Annual Report 2016 Chairman’S Report ALPHA INSURANCE 3

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Annual Report 2016 Chairman’S Report ALPHA INSURANCE 3 Annual Report 2016 Chairman’s report ALPHA INSURANCE 3 Chairman’s Report In 2016, Alpha Group completed consolidation and insourcing processes that have been going on for several years. Alpha Group strengthened reserves considerably, to secure a positive run off on both the old Norwegian workers compensation book and the newer UK personal lines book, addressing the new lower – Ogden – discount rates, which have caused a big upset in the UK market. More so for more estab- lished players with a book going back many years, but even Alpha Group’s younger book is affected. This and the ongoing investment, in turning Nemi Insurance in Norway around, influenced the result of the year, which was negative by DKK 16,3 million. Jens Erik Christensen Thus strengthening of reserves in 2016 should secure the Group against any negative run-off issues going Table of contents forward. At the same time, Alpha Group has insourced a number of functions in particular within IT and actuarial This year we would like to highlight a completely Management’s Review services and streamlined and automated administrative different dimension of Alpha Group’s approach to 3 Chairman’s Report routines. The staff count has therefore grown consider- people and business: Alpha is a boutique insurer 4 Management’s Report ably in 2016, which is also reflected in operating costs that delivers bespoke quality solutions. Alpha is not 10 Financial Highlights for the year, but longer term this will reduce overall focusing on mainstream and volume, but on niche and operating costs. This, together with continuing pre- quality. Alpha believes in its people and the importance mium growth, will significantly improve Alpha Group’s of the environment they work and breathe in. Alpha Statement by Management and Auditors’ Report expense ratio going forward and the new in-house Group’s offices are located in the Copenhagen harbor 12 Statement by Management on the Annual Report resources will provide a stronger platform for under- and designed by acclaimed architect Kim Utzon, son of 14 Independent Auditors’ Report writing and controlling business. Alpha continues to Sydney Opera House’s architect Jørn Utzon. Harbour uphold strong solvency ratios in excess of the industry House is characterized by its wide-open spaces, rays average. Going into 2017, with further capital injections of light and water views and exudes Scandinavian Financial Statements for 1 January - 31 December 2016 by the partners behind Alpha, solvency ratios are even aesthetics. Although Alpha Group is an international 16 Income Statement stronger: 180% in Alpha Holding and 250% in Alpha In- company, it has its base in Scandinavia and therefore 18 Balance Sheet surance. Alpha expects solvency to grow even stronger embodies Scandinavian values. These values are 20 Equity during 2017 making Alpha Insurance the strongest represented in the fine architecture, unique design and 22 Notes capitalized Insurance company among the 10 largest in contemporary and modern art - mainly from Scandi- Denmark. navia but also from other parts of the world. Among 38 Company Information the famous architectures and artists represented at In recent years, our annual financial reports have Alpha’s offices are the iconic Cone lamps designed by focused on some of the most important factors behind Poul Henningsen, Arne Jacobsen’s Egg chairs and the success of the Alpha Group.We have paid tribute Mogens Lassen’s Egyptian table. Ray and Charles to our unique and dedicated staff and to the London Eames and Nanna Dietzel tables and chairs, paintings market. The London market is so important to Alpha and sculptures from the Copenhagen and Amster- that we have already made the decision, and started the dam movement COBRA as well as contemporary and process, to form or acquire an insurance company with celebrated artists Rene Holm, Maria Rubinke, Michael a UK license to be prepared to handle any outcome of Kvium and Scottish artist Douglas McDougall. the BREXIT process without negative effects for our UK agents and customers. 