on Norway is slightly higher, U.K. slightly higher Sweden better, then Denmark a lot better. But everything is moving well in the U.K. And the good story about Henrik being the new Chief Executive during the autumn is that we have a strong management team in Manchester and London. So obviously, when Henrik had to spend some time on the Chief Executive role maybe a bit more than some time. So we have a strong team in the U.K. and they will obviously be there for them and together with them still. But the people we have there is a good team, and we would love to invite you, investors, to meet in Manchester when COVID-19 is history, to meet our strong team in Manchester and in London. And since we have most of our people in Manchester, the location will be Manchester when we do invite you to such a meeting. It's pretty realistic to see that U.K. could double in volume in a pretty near future. It won't take too many years in order to do that. The market is as you now big. We are not in a hurry. It's not important, but the U.K. story here in 2020 is strong, and expectation is profitable growth going forward. Finland is a smaller entity in Protector, rather small. The broker society is not that strong in Finland. Our position in the public sector is smaller. We think that property business in Finland in public sector have too lower rates. So we are not really expecting any growth from that important product in these important areas. Rates are too low. We will lose money if we are fighting too hard in that segment to stay away. But it's good to see that Finland is back on track with some kind of a healthy development. And are doing fine in the Finnish market. So that was kind of my walk through on the different business unit. Only comment before going to the next slide. We can just pop the next slide. I do the comment, it doesn't really matter #11. Is that the change of ownership business is kind of still delivering some volume because the legislation that is expected to arrive, the new legislation, which is linked to the product, is delayed, and we arrived some volume during 2021. And then we will be totally out of new business in that market. The claims handling the part in change of ownership are taking very well care of the claims and the run up, which is incredibly important. It's a hell of a lot of money in that area. So the runoff is running well, people are doing a good job. And we -- at the moment, we also earn money on the runoff situation. And those of you who have followed insurance companies for some years when exit situation is decided and a decision taken, you normally see losses arrive, but you haven't seen them so far in my expectation that you won't see them in future either. So the runoff is moving very well on the change of ownership side. To Gjerdrum then. So our focus is to deliver on good claims handling quality towards the municipality and the municipality management in Gjerdrum. It's a small municipality. They are in incredibly difficult situation, obviously, and our job is to try to support as good as we can in that area. And as many of you know, when such a disaster hits Norway, there is a kind of a natural perils kind of pool, where all losses are distributed among everybody, equal to the market share in the property type of product market here. So it doesn't really matter whether you have clients there or not, you will have your share of the premium and the losses in that type of situation. The COVID-19 effects on the Slide #12. I said it, it's a 1% kind of positive effect in accounting in Protector. Our expectation going forward is neutral. It will be some losses on the business interruption side. It's not absolutely sure at all, obviously, what kind of size. But there will be also some kind of positive elements still. Some motor segments will still drive fewer kilometers, leading to fewer claims. And our expectation is that COVID-19 going forward will be on the neutral side. However, with some uncertainty, obviously. On Page #13, that is kind of a bit of a new story in Protector because now we are start talking about costs. As you have heard, following Protector for a number of years, we are cost leader in the world. So no one have a lower cost ratio than Protector in the world. In the same segments, we are running. I have never ever met an analyst challenging that. I've met many other people challenging that, but not an insurance analyst. If you know 1 company with a better cost ratio than Protector, name it. And I will have a look at the figures, and I'm absolutely sure I'm not wrong on the statement. So we are a leader on costs, but we are not good enough. So in the Nordic market, when client churn have been pretty significant, we are losing clients in 2020. Improving in quarter 4, improving in January 1, but we are losing clients. Meaning that cost ratio development is going north. Because we have basically the same staffing even in some areas, a bit higher staffing in that area. That is a mismatch that is not kind of acceptable in the long run. When we use resources on clean activities like we have done in the Nordics the last 18 months, you need more people. But when that clean up activity has been finished, it is