Solvency and Financial Condition Report (SFCR) /

Transcription

1 Solvency and Financial Condition Report (SFCR) / Summary Alpha Group is an independent and privately held specialty insurer and we provide insurance solutions and insurance fronting for Agents, Brokers, Associations, Affinity Groups and large Corporations, with a high degree of flexibility. We believe in longterm partnerships with our customers and in aligning interests and combining skills and capabilities for a common purpose: The best possible insurance solution. is licensed to write almost all classes of general insurance business in most Western European countries. The technical result for the parent ( incl. Norwegian branch) was DKK 32.6 million in 2016 against DKK 42.2 million in The technical result for 2016 was lower than expected in last years section ""Expectations to 2016"". The technical result was affected negative by more than DKK 200 million to strengthen the Norwegian workers compensation provisions and as a result of change in the Ogden rate for discounting UK personal injury claims. Return on investments for the group was DKK 6.8 million in 2016 against DKK 16.7 million in The net profit for the year 2016 of DKK 16.6 million is not satisfactory. New Executive Order on accounting The new executive order comprises changes to the accounting for and measurement of insurance contracts, hereunder introducing the new terms risk margin on insurance contracts and future profit margin on insurance contracts. The executive order also includes changes to the presentation in the financial statements and the introduction of a new interest rate curve, calculated be the European Insurance and Occupational Pension Authority (EIOPA) is introduced. The change in accounting policies related to future profit margin has had no effect on the income, total assets or equity at or In 2015, the change in accounting policies related to risk margin has increased the Net profit before tax by DKK 3.3 million (Group DKK 2.3 million) and the Net profit for the year by DKK 0.7 million (Group 0.5 million). At , the equity was decreased by DKK 37.5 million (Group DKK 37.5 million) and the total assets by DKK 7.3 million (Group DKK 2.7 million). In 2016, the Change in risk margin increased the Net profit before tax by DKK 2.1 million (Group DKK 6.4 million) and the Net profit for the year and equity at by DKK 0.5 million (Group DKK 1.4 million). In 2016, the gross premium income increased by DKK 35.9 million (2.0%) to DKK 1,817.9 million. Insurance premiums ceded decreased in 2016 by 0.5%, which resulted in premium income for own account increasing from DKK million in 2015 to DKK million in 2016, an increase of DKK 41.2 million. Gross claims incurred amounted to DKK 1,524.8 million in 2016 compared to DKK 1,275.2 million in Recoveries from reinsurers increased by DKK million (17.4%) compared with Costs of claims net of reinsurance increased by DKK million to DKK million. 1

2 The insurance operating cost decreased by DKK 15.3 million compared to In 2016, the insurance operating costs amounted to DKK million compared to DKK million in The combined ratio has increased to in 2016 from in The increased combined ratio stems from an increased gross claim ratio of 83.2 compared to 70.6 in 2015 and a increase in the expense ratio from 32.6 in 2015 to 33.2 in 2016 and a decrease in reinsurance ratio from 2.7 in 2015 to 12.7 in The Solvency Ratio at year end 2016 is 217%. A. Business and Performance A.1 Business Name and legal form of the undertaking; Harbour House Sundkrogsgade 21 DK2100 Copenhagen Registration no.: Name and contact details of the supervisory authority responsible for financial supervision; Finanstilsynet Århusgade 110 DK2100 Copenhagen Name and contact details of the external auditor; KPMG Statsautoriseret Revisionspartnerselskab Dampfærgevej 28 DK2100 Copenhagen Description of the holders of qualifying holdings; is a 100% owned subsidiary of Alpha Holding A/S. Alpha Holding A/S Harbour House Sundkrogsgade 21 DK2100 Copenhagen Registration no.: Alpha Insurance Group consists of, Nemi Forsikring AS (Norway) and a branch office in Norway. owns 100% of Nemi Forsikring AS. 2

3 Group structure Alpha Holding A/S (100%) Nemi Forsikring AS (100%) The material lines of business and material geographical areas; Gross premium split on lines of business Sickness and accident insurance 1% Workers compensation insurance 15% Motor liability insurance 25% Motor own damage insurance 27% Marine, aviation and goods insurance 2% Fire and contents insurance (private) 2% Fire and contents insurance (commercial) 10% Liability insurance 4% Credit and surety insurance 3% Legal expenses insurance 6% Other direct insurance and proportional reinsurance 5% Gross premium split Main geographical areas Denmark 16% France 11% Germany 8% United Kingdom 48% Others 17% The technical result was affected negative by more than DKK 200 million to strengthen the Norwegian workers compensation provisions and as a result of change in the Ogden rate for discounting UK personal injury claims. 3