4 ALPHA INSURANCE MANAGEMENT’S REPORT MANAGEMENT’S REPORT ALPHA INSURANCE 5 Management’s Report Main activity introducing the new terms risk margin on insurance contracts Solvency II Alpha Group is currently active in: Alpha Insurance A/S is licensed to write almost all classes and future profit margin on insurance contracts. The The European regulation to enhance consumer protection in Denmark of general insurance business in most Western European executive order also includes changes to the presentation insurance, Solvency II, came operational from January I, 20I6. Sweden countries. in the financial statements and the introduction of a new The Solvency II framework has three main areas (pillars): Norway interest rate curve, calculated by the European Insurance and Finland Alpha Insurance Group consists of Alpha Insurance A/S, Nemi Occupational Pension Authority (EIOPA) is introduced. Pillar I consists of the quantitative requirements including the France Forsikring AS (Norway) and a branch office in Norway. amount of capital an insurer should hold. United Kingdom Alpha Insurance A/S owns 100% of the companies in the The change in accounting policies related to future profit Pillar 2 sets out requirements for the governance and risk The Netherlands group. margin has had no effect on the income, total assets or equity management of insurers, as well as for the effective supervi- Spain at 31.12.2015 or 31.12.2016. In 2015, DKK 21.1 million (Group sion of insurers. Pillar 3 focuses on disclosure and transparency Greece Annual Report 2016 DKK 14.7 million) was reclassified from “Change in premium requirements. Italy Alpha Insurance A/S is a 100% owned subsidiary of Alpha reserve” to “Change in future profit and risk margin”. Germany Holding A/S. At 31.12.2015, DKK 55.9 million (Group DKK 59.6 million) was The Company has implemented the new regulation already Ireland reclassified from “Premium provisions, gross” to “Future profit”. in force, including the calculation of the Solvency Capital Belgium The result of the year and development of Requirement by the Standard Formula of Solvency II. In the Luxembourg the company In 2015, the change in accounting policies related to risk second half of 2016, 2017 and 20I8 the last parts of Pillar 3 are Poland The financial year 2016 resulted in a result after tax for the margin has increased the “Net profit before tax” by DKK 3.3 to be reported, and the Company is currently preparing the Alpha Insurance Group of DKK -16.6 million against a result million (Group DKK 2.3 million) and the “Net profit for the reporting and disclosure. after tax of DKK -21.4 million in 2015. The technical result for year” by DKK 0.7 million (Group 0.5 million). At 01.01.2015, the Day 1 -2106 2016 the group is DKK -67.6 million in 2016 compared to DKK -7.8 equity was decreased by DKK 37.5 million (Group DKK 37.5 DKK million DKK million million in 2015. The technical result for the parent (Alpha million) and the total assets by DKK 7.3 million (Group DKK Solvency requirement (SCR) 220 214 Total eligible own funds 462 468 Insurance A/S incl. Norwegian branch) was DKK -32.6 million 2.7 million). In 2016, the “Change in risk margin” increased to meet the SCR in 2016 against DKK 42.2 million in 2015. The technical result the “Net profit before tax” by DKK 2.1 million (Group DKK Solvency ratio 2.1 2.2 for 2016 was lower than expected in last years section 6.4 million) and the “Net profit for the year” and equity at “Expectations to 2016”. 31.12.2016 by DKK 0.5 million (Group DKK 1.4 million). Dividend The Board of Directors proposes no dividends for 20I6. The technical result was affected negative by more than DKK Equity and solvency 200 million to strengthen the Norwegian workers compensation Alpha Insurance A/S equity as at 31 December 2016 amounts Insurance activities provisions and as a result of change in the Ogden rate for to DKK 286.6 million. An equity decrease of DKK 17.3 million In 2016, the gross premium income increased by DKK 35.9 discounting UK personal injury claims. compared to 31 December 2015. million (2.0%) to DKK 1,817.9 million. Insurance premiums ceded decreased in 20I6 by 0.5%, which resulted in premium Return on investments for the group was DKK 6.8 million in The solvency requirement of Alpha Insurance A/S calculated income for own account increasing from DKK 775.0 million 2016 against DKK 16.7 million in 2015. in accordance with the Financial Supervisory Authmity rules in 20I5 to DKK 816.2 million in 2016, an increase of DKK 41.2 amounts to DKK 213.7 million at 31 December 2016 against million. The net profit for the year 2016 of DKK -16.6 million is not DKK 144.9 million at 31 December 2015 (Solvency I). The satisfactory. eligible own funds to meet the SCR amounts to 468.3 million. Gross claims incurred amounted to DKK 1,524.8 million in This means that the Financial Supervisory Authority’s required 2016 compared to DKK 1,275.2 million in 20I5. Recoveries New Executive Order on Accounting solvency margin is covered 2.2 times (2.1 times in 2015). from reinsurers increased by DKK I45.6 million (I7.4%) The new executive order comprises changes to the accounting compared with 2015. Costs of claims net of reinsurance for and measurement of insurance contracts, hereunder increased by DKK I04.0 million to DKK 542.4 million. 6 ALPHA INSURANCE MANAGEMENT’S REPORT MANAGEMENT’S REPORT ALPHA INSURANCE 7 The insurance operating cost decreased by DKK 15.3 million Branch office Expectation for 2017 Financial risk compared to 2015.
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