today, then you have to address the kind of cost ratio you have here. So we have an agenda in Denmark and Finland in order to reduce costs a lot. And we have an agenda in Sweden and Norway, which are pretty lean. But still, we have something to pick on the cost side in Norway and Sweden, and we will do in that area. Norway and Sweden is cost leader in the world, but it's not good enough. And when we lose volume development, we have to take a breath, step back, do what is necessary in order to maintain competitive advantage or higher expectation in the next 3 to 5 years strengthen the competitive position of Protector. And the logic is pretty easy and is a part of the DNA of the company, cost and quality leadership should lead to profitable growth, which, again, should put Protector in a top 3 position in any market segment we enter. The 4 targets of the company, the statement we got to market 15 years ago. And we are cost leader in the world, but it's not good enough because we are challenged on cost in the Nordic market. We will be back on Capital Market Day a few weeks from now and explain more in detail about what we internally call CL8, which is Cost Leadership 8. We will come back and talk about this 8. You have heard about CL7, haven't you or CR7, actually. So we have stolen an idea from Cristiano Ronaldo, and he is the Champion League guy, according to himself, and he probably is the most kind of the best Champions league player as far as I understand. Yes, he is. So we are still in kind of some ideas then from Champions League. We would like to win happens league on cost every year in the world. That's kind of the idea behind CL8. Come back, talk more about -- I'm smiling a little bit. We're trying to create some energy around cost improvements then. I do not think that we will go to Madrid to celebrate anything, I don't think so. So okay, let's have a look at volume in 2021 on Page 14. Churn is back to normal or slightly better, and we expect to grow premiums in local currency size 10 and Norwegian kroner, possibly the same. That's -- we don't really know. But so far, the currency level is at least in the kind of volume we have seen in January is basically equal to what it was last year. So 10% growth coming out from U.K., but not only because there will be some growth coming out from Scandinavia is my expectation as well that Sweden -- possibly Norway, but at least Sweden. But that's the kind of story. And you heard the story a few weeks ago, so I won't spend more time on it. If you go to next slide, that's a pretty important one. Slide #15. This is the combined ratio. For those of you that are new, 100 minus what you see here is the margin we're living on. And if you have a 6% to 8% margin, meaning a combined rate of 92% to 94%, you earn a lot of money. Then you have a return on equity size 20 in an insurance company on the technical side. So over guiding towards this year is 90% to 92%. The long-term target has been 95%. It still is today. And whether we will revise these kinds of targets or not, we are discussing it at the moment. We will come back at the Capital Market Day and talk about a bit more longer-term guidance on the volume and combined ratio side. So the volume communication to the market 2021 is above our long-term target, and the combined ratio kind of communication to the market today is better, meaning lower than the long-term target, and we have started to discuss long-term targets internally in the company as we speak. And we will be back on the Capital Market Day and update you on a bit longer horizon in that area. So what you see on this slide is starting on the last year's combined ratio size 94.8%. We had some run-off losses. We -- our expectation is that they will be similar on next year. We had large losses sized 1.8% above normalized expectation. We expect that to disappear. It doesn't really matter where the expectation is 7% or 8%. It's already inside the premium calculation and the renewal calculation of the season here. So we will do the math before the Capital Market Day and update. But our expectation is that, that figure will be 0. Obviously, with volatility. Large losses is a part of the volatility of what we are doing in that area. COVID-19 effects may disappear in 2021 and maybe 0, we said neutral effect with some earnings, some losses, accumulated to 0. So that advantage from last year will disappear. There will be some negative surprises outside what we can understand today. And they could be around 2 to 4 percentage points. Kind of a margin of safety. But remember that if you have an expected normalized large loss size of 8 that should be multiplied with NOK 5.5 billion to NOK 6 billion. So first, we can have large losses sized NOK 400 million, NOK 500 million. And then we start to eat on the margin of safety. So it's not like that NOK 100 million claim is eating our marginal safety. It's eating of the normalized large losses first in that area. But some negative surprises, not only occur in an insurance company. You have to have a margin of safety before communicating anything towards the market. The quality of the customer portfolio may be slightly better. But what about new clients, it's always