4 A.2 Underwriting Performance Parent Sickness and accident insurance Workers compensation insurance Motor liability insurance Motor own damage insurance Marine, aviation and goods insurance Fire and contents insurance (private) DKK million Gross premiums 15,7 23,2 203,3 264,0 349,1 116,1 371,6 183,3 24,1 15,7 26,8 22,9 Gross premium income 17,1 23,3 200,9 241,0 275,0 157,0 290,9 244,1 23,6 5,2 29,7 22,5 Gross claims incurred -20,6-20,1-292,9-181,5-245,1-190,8-331,2-286,3-19,8 1,5-20,3-14,4 Gross insurance operating costs -2,6-5,9-64,0-46,3-107,7-33,9-88,9-36,3-4,8-1,1-8,8-9,2 Profit of ceded business 4,4-1,1 66,1 11,7 76,0 60,6 118,2 88,0-0,6-3,8-1,5-2,0 Technical interest f.o.a. 0,0 0,0 0,0-0,1 0,0 0,0 0,0-0,1 0,0 0,0 0,0 0,0 Insurance technical result -1,7-3,8-89,9 24,8-2,1-7,1-10,8 9,4-1,6 1,9-0,8-3,1 Parent Fire and contents insurance (commercial) Liability insurance Credit and surety insurance Legal expenses insurance Other direct insurance and proportional reinsurance DKK million Gross premiums 140,1 140,8 58,2 136,3 37,4 44,0 82,2 188,5 61,6 112, , ,4 Gross premium income 155,1 140,9 96,8 187,4 38,2 43,2 87,1 189,9 68,7 87, , ,3 Gross claims incurred -41,8-70,1-92,1-115,1-7,5-2,2-6,0-20,0-50,0-48, ,2-947,4 Gross insurance operating costs -48,5-41,2-2,3-41,5-13,5-10,3-72,3-137,2-17,4-44,5-430,8-407,5 Profit of ceded business -22,3-21,2 23,2-49,3-10,1-13,8-6,2-9,2-4,8-4,9 242,4 55,1 Technical interest f.o.a. 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0-0,2 Insurance technical result 42,5 8,4 25,6-18,4 7,3 16,8 2,5 23,4-3,5-9,9-32,6 42,2 Total The technical result was affected negative by more than DKK 200 million to strengthen the Norwegian workers compensation provisions and as a result of change in the Ogden rate for discounting UK personal injury claims. 4

5 A.3 Investment Performance In DKK 000 Asset category Portfolio Asset held in unit linked and index linked funds 1: Statsobligationer 6: Overordnet 2: Hverken unit-linked eller indeksreguleret 2: Erhvervsobligationer 6: Overordnet 2: Hverken unit-linked eller indeksreguleret 3: Kapitalandele 6: Overordnet 2: Hverken unit-linked eller indeksreguleret 7: Kontanter og indskud 6: Overordnet 2: Hverken unit-linked eller indeksreguleret Dividends Interest Rent Net gains and losses Unrealised gains and losses A.4 Performance of other activities Not relevant. A.5 Any other information Not relevant. 5

6 B. System of Governance B.1 General information on the system of governance There were no changes in the organisation of the system of governance during B.2 Fit and proper requirements When a new member joins the Board of Directors or the Executive Board, that person must be evaluated on the basis of the Fit & Proper compliance concept established in the Fit & Proper compliance policy and guideline. The actual evaluation must be made in the light of the position held by that person. Key personnel employed by Alpha Insurance are also covered by this policy and the related guideline. Key personnel and other relevant employees are evaluated in terms of Fit & Proper compliance at recruitment. The Executive Board of Alpha Insurance must secure that the company s policies and guidelines are complied with when outsourcing key functions to external service providers. This implies that persons performing work for the company in accordance with outsourcing agreements also must be evaluated in terms of Fit & Proper compliance. At least once a year or as needed, persons covered by this policy must be evaluated on the basis of the Fit & Proper compliance concept (specified in details in the related guideline). Reevaluation as needed must as a minimum be made if a person covered by this policy is accused of violation of the criminal code, financial law or other relevant legislation. The reevaluation must also be made if a person covered by this 6

