What Could We Expect From Vardia in Sales 2015?

In recent time have I seen several discussions regarding Vardia sales numbers on different blogs and almost fierce comments from some readers in the commentfields. Therefore I want to highlight this post to really focus on the Sales and try to give a fair estimate on where we would end up after 2015.

Before we start I want to highlight the big Q everyone has:

Q: What if the big insurance companies just lower the price and compete Vardia out of the market?

A: Vardia's business model is to provide low risk customers with insurance products. Since low risk customer will do less insurance claims then high risk customers, Vardia could offer the product to a lower price. In other words Vardia says that, why should you share a risk with high risk customers when you are a low risk customer?

This is the main reason why Vardia will be a winner in the end, and this business model is not done by the big insurance companies today. Of course to this you could add several things in Vardias advantage like more efficient IT, lean organisation etc. but it's still the core business model that will make Vardia successful. 

Now over to the numbers,

To make this forecast as correct as possible I will investigate how 2014 sales number were per annual, monthly and daily basis. Then adjust a modest annual sales growth on below market expectations on 15% (For Vardia this is modest). 

How was sales on annual and monthly basis 2014?

-Total sales of 1044.3 million NOK 2014.

-Average per month 87 million NOK.

How was sales on daily basis 2014 and how will it be 2015?

Public holidays 2014 which fell on a weekday (Could have 1 day wrong here on some country) :

Denmark: 11 days

Sweden; 15 days

Norway: 12 days

We take an average here and say 13 days in general.

Weekends (Saturday and Sunday) 2014: 104 days

Holiday (I assume everyone has 5 weeks); 35 days

Number of days per year:  365 days

How many effective working days do we end up with per year now?

365 - 13 - 104 - 35 = 188 days

If we assume 15% sales growth next year we end up at 1200.6 million NOK, divide that per effective working day, we have sales per day at: 6.38 million NOK.

How will sales be per month 2015?
After analyzing local holidays and normal vacation patterns I did this assumptions for effective working days per month for 2015:

January: 14 Days
February: 18 Days

March: 18 Days

April: 17 Days
May: 17 Days
June: 12 Days
July: 9 Days
August: 13 Days
September: 19 Days
October: 19 Days
November: 19 Days
December: 14 Days

If we now apply the assumed average sales per day on effective working days for 2015 we end up with a sales per month like this:

So next year, annual sales forecast on 1200.5 million NOK and GWP forecast on 56-60 NOK per share. 2015 will be a great year for Vardia Insurance!!

Sincerely,
Eighth Wonder Investing

Note: Vardia offer products to everyone, but high risk customers gets a high premium.
Full disclosure: Long Vardia Insurance Group (VARDIA)
Disclaimer: All text on this blog is not a form of investment advice, this is only for personal use and I disclaim myself  for misspelling or wrong calculus.

Protector Forsikrings Forecast and Announcement January 20th 2015

Brief notes about the announcement from Protector today.

Protector (PROTCT) today announced their own forecast and a significant volume increase for year 2015.
Their CEO Sverre Bjerkeli said this today about 2015:

"The Company experiences strong growth in January and expects Gross Written Premiums (GWP) to increase to 18% (15% measured in local currencies) over full year 2015. Norwegian business areas will contribute with single-digit growth, while Sweden / Denmark will grow approximately 50% in aggregate. Gross and net written premiums are expected to experience identical growth rates. 

This text is really a statement that Protector Forsikring has just started, 18% (!) growth is magnificent and really show how much hidden value there is in this insurance company. A wonderful company like this should be traded at higher price, that's it. Mr. Market wake up!!

Looking forward for the 2014 annual report 12th February.

Other highlights in the announcement were:

• Strong premium growth in Q4, up 19% since last Q4. Gross premiums written amounted 282 million NOK.
• Net GWP Q4 was 250 million NOK, up 24% since last Q4.
• GWP 2014 were 2.375 million NOK, up 28% since last year.

Over and out,
EWI

Portfolio and Transactions - New page on the blog

Decided that its time to be more transparent in my portfolio and to track the transactions, just because of two reasons, first that it will be a nice thing for me to have during this journey and secondly that I hope it will inspire someone to start the same adventure as I will do.

Below you could see how the report will look like, yes I know very simple. The report will be updated monthly with the consisting portfolio and the done transactions during the period.

Best Regards,
Eighth Wonder Investing


Latest update: 18012015

I am at the moment invested in 4 companies. My portfolio and the changes will be updated once a month. All values in the portfolio summary will be denoted in SEK, total value of portfolio and changes will be denoted in SEK and EUR.