an issue. So we estimate now that the quality of the portfolio 2021 will be quarter 2020. We did some clean up on the Workmen's Comp side January 1. But whether that would have been profitable or unprofitable before COVID-19 in Norway, and in Denmark, it's a long tail. It's hard to say. But okay, our expectation is that the quality of the customer portfolio is basically equal in 2021, 2020. All insurance companies are fighting to improve portfolios. Everybody says they are good. The question is we are the other ones go then. They are somewhere out there. And we have some clients that we don't really understand or that are wrongly priced, and it's constantly, obviously, a job in order to try to find the balance between risk and price and terms and conditions. But our expectation now after the significant cleanup, we have communicated to you for 18 months. That's not the issue at the moment, which is good resources can be used at other activities there. The next thing here is a bit technical, the earned premium element. When increasing prices in 2020, we are getting in the bookkeeping at 12th of that earning every month. So when we increase prices, July 1 last year or November 1, then we will have a margin effect in 2021. So it's kind of earned premium developed slower than written premium. When we send an invoice for 1 million something, euro or pound or krone, we earn 1/12 every month. That's the earned premium element. 1.2 percentage points profitability improvement, that is not an estimate. That is a fact. So that figure is hard. It will not disappear. It's history. So margin improvement relative to earned premium will be 1.2 is a fact. Another fact is the next one. We have had price increases in the Nordics January 1, that's history. There will be price increases also going forward. And our -- so a lot of that 2.0 percentage points here, that is fact. Some of it is future. But in Denmark, 80% of the volume is renewed already for the full year. And price increase is a fact, it's not an estimate. But Figure 2 is a combination of factor estimate, varying a little bit between the different countries though. So that figure is pretty close to fact, and it's 2.0.And then cost ratio improvement should be a surprise to some, but normally, it's not. So that will be around 1. And that leads to a combined ratio guiding size 90% to 92% in that area. So the bit of teaching on how to build expectation in Protector and in an insurance company. And I think that this kind of slide you see here is more detail than competitors are delivering to the market. And that also makes sense that the bigger guys in the market, they have a more top-down unit and are not that precise. So that would be a pretty large job, if you are in a large number of segments then, many, many products, many, many segments, many countries. So I'm not saying that competitors do not have good communication in these areas. They have, both [indiscernible] are very good at managing these kind of things. And -- but is a bit more detail for Protector because it's possible, and it hopefully help you to understand that what kind of credibility, but it could be surprises. We had Grenfell Tower. We had [indiscernible] crisis, costs money resources, challenges in that area. That's the margin of safety. So no promise is given, but I can take a bet on it with a bottle of wine, obviously. If you go to the investment side and go to Page #17, just a small reflection on this slide because if you go back to 2010, you will see that we had [ NOK 2,122 billion ] investment sized investment portfolio. And the management team on Protector, we met up North in Norway, that autumn. And we saw that one, wow, we are passing NOK 1 billion in annual premium. That's great. The first billion is the most difficult one. 2010. Up north. [Foreign Language]. Some of you have even been there. Nice place, beautiful mountains, fishing, eagles, waves. So it's great. My father is from that place. So it's a great place to go. We had NOK 1 billion in premium and NOK 2 billion in investment. Today, we are getting closer to NOK 6 billion in annual premium. Today, we have NOK 14 billion in investment portfolio. So the good thing about an insurance company growing and building also then an investment portfolio and building float, even with the interest rate level so very low as it is today, still, it adds value to the company. And those of you have followed the company, you know that investment is core in Protector, get used to it, so we are doing insurance and investment. And investment part of the profit in Protector historically to date is about 75% of the tax. I think that the technical profitability of Protector will play a bit stronger significance in the next years to come, maybe right around, depending on the investment side, but investment is very, very important for Protector, and we are 7x the volume on investment during the last 10 years, and we are 6x the premium volume in 10 years. The question is to Henrik and to others, what will the next 10 years deliver on?If you go to Page 18, investment performance has been great. If we go to Page 19. It has been a great year on the bond side, have more look into it at a later stage. And