7 policy behaves in a way that gives a reason to believe that the person concerned is not fit to perform the job properly. Moreover, a reevaluation must be made if there is a reason to believe, that a person intend to oppose the company in a way implying that the operation of the company does not comply with applicable law, or if the situation gives a reason to believe that a person will increase the risk of financial crime by way of money laundering or financial terrorism. A reevaluation must also be made if there is a reason to believe that the company is exposed to risk of mismanagement. The complete managerial skills and experience must as a minimum include the following areas: Market knowledge o Knowledge and insight of the business as well as of financial and market areas in which the Alpha Insurance operates especially worker s compensation and investment. Business strategy and model o Proper knowledge and understanding of the company s strategy and business model Form of management risk management and control systems o Knowledge and understanding of the risks exposed to the company and the ability to handle these o The ability to evaluate the form of management and its efficiency as well as to effect changes in the form of management if necessary, for example due to market developments. Financial and actuarial analyses o The ability to interpret financial and actuarial information, to identify significant issues, to implement suitable controls and to take the necessary measures based on such information Regulatory framework and requirements o Knowledge and understanding of the regulatory framework under which Alpha Insurance operates and the ability to adjust the company to follow new legal requirements within the time frames set by the Danish Financial Supervisory Authority B.3 Risk management system including the own risk and solvency assessment The rules of procedure of the Board of Directors as well as its description of the Alpha business model and strategy form the basis of the capital and risk management at Alpha. The policies are all are worded based on the Board of Directors assessment of what is proportionate and adequate and based on Alpha s current business model including: The nature, scale and complexity of Alpha s risks and activities including geography of business The size of Alpha s business The organization and group structure The lines of business that Alpha is offering The risk management function is responsible for overseeing and controlling risk. The designed risk management system of Alpha must at least include the following: Underwriting and insurance liabilities Investments Asset/liability management Liquidity and concentration risk Operational risk 7

8 Reinsurance Consequently, the detailed policies as mentioned above must include details on: Defined risk categories and methods of measuring risk A description of how the company controls the relevant risk categories and any possible accumulation of risk Describe the link between the ORSA, Own funds etc, solvency capital requirement, minimum capital requirement and risk limits. This is described using the Standard Capital Model structure and is combined and summed up in the solvency capital requirement calculation. The risk management function shall on a yearly basis report as part of the ORSA reporting and conclude to the Board of Directors the following: Whether the basis for conclusion of the Board of Directors is sufficient and adequate That all risk are identified, measured, controlled and reported Also including risk arising from outsourced activities That they have participated actively in the development of Alpha s risk strategy and form part of significant decisions before they are taken from a risk perspective Further the risk management function shall report to the Board of Directors if: He or she has any concerns regarding development in risks and other specific areas An investment made results in a significant risk or change to the risk profile. The Board of Directors and the Executive Board must perform a risk assessment including Qualitative description of the most significant risks Assessments of which identified risks are met with capital and which are met by risk mitigation Description of methods and assumptions Assessment of deviations from the risk profile of the Company and the solvency calculations, including quantifications Assessment of how the risk profile, risk limits, solvency requirement and basic own funds are linked The Company must document this risk assessment in a way that makes it possible for a third party to evaluate assessments and calculations. The documentation must take a form such that it, on request, can be sent to the Danish Financial Supervisory Authority. An internal report must be written after each risk assessment to be communicated to relevant employees. The Danish Executive Order on management of insurance business section 3 no. 2s specifies that the Board of Directors at least once a year must identify and quantify the significant risks which the Company is or will be exposed to. The Company must also have efficient procedures in place to identify, manage, monitor, control and report on the risks which the Company is or may be exposed to, see section 71 of the Danish Financial Business Act. The Executive Board must secure that Alpha is in possession of a complete risk exposure assessment across significant risk areas. The Executive Board must report on this by an annual risk identification and assessment to the Board of Directors, see the annual cycle of work adopted by the Board of Directors. Management must secure that the risk identification is part of the prospective decisionmaking process. According to section 70 of the Danish Financial Business Act, the Board of Directors must prepare written policies on the Company s primary activities, and with it establish its risk profile. The policies provide the 8

9 scope of the risks undertaken in the insurance business and in the areas of investment, IT and operational risks. The Board of Directors and the Executive Board must secure that the complete risk undertaken by the Company is reported and assessed sufficiently and conservatively, including which assets and liabilities are important to the Company. Credit risks assessments are based on Standard & Poor. Further are collected current ratings on reinsures from brokers and other assets from public available sources. B.4 Internal control system Alpha Insurance shall have appropriate internal controls in place in order to ensure that all persons with operational and oversight responsibilities act in accordance with the undertaking's objectives and in compliance with applicable laws, regulations and administrative provisions. In order to ensure an economic valuation that is reliable, accurate and in compliance with Article 75 of Directive 2009/138/EC, Alpha Insurance shall establish and implement appropriate internal controls for the valuation of assets and liabilities of Alpha Insurance. Alpha Insurance shall establish, implement, maintain and document clearly defined policies and procedures for the process of valuation, including the description and definition of roles and responsibilities of the personnel involved with the valuation, the relevant models, and the sources of information to be used. At the request of the supervisory authorities, Alpha Insurance shall undertake an external, independent valuation or verification of the value of material assets and liabilities. At all time Alpha Insurance must: (a) provide sufficient resources, both in terms of quality and quantity, to develop, calibrate, approve and review valuation approaches used for solvency purposes; (b)establish internal control processes which include all of the following: (i)an independent review and verification on a regular basis of the information, data, and assumptions which are used in the valuation approach, its results, and the suitability of the valuation approach with respect to valuation of the items referred to in point (a) of Article 263; (ii)oversight by the persons who effectively run the undertaking of the internal processes for approval of those valuations and the process in place to take account of any external, independent valuation or verification of the value of material assets or liabilities. Further to this the management board must assure that all limits, lines, controls etc. defined in the various policies and guidelines for Alpha Insurance is controlled on a regular basis. The management board has appointed Lisette Tonia Nygaard as responsible for the compliance function at Alpha Insurance. B.5 Internal audit function The management board has appointed Mads Myrtue Thomsen as responsible for the internal audit function at Alpha Insurance. The only activity for Mads Myrtue Thomsen in the Company is the internal audit function. 9

