Growth goes from 15% to 40% in 2023 💪💪💪
See what happened in Q1 and let company Q2 update on UK public sector sink in 😊 As you can see from the table below there are some analytical errors that now probably will be corrected. One analyst also missed on insurance revenue with a lot (not shown in table). I had a lucky analytical preview again in Q1 but DNB and SEB also did well on EPS. We were all wrong (given Jan 1st company update) on volume and neither of us saw the exceptional volume April 1st.
My volume summary in short is based on 2.2 bill growth in H1 (90% of that is facts not assumptions) and a modest 663 mill growth in H2 including currency effects. You have a lot of “margin of safety” in that figure and you will probably pass 40% growth and 10 bill NOK in premium. The 2023 growth in LCY will be around 32%.
Eps 22.00 in 2023🔥: When you add up, calculate in some financial costs and other costs you will end up with an Eps sized 22 NOK. I will be back with a new analyst update and my new target price shortly.
The big question no 1 is how it is possible to grow 40% without losing underwriting control?
First – this is mainly about the UK (1 bill NOK in growth April 1st). Second – the same people are on board today as in 2016-2022. Thirdly – Protector have communicated low hit-ratios for years now saying, “we will never compromise on discipline” and they are now stating, “we have not changed anything“. The market is finally pricing up – it takes 5 years to turn around a portfolio, then losses will hit in full, then you must increase prices with a lot … or leave the market. It should have happened before, but it happened now – somebody has been sacked and others are in charge.
The big question no 2 is even in a rational market, how can you undercut prices and earn money?
Have you forgotten Protector main target no 1 and 2 (stated first time in 2006/2007)? We will be Cost leader (in the world) and Quality leader in all markets at the same time. If you can deliver on the two you have a significant competitive edge and you will earn a lot where others lose money or are at break even.
Fact no 1: In the UK Protector is more than 10% (pp) lower in cost than competitors (even more than in Scandinavia). It’s a fact and it’s possible to find out, but it’s impossible to find exact figures.
Fact no 2: In the UK brokers have nominated Protector as the quality leader 5 years in a row now.
Fact no 3: The logic above does not apply for all products/segments, but it fits extremely well with Protector’s main risk appetite, Property (frequency) business and large motor fleets both in the Public and Commercial sector. Why do you think these risk segments are priority …... 😊
Fact no 4: The main growth driver now is Public sector with 1 bill growth April 1st and a lot of growth in Scandinavia Jan 1st (Jon and his team again😊). Protector is the market leader (by far) in this sector in Scandinavia and soon no. 2 in the UK (you heard Chief UW Public sector UK Bjarte speak on Friday – didn’t you).
Summary on growth vs Risk – strong Moat kicks in
Protector is a disciplined underwriter growing 40% (32% in LCY) in a market they know very well. They can do this because they are the cost leader in the world and quality leader at the same time. This could last forever but remember market conditions will change.
Sverre Bjerkeli
Analyst trainee, Hvaler Invest AS
Lillestrøm, 04.05.23