Portfolio today:

Transactions:

2014/12/30 - Dividend Tesco +165.3 SEK

2014/12/17 - BUY Vardia Insurance Group - 1000 shares - 26 911 SEK
2014/12/17 - BUY Protector Forsikring - 720 shares - 24 820 SEK
2014/12/16 - Dividend MCD +521.34 SEK
2014/12/09 - SELL MCD +54 810 SEK
2014/10/08 - BUY Vardia Insurance Group - 800 shares - 23 647 SEK
2014/07/16 - Dividend Tesco +1728.49 SEK
2014/07/08 - BUY Protector -720 shares -30 983 SEK
2014/06/17 - Dividend MCD +430.4 SEK
2014/05/17 - Dividend H&M +1662.5 SEK
2014/03/19 - Dividend MCD +411.12 SEK
2013/12/17 - Dividend MCD +425.57 SEK
2013/01/07 - Dividend Tesco +712.98 SEK
2012/05/10 - Dividend H&M +1662.5 SEK
2011/12/12 - BUY H&M - 175 shares - 37 376.6 SEK

Vardia Insurance - December Sales

Finally the sales for Vardia Insurance arrived, lets have a look at them.

As expected the total sales were lower in December than in November, 79M NOK versus 105M NOK, due to the Christmas holiday. 79M NOK is an OK number but not more than that would I say, my forecast were slightly higher as could be seen here:December Sales Forecast

Let's do the calculation to see how the sales actually were adjusted to working days.
I assume Vardia's employees only are on duty working days, which is 5 days a week. As far as I could find none of the countries Vardia is operating in had local holidays in November, which is Norway, Sweden and Denmark.

Let's start,

November
20 full working days. Which is below average, normal month has 21 working days.

December
If we consider local holidays in December we sum up to 18 full working days. Local holidays for all the countries are as you probably know, Christmas Eve, Christmas day, Boxing day, New Years Eve. In other words, but how people are actually only taking the local holidays off during Christmas?

Not so many people I would say..  So the real question we should ask us are if sales people at Vardia took additional vacation during Christmas? Most likely.. 

For me this question is impossible to answer, but I could assume from my experience from family and friends that a normal person has around 6 days vacation during Christmas which means that December had 15 full working days. As I said above November consisted on 20 full working days and the outcome of November were 105M NOK in sales.
December consisted of 75% of the working days of November (15/20). If we after that multiply that 75% with the sales of November to see the sales numbers of November applied on the same working days as December, we get:

105M NOK x 75% =  78.75M NOK

Assume then a modest growth on 1%:

78.75M x 101% = 79.53M NOK

In other words we missed target with approximately 800K NOK which is almost nothing but its not a magnificent month for Vardia. Although my view on Vardia is still the same, the company should at least be valued as 1.0 x GWP, which should be around 36 NOK per share now. On the other hand as longer the price stays low as more shares I could come over.

Important to highlight is that 1.0 x GWP are a very modest valuation and with the sales growth we seen in the last year for Vardia an even higher valuation wouldnt have surprised me at all. 

Sincerely,

Eighth Wonder Investing

Bi-weekly Roundup and Forecast December Sales Vardia

Its time to start with Bi-weekly roundups to keep track on my last two weeks and see that I am on the right track to make my goals for 2015. This post will also include some thought for the sales figures that Vardia Insurance is announcing tomorrow.

Lets start with the financials for the first 11 days of this year.

The salary for December was really good due to a bonus, ended up at a salary income at 3215 euros. It has been some bad consumption during these days, would like to highlight some of them.

• Bought designer plates and forks for 750 SEK (approx. 78 euros).
• 113 Euros are spent on alcoholic beverages.
• 48 Euros spent on taxi trips.

As you see always room for improvment, on the other hand if you deduct these expenses the month has been really good I must say, at the moment 2169 Euros are left when all invoices are paid. The forecast is to have 2000 euros left when the new salary are dropping in on the account the 28th January.

The portfolio is up 2.08% for 2015 which is great but I would have preferred to see falling share prices instead. Just by the simple reason that I know I will be a net buyer of stocks in at least 7-8 years from now on. The portfolio still consists of the same companies, allocation in brackets. 

• Hennes & Mauritz (28.1%)
• Protector Forsikring (29.3 %)
• Vardia Insurance (24.5%)
• Tesco (18.01%)

The company which will get my next purchase is Vardia Insurance. Vardia is the stock with the best intrinsic value. Target price is 1.0 x GWP (Gross written premiums) are now at the moment around 35 NOK, and forecast for 2015 are 50-55 NOK in GWP. Will continue to buy the stocks until we have a valuation on 1.0 x GWP and if nothing happens in terms of falling sales for example.

Forcast December Sales Vardia

I assume 16 full working days in December (normal month consists of 21 days). Which is 23% less working days from a normal month. I apply a growth on 1% and then deduct the loss in working days, after the calculus we assume that the sales will be around 80.295 million NOK in December, will be really interesting to see were we end up tomorrow.

Over and out,

EWI