10 B.6 Actuarial function The actuarial function through 2016 has included the Actuarial Team, headed by Chief Actuary Sverre Lorenzen and Actuarial Key Function Holder Mikkel Larsen. B.7 Outsourcing Without informing the Board of Directors in advance, the Executive Board has the framework mentioned in the overall risk profile at their disposal. The Executive Board may pass on the authorities to the persons operationally responsible for the risk areas established. However, it must be secured that the overall perspective of the investment risks remains within Alpha Insurance s central risk management environment. The reporting must be made by way of written reports and written communication between the Executive Board and the Board of Directors. The purpose of the reporting is to provide the stakeholders with an update of the current risk situation and the outsourced assets and to ensure that Alpha Insurance is always compliant with the current Executive Order on outsourcing as well as the guidelines for outsourcing defined by the Board of Directors. B.8 Any other information Not relevant. C. Risk Profile Identification and quantification of risks Significant risks are monitored and quantified in the Risk Register. The Risk Register is updated if changes or new risks occur and at least on a quarterly basis. Risks are quantified both gross and net of mitigation. The risks are monitored continuously and reassessed by the Management. Reassessment in connection with the preparation of the assessment of the overall solvency requirement reporting of Alpha Insurance is shown in the table below: Type of risk Underwriting risk denotes the risk of a change in value of claims due to a deviation of actual claims from the expected amount of claims caused by coincidence, error or change. The underwriting risk includes premium risk, reserve risk and catastrophe risk Market risk arises from the level or volatility of market prices of financial instruments. Market risk includes the impact of movements in the level of financial variables such as stock prices, interest rates, immovable property prices and exchange rates. Concentration risk denotes the risk arising from a company having exposure to individual risks or strongly correlated risks with a significant potential for loss or default. Significant according to risk policy Reassessment of risk, SCR report Met with mitigation or capital Yes Yes Capital Yes Yes Capital Yes Yes Capital 10

11 Liquidity risk denotes the risk of a company being unable to meet its financial obligations when they fall due because of a lack of marketability of investments Counterparty default risk reflect possible losses due to unexpected default of the counterparties and debtors The counterparty default risk includes riskmitigating contracts, such as reinsurance arrangements, securitisations and derivatives, and receivables from intermediaries, as well as any other credit exposures which are not included in the market risk Operational risk is the risk of loss arising from inadequate or failed internal processes, or from personnel and systems, or from external events. Operational risk include legal risks, and exclude risks arising from strategic decisions, as well as reputation risks. Strategic risk is the risk arising from strategic business decisions. Strategic risk includes the risk of business decisions failing to adapt to a changed operating environment, also control risk, reputational risk, group risk and profit risk and included in the strategic risk Control risk is the risk of a loss arising from limited management and controls. Control risk includes risk of lacking competencies and knowledge. Higher control risk are expected in small organizations. Reputational risk is the risk arising from potential damage to a company s reputation as a consequence of adverse publicity (e.g., among customers, business partners, shareholders, associations). Similar to strategic risk, reputational risk is usually one that arises in combination with other risks. However, it can be an individual risk too. Group risk arises when the company has subsidiary companies, associated companies and/or a parent company. The weight to be plazed on subsidiaries and associated companies depends on their number and size. Risk connected with earnings in the company s ability to achieve a surplus. By earning a high income, the company will be better able to absorb future losses. In the company has a low income, it must be considered whether this should result in an increase in the solvency requirement. Earning potential must also be evaluated in relation to dividend policies. Yes Yes Mitigation Yes Yes Capital Yes Yes Capital Yes Yes Mitigation Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Yes, included under strategic risk Mitigation Mitigation Mitigation Mitigation Risk mitigation techniques According to the internal guidelines, Alpha Insurance must in connection with the reporting on the solvency capital assessment be able to demonstrate the extent to which its risk mitigation techniques recognised in the calculation of the solvency capital requirement meet the requirements defined in the risk mitigation techniques under Solvency II. 11

