A good year for Alandia despite many challenges
During the unusual year of 2020, Alandia's operations have run smoothly and continued to develop in a positive direction. The result for the group has been good in 2020. Actuarial performance improved significantly compared to the previous year through persistent work on premium and condition setting, as well as risk selection, which has continued over the past 18 months. The results of the investment activities were very good given the conditions at the beginning of the year.
Premium income has continued to grow throughout the year, albeit at a slightly lower rate than in the last two years. The growth has come partly from increased risk-based premium rates and partly from having more customers in all insurance products except statutory accident. Statutory accident was also the insurance product that saw a sharp reduction in premiums as a result of shipping companies layoffs of both onshore and sea personnel during the year. Sales of leisure craft were positively affected by less travel and this had a positive effect on sales of leisure boat insurance in both Finland and Sweden.
Claims costs fell sharply during the year compared to the previous year. In particular, the claims frequency in hull insurance was clearly lower than in previous years. Two major claims occurred, which were partly covered by reinsurance. In leisure boat insurance, the claims rate was clearly higher than previous peak seasons and the claims occurred over a much larger part of the season. Nevertheless, the total claims cost of this segment was at the same level as in previous years due to significantly lower average cost per claim.
The company’s expense ratio continued to decline during the year and amounted to 22.7% compared to 25.2% the previous year. This was at its highest in 2017 at 31.1%. The decrease in the expense ratio during the year is due to some savings as a result of reduced travel, reduced activities in the form of missed trade fairs and other physical customer events, but also because an increased insurance volume has been managed by largely the same number of employees as in the previous year. The ambition is to continue the work to streamline our processes to reduce the expense ratio and thereby increase the company’s competitiveness.
The financial markets were mainly very volatile at the beginning of the year and in connection with the spread of the Covid-19 pandemic, when share prices fell and credit risk margins widened. After massive support efforts from the central banks, prices rose again and overall the year gave a good return on the company’s investment portfolio.
On the last day of May 2020, the subsidiary Försäkringsaktiebolaget Liv-Alandia transferred its entire insurance portfolio to Aktia Livförsäkring in accordance with the agreement reached at the end of the previous year. At the time of the transfer, Alandia took out five capital loans from Aktia Livförsäkring totaling EUR 60 million. The loans have long maturities and can be used as solvency capital during the loan period in accordance with the Solvency II rules and in accordance with the criteria of the S&P rating institute. In spite of the sharply strengthened solvency position, S&P Global placed the company’s A- rating first on Credit Watch Negative and then on Negative Outlook during the year. This does not correspond to our view of the solvency position and with the criteria set by S&P to reverse the negative outlook, my view is that this will happen within the set period of 12-24 months from June 2020.
The staff’s contribution to Alandia’s success in 2020 is worthy of great praise. As with the vast majority of other businesses, there have been many challenges in adapting for work to be carried out remotely due to Covid-19. However, we have been able to perform the vast majority of the work well digitally thanks to a good IT structure. We have all learned a lot from this and although we need to meet customers, partners and colleagues in physical meetings, the pandemic will have affected how we will address these meetings in the future. If we do this well, we will be able to continue to reduce environmental impact, increase our efficiency and work in a way that creates a good work-life balance according to individual life situations.
Finally, together with all of Alandia’s staff, I would like to thank our customers, partners, board members and owners for continued good cooperation in 2020. We are on an exciting journey of creating a European maritime insurance specialist and it is my conviction that we are only at the beginning of it. All of Alandia’s staff look forward to continuing the development of the company together, based on our customers’ need for relevant insurance cover.