if you go to the equity side on Page 20 we have delivered strongly after a couple of poor years. Then we are back with good results. It will be volatility. It is unrealized gains, most of it. And this country intrinsic value has gone down to 26% from above 40% in the last quarter here. So we are thankful for the kind of good result, meaning that we are eating on future expected returns from the investment side. But okay, that's the story. And the Page 21, this is only for the kind of history books. We have been through these kind of presentations we do a couple of times before. COVID-19 crisis arrived. We were very prepared. We had to act and we acted, and we have taken out more profitability because we have been solid enough and prepared enough to take action. Like we did in the financial crisis in 2008, where we also kind of acted and got something extra out of it. On Page 22, capital allocation we will always put priority to insurance and profitable growth. The good thing is that if you are looking 3 years ahead now, and if just for the sake of an example, if we grow 10% a year, which we have guided on. And if we do that a couple of more years. Then the accumulated growth will be 33%. But the good thing is that capital consumption is growing a lot less. Then in such a situation, capital consumption growth will possibly be -- not possibly, it's a fact that it will be lower. It will be in around 8% or something like that. So we can grow volume a lot but capital requirement and capital consumption, less, a lot less. And the reason why is because we have gradually exited from Workmen's Comp in Denmark that consumes a hell of a lot of capital. We have taken down Workmen's Comp volume in Norway, relative to other products, and we are growing quickly, motorway business in all countries. First, in Sweden, then in U.K., and that is more short tail, and it consumes less capital. So even with pretty strong growth, we will not consume that much capital, leading to an opportunity to strengthen the balance sheet of Protector, invest more in riskier assets if we would like to on, for instance, on the equity side, we don't have any plan to do it. But that is an opportunity. And the other opportunity is to pay dividend to shareholders. So we are in a situation where we are going towards a good growth without consuming too much capital. That's a shareholder story. That is interesting. We are happy to share more information about that on the Capital Market Day a couple of weeks from now. So then we are on the next page. It's our DNA. This is who we are. And if you go to the profit and loss statement on Page 24, I'm nothing more to say, have a look at the figures. I've told the story, the balance sheet on 25. 188% solvency capital ratio, good protection on the downside still. So if a new crisis arrive and it will when, we don't know, then we are solid, and we have downside protection. There are some scenarios on Page 26 have a look at it. And on Page 27, this is the dividend story of today. So the Board has decided to propose for the general meeting and we have to go through the FSA, like all of the financial institutions in Europe in order to update on what our plans are, and they will give their feedback in that area. But we are targeting to propose a NOK 3 per share dividend based on 2020. We are updating you today on the fact that we will consider going to paying quarterly dividend in 2021. Decisions will be taken after each and every quarter and will be decided by the Board. And remember, you shouldn't really in Protector expect a stable dividend policy. That's not who we are. We are doing insurance and investment and there will be volatility. So obviously to smoothen out dividend somewhat is positive. But don't expect us to be like the large consumer-based insurance companies that are growing less -- are less potentially than volatile than us. I think that our volatility is going down on the insurance side because we have a more diversified geography, and we have a more diversified product portfolio. But we would like to have a flexible capital allocation setting. Profitable growth on insurance first, are there opportunities in the investment market, there could be volatility on our result, and it will certainly be on the investment side. But what you should expect from our side is that we have decided to consider a quarterly dividend policy going forward. And we will say a bit more on that in the Capital Market Day a few weeks from now. And then we have to see after quarter 1, whether we will take new decisions on a quarterly basis or not. But at the meantime, for the previous year, NOK 3 per share then on the dividend side. A look in at my IR responsible, did I get it right, Amund. he is nodding. Yes, you got it right. So the summary on Page 28, and we open up for questions. We have 10, 15 minutes late. No. Again, of the presentation. So the summary is we have had a historically high earnings per share size NOK 12 in 2020. We expect 10% growth and a combined ratio of 90% to 92% in 2021. There is proposed to dividend size 3 quarterly assessment will be considered. And welcome to our Capital Market Day in March 10 at what time, Amund. Is that decided?