12 Risk mitigation are built into policies and guidelines. Further mitigation regarding Underwriting, liquidity and strategic risks are not included in the standard formula but supplemented in the following. Mitigating Underwriting Risk All reinsurance contracts have been signed, according to the programme approved by the Board of Directors. Mitigating Liquidity Risk Liquidity risk is most relevant if major losses occur and until reinsurance cover is received liquidity are necessary. Since the company invest in highly secured papers, liquidity will be available under these circumstances. Mitigating Strategic Risk Strategic risk is the risk arising from strategic business decisions. Strategic risk includes the risk of business decisions failing to adapt to a changed operating environment, also control risk, reputational risk, group risk and profit risk and included in the strategic risk The existing and new business in the Group and the segments in which it operates creates strategic risks, which can lead to a longterm reduction in corporate value. Strategic risk is mitigated in the work in the Boards Business and Strategic Planning and in the other Board meetings. C.1 Underwriting risk See introduction under C. C.2 Market risk Currency risk: To avoid the currency risk in the technical reserves, it is the goal to hedge this risk by investing in foreign currency investments or hedging the currency risk by buying forward currency contracts. Interest risk: To avoid the risk of mismatch in duration between the technical reserves and the duration of the investments, it is the goal to hedge this risk by investing in bonds with the same duration as the technical reserves. The most significant market risks are the strategic equity risks and the currency risk. Assets Liabilities Interest rate down shock Interest rate up shock Strategic participations (type 1 equities) Other type 2 Equity 228 Strategic participations (type 2 equities) Spread risk bonds and loans Market risk concentrations Currency exposure

13 C.3 Credit risk Except Sydbank which is has a credit quality step 2, the 10 largest single name exposures are rated with credit quality step 1. Type 1 exposures, the 10 largest single name exposures Loss given default Swiss Re Group Citadel Risk Greenlight Re Sydbank Peak Reinsurance Company Berkshire Hathaway New Re General Insurance Corporation of India RGA Munich RE group Type 2 exposures Receivables from Intermediaries due for more than 3 months All type 2 exposures other than receivables from Intermediaries due for more than 3 months C.4 Liquidity risk The total amount of the expected profit included in future premiums is DKK 000. Best estimate premium provisions are calculated on data aggregated to Solvency II Lines of Business, using the simplification from the EIOPA Guideline on Technical Provisions. For each line of business, the expected profit included in future premiums on each line of business is the following. Line of Business EPIFP, net DKK Income protection insurance Workers' compensation insurance Motor vehicle liability insurance Other motor insurance Fire and other damage to property insurance Credit and suretyship insurance Miscellaneous financial loss Total C.5 Operational risk The dominant factor in the standard formula is the reserve risk component. Operational risk Information on technical provisions DKK 000 Life gross technical provisions (excluding risk margin) Nonlife gross technical provisions (excluding risk margin)

14 Operational risk Information on earned premiums Earned nonlife gross premiums (previous 12 months) Earned nonlife gross premiums (12 months prior to the previous 12 months) C.6 Other material risks Not relevant. C.7 Any other information Alpha Insurance uses stress tests on individual risks in order to calculate a combined loss potential, meaning that the potential loss is calculated in every situation as if Alpha would be affected by the risk actually occurring. Stress tests have been performed both on relevant parameters, scenarios and reverse stress tests to identify the most significant sources of risk Reverse stress testing The reserve stress testing have been done to identify the most important sources of risk and on those risks have been identified relevant scenarios to challenge the solvency calculations. Calculations have been made to identify risks that theoretically could result in a solvency ratio of 100% Market risk are as such not a major risk in the company. Counterparty risk, Health Underwriting Risk and Nonlife Underwriting Risk are significant risks in the company. D. Valuation for Solvency Purposes D.1 Assets The valuation for solvency purposes is the same as in the financial statement. Assets Solvency II value DKK '000 Intangible assets Investments (other than assets held for indexlinked and unitlinked contracts) Holdings in related undertakings, including participations Equities Bonds Insurance and intermediaries receivables Reinsurance receivables Receivables (trade, not insurance) Cash and cash equivalents Any other assets, not elsewhere shown

