Investing In Technology And Expanding Into France Will Improve Operational Efficiency

Key Takeaways

• Enhancing data quality and investing in technology could improve operational efficiencies and net margins, supporting long-term scalability and earning growth.
  
• Strong growth in public sector premiums in the UK and France, alongside opportunities in developing markets, signifies substantial revenue potential.
  
• Expansion into France carries execution and competitive risks, while reliance on limited markets and volatile property insurance could hinder growth and earnings stability.

Catalysts

Operates as a non-life insurance company, provides various insurance products to the commercial and public sectors, and the grouped insurance schemes markets in Norway, Denmark, Sweden, the United Kingdom, and Finland.

• Protector Forsikring is focusing on improving data quality, which is expected to drive cost and quality leadership over time. This may enhance operational efficiencies and result in better net margins in the long term.
  
• The company's significant growth in premiums from the public sector, particularly in the UK and France, suggests strong revenue potential given this segment's increasing relevance and Protector's specialization.
  
• There are strong growth opportunities in France, viewed as a new and developing market, which could drive future revenues as the company aims to become a top 3 player in its operational segments.
  
• Price increases and high retention rates in the Nordics and the UK signal a positive impact on revenue and net margins, supporting stable financial growth as the company counters claims inflation.
  
• Protector's investment in technology and efficiency improvements is likely to reduce costs over time, facilitating better scalability and potentially improving net margins and earnings.

Protector Forsikring Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Protector Forsikring's revenue will grow by 9.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 16.1% today to 12.6% in 3 years time.
• Analysts expect earnings to reach NOK 2.0 billion (and earnings per share of NOK 24.54) by about February 2028, up from NOK 1.9 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.9x on those 2028 earnings, up from 14.0x today. This future PE is greater than the current PE for the GB Insurance industry at 12.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.75%, as per the Simply Wall St company report.

Protector Forsikring Future Earnings Per Share Growth

Risks

• Protector Forsikring's expansion into the French market carries significant execution risk, given the different market dynamics and the nascent state of its operations there, which could affect net margins due to initial inefficiencies and increased costs.
  
• The reliance on a confined public sector and housing market limits growth opportunities, as this sector is finite, potentially capping revenue growth if expansion into other segments isn't successful.
  
• The emphasis on property insurance, which can be volatile and has large loss exposures, suggests potential risks in earnings stability due to a higher likelihood of large claims.
  
• The ongoing 'cleanup' in Sweden indicates potential past or existing issues within its portfolio management, which might affect future margins if similar issues reappear or if growth isn't sufficiently robust to offset these setbacks.
  
• Increased competition and the reliance on price competitiveness in new markets like France, particularly without substantial brand recognition there, could pressure revenue and net margins if not adequately managed.

Valuation

• The analysts have a consensus price target of NOK373.33 for Protector Forsikring based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK16.0 billion, earnings will come to NOK2.0 billion, and it would be trading on a PE ratio of 17.9x, assuming you use a discount rate of 5.8%.
  
• Given the current share price of NOK331.0, the analyst's price target of NOK373.33 is 11.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.