No, it's not.
Okay. So exactly what time is not really been decided. So we will get to you shortly on whether that will be at 10:00 or something else then. So hopefully, some of you will meet them. And then I am through the presentation. And my question is whether there are any questions, and we are nodding here. Then you start with the first one, Amund.
Yes, I will. So if you -- yes. You there, if you mute yours? We don't hear me double up. Good. So 10% premium growth, what's your feeling here? Do you think -- do you think it will be positive or negative surprises?
So it was an echo here. So I had a bit of a problem in order to catch your question. So could we get rid of the echo and I will mute. Okay, you're arriving here and taking the question in my microphone then, Amund, right?
So you guide 10% premium growth. What's your feeling about positive and negative surprises?
Positive and negative surprises. If that is linked to the premium growth, the question is linked to premium growth. I think that there is not very much risk on the volume estimate. We have an underlying reality in January 1, which was north of 10. But we got rid of some Workmen's Comp business in Denmark and Norway. The cleanup has been finished. The underlying reality is stronger. And April 1, U.K. will kick in. That's the big data in U.K. It is January 1 in the Nordics. So I think that it's very limited risk on the volume side in 2021. So we will be around 10. That could be slightly lower, but not a lot. It could be north that depending on the large typical situation, we may see in the market, but my expectation is that it will be not a long distance from 10, either south or north actually.
Yes. Some more questions on profitability and underwriting. Since the Nordic insurance market, in general, is very cost efficient. Is there an opportunity for Protector to gain competitive advantage by developing superior underwriting processes? For example, by investing in technology or IT?
Okay. So that's a good one. So I think that when it comes to underwriting superiority, we have that superiority in one segment, that is in public sector. So if you compare Protector with other market players in public sector in the Nordics, the [indiscernible], KLP, if [indiscernible], or [indiscernible] or others, it's a fact that we have delivered better than competitors in the public sector. So I think we are very good at underwriting in public sector. Outside that, it is difficult to see that we can get into such a situation in the Nordics. There are good underwriters on the competitor side as well. And I don't see that technology play an important part in this area actually. I think we are good on technology. We innovate faster than anyone else in other segments, obviously, on technology, but we are not big data and consumer sector. So we think that the companies in the Nordic are rather good on IT development in consumer sector and using big data in a good way and can automate part of the claims handling value chain, for instance, and they do. So they are good in the consumer sector. It's a bit more complicated in the commercial sector, where we have more bigger claims, that cannot be automated on the property side, for instance, or in other areas. The relative share of the big-sized claims in other segments are very, very different from the consumer sector. So I think that we are good on IT. It is playing a more models to all-in other segments compared with the consumer sector. Next question?
Yes. Thank you. Could you please give some details on which cost that goes into the financial returns line in profit and loss in Q4? And if that's normal levels.
So I'm not quite sure that I understand the question. So we...
We said something on this slide with investment return about some -- above normal costs.
Okay. Okay. So what we see on -- in 2020 on the cost side, both on -- in the investment area and in the insurance company of Protector, the level of -- the bonus level, the long-term bonus level in the insurance side is linked to a long-term incentive plan, linked to share price development. And so we have a very significant long-term bonus plan cost hit in 2020 on the insurance side. At the same time, we have a long-term incentive plan among key people in the investment department. That is even a longer horizon, which makes sense, I guess, and after a poor investment year in 2018, a poor investment year in 2020, but a very strong -- I'm sorry, poor in '18/'19, very strong in '20. What you do is that you are not putting any expected bonuses in 2018 in your profit and loss statement because performance is poor. And the period as such is expected to be too poor. Same happens in '19. But when you kick in, in '20, you must set aside the costs on the investment for '18, '19 and '20 at the same time. If you normalize that over 3 years, it's normalized, but it's not the correct way to do a company. So it will, by definition, be volatile in that area. So you could argue that you have a tripled bonus level on the investment side and a doubled bonus level on the insurance side in 2020. That's not normal. Hopefully, the share price development still will be good, but you should have a longer horizon on that kind of cost development in that area. So that's the communication. So that's a good question. And thanks for giving me the opportunity to clear out that kind of situation. So next question.