15 D.2 Technical provisions The overall process for technical provisions is before quarter end, to Analyze ultimate claims costs on binder data, to calculate IBNR and Loss Ratios used in the Rollforward Decide final Loss Ratios (and for a few binders, IBNR amounts) After quarter end, to Assess possible adjustments in the Rollforward and decide final numbers Retrieve premium and claims data from each binder and calculate o Prorata premium reserves, gross and ceded of reinsurance o Payments and changes in case reserves to get gross and ceded RBNS reserves Calculate IBNR, discount effects, best estimate premium reserves and risk margin Undiscounted claims provisions Most of the calculations are done in the chainladder model on both paid and incurred triangles, adjusted for large claims with exclusions of extreme values and including tail. Discounting of claims provision Discounting are calculated after year end with interest rates from EIOPA including Volatility Adjustment. The calculations are done in Excel work books, for both gross and ceded claims provision and for each currency. The effect of using Volatility Adjustment is a reduction on DKK in Own Funds after tax, and reductions of SCR on DKK and MCR on DKK Best Estimate Premium Provision Best estimate premium provisions are calculated on data aggregated to Solvency II Lines of Business, using the simplification from the EIOPA Guideline on Technical Provisions. Risk margin Alpha uses a simplification as referred to in Article 58(a) of Commission Delegated Regulation 2015/35, with method 1 as described in the guidelines from EIOPA to approximate the risks and subrisks within the relevant modules and submodules used to calculate the future Solvency Capital Requirements (SCR). 15

16 In DKK 000 NonLife Technical Provisions per NonLife Insurance Gross Total best estimate Recoverables from reinsurance Net Risk margin Medical expense insurance Income protection insurance Workers' compensation insurance Motor vehicle liability insurance Other motor insurance Marine, aviation and transport insurance Fire and other damage to property insurance General liability insurance Credit and suretyship insurance Legal expenses insurance Assistance Miscellaneous financial loss Total Nonlife Life and Health Technical Provisions per Annuities stemming from nonlife insurance contracts and relating to health insurance obligations Total Life Total D.3 Other liabilities The valuation for solvency purposes is the same as in the financial statement. Liabilities Solvency II value DKK '000 Debts owed to credit institutions Financial liabilities other than debts owed to credit institutions Insurance & intermediaries payables Reinsurance payables Subordinated liabilities D.4 Alternative methods for valuation Not relevant. D.5 Any other information Balance sheet Day 1 16

17 Solvency II value C0010 Statutory accounts value Difference Assets Intangible assets Property, plant & equipment held for own use Investments Reinsurance recoverables Insurance and intermediaries receivables Reinsurance receivables Receivables (trade, not insurance) Cash and cash equivalents Any other assets, not elsewhere shown Total assets

18 Liabilities Technical provisions nonlife Technical provisions life (excluding indexlinked and unitlinked) Deposits from reinsurers Deferred tax liabilities Debts owed to credit institutions Financial liabilities other than debts owed to credit institutions Insurance & intermediaries payables Reinsurance payables Subordinated liabilities Total liabilities Excess of assets over liabilities E. Capital Management E.1 Own funds According to the Alpha Insurance internal policies and guidelines, the Board of Directors and Management must ensure that the Company has an adequate capital base and that internal procedures are in place for risk measurement and control so that a continuous assessment can be implemented and a capital base of an appropriate size, type and distribution can be maintained as appropriate to cover the Company s risks. The Company s Own Funds includes both tier 1, 2 and 3 elements. Tier 1 consists of ordinary share capital and retained earnings, excluding deferred tax assets. Tier 2 is subordinate loan capital while tier 3 is the deferred tax asset. DKK 000 Total Tier 1 Tier 2 Tier 3 Ordinary share capital (gross of own shares) Share premium account related to ordinary share capital Surplus funds Reconciliation reserve Subordinated liabilities An amount equal to the value of net deferred tax assets Not all the tier 2 and none of the tier 3 capital are eligible. DKK 000 Total Tier 1 Tier 2 Tier 3 18

19 Total eligible own funds to meet the SCR Total eligible own funds to meet the MCR The subordinate loan capital was obtained before January E.2 Solvency Capital Requirement and Minimum Capital Requirement The company is using the Standard Formula without Undertaking Specific Parameters for calculation of the Solvency Capital Requirement (SCR). Each module in the Standard Formula is shown below together with the aggregated SCR after diversification. DKK 000 SCR Market risk 101,255 Counterparty default risk 12,327 Health underwriting risk 82,436 Nonlife underwriting risk 122,353 Intangible asset risk 14,385 Operational risk 47,135 Lossabsorbing capacity of deferred taxes (60,335) Solvency Capital Requirement 213,738 The company uses simplifications in the calculation of risk mitigating effect in the counterparty module, in the calculation of expense risk in the health SLT module and on the asset side of interest rate risk. The Minimum Capital Requirement is kdkk The calculation is based on the following input. DKK 000 Net TP Net premium Income protection insurance and proportional reinsurance 9,070 7,258 Workers' compensation insurance and proportional reinsurance 311,591 57,929 Motor vehicle liability insurance and proportional reinsurance 87, ,107 Other motor insurance and proportional reinsurance 93, ,655 Marine, aviation and transport insurance and proportional reinsurance 5,216 4,908 Fire and other damage to property insurance and proportional 46, ,362 reinsurance General liability insurance and proportional reinsurance 39,962 28,042 Credit and suretyship insurance and proportional reinsurance 8,441 17,408 Legal expenses insurance and proportional reinsurance 1,798 12,124 Assistance and proportional reinsurance 1 Miscellaneous financial loss insurance and proportional reinsurance 10,167 50,054 E.3 Use of the durationbased equity risk submodule in the calculation of the Solvency Capital Requirement Not relevant. 19

