Protector Q2 2023 preview
79,3% growth 💪 and running yield at 6.2% 💪 – target price 271 (up from 238 pre Q1)
Our previous Q2 assumptions was 76,7% GPW growth and Combined ratio at 88,2%. These assumptions lead to our 2023 target price of 271. We think Protector will deliver even stronger in Q2 as shown in our table below.
Combined ratio will be better because our previous Q2 assumptions was in the conservative corner. We are not overly worried about inflation information communicated at Protectors webpage linked to ABGs insurance trip in May, since such information must have been included in actuary reserves in Q1 if they were of any significance. Some analysts/investors talk a lot about weather, large losses, reserves etc in a preview – we don’t, because it’s not worth while guessing. Those figures are only important to figure out underlying CR after release of quarterly figures.
Running yield is moving up around 60 bp to 6.2 entering Q3. 3- and 4-year curves are also moving rapidly up. We have not calculated the long-term effect but the facts are; Return on bonds will stay higher for longer 😊😊
Investment return in a quarter is not important but we have -3% equity return and 1.55% bond return. It looks like Ulrik in Nordea and Hvaler is close on ROI while DnB is a lot lower. I put my money on us Ulrik 😊
Our Eps is 5.62 positively influenced by significant one-off effects (discounting of reserves sized 200 mill). Other analysts EPS is a lot lower for different reasons, but main driver is CR. It’s not important if Eps is 4.63 (CR 88.2% - base assumption) or lower (investment return volatility). You should focus on volume, underlying combined ratio and running yield (big 3 drivers)
Conclusion: Incredibly strong on “big 3” 💪💪 💪 – target price 271.
Sverre Bjerkeli, David Bjerkeli,
Analyst trainee, Hvaler Invest AS Investor and analyst, Hvaler Invest AS
Lillestrøm July 6th