So we have more questions on dividend versus buyback. So I'll combine them.
Yes.
So what is your Solvency II margin target? Will you pay out capital excess capital or that level? And why not go for buyback?
Okay. So we will come back in the Capital Markets Day to explain a bit more about capital allocation and what kind of targets we have or if they will be slightly changed or more changed, we will come back on the Capital Market Day. So no communication about that kind of issue today. On the buyback situation, we think that the window of opportunity to buy shares very cheaply is not there. If we had gone on to the market today, and said that we will do buyback, that would probably push the share price even north of what you see here. It will have taken a few weeks. So our expectation then is that, that will be on a higher level than yesterday, obviously, which I think we can see some indication on this morning. I've really been there, but I understand that share price is coming up today, which we basically expected. So the window of opportunity is possibly not brilliant. And then we'll let kind of the shareholders decide then. Now we pay dividend, if we would like to buy shares, buy shares, and there will certainly be a situation in the future where there will be given buyback opportunities again. And let's see whether we are acting swiftly enough in order to get in when we should get in. So we may lose some window opportunity, sorry about that, in 2020, there will be opportunities in future, I guess. And hopefully, you can see a company moving in these kind of actions. But remember, only going 1, 2 years back, some issues on the profitability side, on the technical side, some issues on core investment result a year or 2. But now we are steady evolving with a strong riding. It will be volatility on the investment side, but we feel that the technical side will deliver profits in the quarters and years to come. And then the financial flexibility of the company has increased. So if there is a crisis in the market and the share price drops with 10%, 20%, 30%, 40% or 50% then you should expect us to move in that area, but not at the moment, no.
Good. We have more congratulations to the appointment of Henrik, but could you comment on how that could change roles for the organization as a whole? For example, the role of Hans.
Okay. So will there be role changes and implications relative to the new Chief Executive, obviously, it will be. That kind of succession discussion has started internally in the management team of Protector 3-4 years ago. So we have prepared for the situation for 3-4 years. We have prepared more lately, and we will continue to do that. So obviously, as you also have seen, with the kind of also stock exchange information release January 1, the 2 of them, Hans and Henrik, they got the same long-term incentive plan with shares linked to a 3-year kind of horizon from the company in January 1. And it's obvious that when Henrik is taking the Chief Executive position, Hans will expand his kind of playground in the company, so will others in that area. And we half year to go or a bit more in order to continue to prepare for that kind of situation. So yesterday evening, Henrik, Hans, my management team and myself, we had a meeting, drinking champagne, celebrating Henrik. And I'm talking about the succession of this full management team here. So as Henrik then stated yesterday, Hans is #2 in the company now, and we'll obviously play a more important role going forward in the future. Like Henrik has been my number 2 in the company for a number of years, that is about to change. I will still stay here for a few months and be there. I enjoy that and look forward to the next few months. We are on schedule to close down now. It's 11:00.
Yes.
Do you have something investors want to ask, Amund, or no?
No, I believe you have covered mostly all of the questions. And if not, we will answer by e-mail.
Okay. So we come back and if there are very, very intelligent questions, and all of them have been -- we will pop the question and distribute to everybody. And if there are more like detail, we only respond to those who have come ask the question. So thanks a lot for joining. It has been a pleasure to be here together with you. I hope I see many of you on the Capital Market Day, March 10. Thanks a lot, everybody.