20 E.4 Differences between the standard formula and any internal model used Not relevant. E.5 Noncompliance with the Minimum Capital Requirement and noncompliance with the Solvency Capital Requirement Not relevant. E.6 Any other information Not relevant. 20

21 Templates Appendix I: Quantitative reporting templates Balance sheet S a Solo quarterly (a) (Publiceret) Alpha Ins Solo Q4 - efter rettelser SolvencyTool Fund number Assets Solvency II value Goodwill Deferred acquisition costs Intangible assets Deferred tax assets Pension benefit surplus 0 Property, plant & equipement held for own use Investments (other than assets held for index-linked and unit-linked funds) Property (other than for own use) 0 Participations Equities Equities - listed Equities - unlisted Bonds Government Bonds Corporate Bonds Structured notes 0 Collateralised securities 0 Investment funds 0 Derivatives 0 Deposits other than cash equivalents 0 Other investments 0 Assets held for index-linked and unit-linked funds 0 Loans & mortgages 0 Loans on policies 0 Loans & mortgages to individuals 0 Other loans & mortgages 0 Reinsurance recoverables from: Non-life and health similar to non-life Non-life excluding health Health similar to non-life Life and health similar to life, excluding health and index-linked and unit-linked Health similar to life Life excluding health and index-linked and unit-linked 0 Life index-linked and unit-linked 0 Deposits to cedants 0 21

22 Insurance & intermediaries receivables Reinsurance receivables Receivables (trade, not insurance) Own shares 0 Amounts due in respect of own fund items or initial fund called up but not yet paid in 0 Cash and cash equivalents Any other assets, not elsewhere shown Total assets Liabilities Solvency II value Technical provisions non-life Technical provisions non-life (excluding health) TP calculated as a whole 0 Best Estimate Risk margin Technical provisions - health (similar to non-life) TP calculated as a whole 0 Best Estimate Risk margin Technical provisions - life (excluding index-linked and unit-linked) Technical provisions - health (similar to life) TP calculated as a whole 0 Best Estimate Risk margin Technical provisions life (excluding health and index-linked and unit-linked) 0 TP calculated as a whole 0 Best Estimate 0 Risk margin 0 Technical provisions index-linked and unit-linked 0 TP calculated as a whole 0 Best Estimate 0 Risk margin 0 Other technical provisions Contingent liabilities 0 Provisions other than technical provisions 0 Pension benefit obligations 0 Deposits from reinsurers Deferred tax liabilities 0 Derivatives 0 Debts owed to credit institutions Financial liabilities other than debts owed to credit institutions Insurance & intermediaries payables Reinsurance payables

23 Payables (trade, not insurance) 0 Subordinated liabilities Subordinated liabilities not in BOF 0 Subordinated liabilities in BOF Any other liabilities, not elsewhere shown 0 Total liabilities Solvency II value Excess of assets over liabilities

24 S a Solo quarterly (a) (Publiceret) Alpha Ins Solo Q4 - efter rettelser Forsikring vedrørende udgifter til lægebehandli ng Forsikring vedrørende indkomstsikri ng Arbejdsskad eforsikring Motoransvar sforsikring Non-life direct business and accepted proportional reinsurance Anden motorforsikrin g Sø-, luftfartsog transportforsi kring Brand og andre skader på ejendom Almindelig ansvarsforsik ring Kredit- og kautionsforsi kring Retshjælpsfo rsikring Assistance Diverse økonomiske tab Non-life accepted non-proportional reinsurance Ikkeproportio nal sygegenforsi kring Ikkeproportio nal ulykkesgenfo rsikring Ikkeproportio nal luftfarts-, sø- og transportgenf orsikring Ikkeproportio nal ejendomsgen Premiums written Reinsurers' share Net Premiums earned Gross - Direct business ########## Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Claims incurred Gross - Direct business ########## Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Changes in other technical provisions Gross - Direct business Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Expenses incurred Other expenses 0 Total expenses forsikring Total Non- Life obligation 24

25 Sygeforsikrin g Forsikring med gevinstandel e Indeksregule ret og unitlinked forsikring Life insurance Life reinsurance Total Life obligation Anden livsforsikring Annuiteter hidrørende fra skadesforsikr ingsaftaler og relateret til sygeforsikrin gsforpligtelse r Annuiteter Sygegenforsi hidrørende kring fra skadesforsikr ingsaftaler og relateret til andre forsikringsfor pligtelser end sygeforsikrin gsforpligtelse r Livsgenforsik ring Premiums written Gross Reinsurers' share Net Premiums earned Gross Reinsurers' share Net Claims incurred Gross Reinsurers' share Net Changes in other technical provisions Gross Reinsurers' share Net Expenses incurred Other expenses 0 Total expenses Total amount of surrenders

26 Appendix I: Quantitative reporting templates Premiums, claims and expenses by country S Annual Solvency II reporting Solo (ARS) (Kladde) Årlig QRT Premiums written SolvencyTool Non-life obligations Home Country Top 5 countries (by amount of gross premiums written) Total Top 5 and home country DE FR GB GR PF Gross - Direct Business Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Premiums earned Gross - Direct Business Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Claims incurred Gross - Direct Business Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted Reinsurers' share Net Changes in other technical provisions Gross - Direct Business Gross - Proportional reinsurance accepted Gross - Non-proportional reinsurance accepted

27 Reinsurers' share Net Expenses incurred Other expenses 0 Total expenses Premiums written Life obligations Home Country Total Top 5 and home country Gross 0 0 Reinsurers' share 0 0 Net 0 0 Premiums earned Gross 0 0 Reinsurers' share 0 0 Net 0 0 Claims incurred Gross Reinsurers' share Net Changes in other technical provisions Gross 0 0 Reinsurers' share 0 0 Net 0 0 Expenses incurred Other expenses 0 Total expenses

28 Appendix I: Quantitative reporting templates Life and Health SLT Technical Provisions S a SolvencyTool Forsikring med gevinstan dele Indeksreguleret og unit-linked forsikring Anden livsforsikring Annuiteter hidrørend e fra skadesfor sikringsaft aler og relateret til andre forsikrings forpligtels er end sygeforsik ringsforpli gtelser Livsgenforsikring Total (Life other than health insurance, incl. Unit- Linked) Sygeforsikring Annuiteter Sygegenf hidrørende orsikring fra skadesforsikr ingsaftaler og relateret til sygeforsikrin gsforpligtelse r Total (Health similar to life insurance) Contracts without options and guarantee s Contracts with options and guarantee s Contracts without options and guarantee s Contracts with options and guarantee s Insurance with profit participati on on Accepted reinsuran ce (Gross) Indexlinked and insurance Other life unit-linked on insurance Accepted on reinsuran Accepted ce reinsuran (Gross) ce (Gross) Annuities stemming from nonlife accepted insurance other than health (Gross) Contracts without options and guarantee s Contracts with options and guarantee s Technical provisions calculated as a whole Total Recoverables from reinsurance/spv and Finite Re after the adjustment for expected losses due to counterparty default associated to TP as a whole Technical provisions calculated as a sum of BE and RM Best Estimate Gross Best estimate Total Recoverables from reinsurance and SPV after the adjustment for expected losses due to counterparty default Best estimate minus recoverables from reinsurance and SPV - total Risk Margin Amount of the transitional on Technical Provisions Technical Provisions calculated as a whole Best estimate Risk margin Technical provisions - total

29 Appendix I: Quantitative reporting templates Non-life Technical Provisions S a Solo quarterly (a) (Publiceret) Alpha Ins Solo Q4 - efter rettelser Forsikring vedrørende udgifter til lægebehan dling Forsikring vedrørende indkomstsik ring Arbejdsskadef Motoransvarsf Anden orsikring orsikring Direct business and accepted proportional reinsurance motorforsikrin g Sø-, luftfarts- og transportfor sikring Brand og andre skader på ejendom Almindelig ansvarsforsikri ng Kredit- og Retshjælpsf Assistance Diverse kautionsfors orsikring ikring økonomiske tab Accepted non-proportional reinsurance Ikkeprop Ikkeprop ortional ortional sygegenf ulykkesg orsikring enforsikri ng Ikkeprop ortional luftfarts-, sø- og transport genforsik ring Ikkeprop ortional ejendom sgenforsi kring SolvencyTool Technical provisions calculated as a whole Total Recoverables from reinsurance/spv and Finite Re after the adjustment for expected losses due to counterparty default associated to TP as a whole Technical provisions calculated as a sum of BE and RM Best estimate Premium provisions Gross - Total Total recoverable from reinsurance/spv after the adjustment for expected losses due to counterparty default Net Best Estimate of Premium Provisions Claims provisions Gross - Total Total recoverable from reinsurance/spv after the adjustment for expected losses due to counterparty default Net Best Estimate of Claims Provisions Total Best estimate - gross Total Best estimate - net Risk margin Amount of the transitional on Technical Provisions TP as a whole Best estimate Risk margin Technical provisions - total Technical provisions - total Recoverable from reinsurance contract/spv after the adjustment for expected losses due to counterparty default - total Technical provisions minus recoverables from reinsurance and SPV - total Total Non-Life obligation 29