Protection & Indemnity

American Club | www.american-club.com

2016/17 financial year results

  • Owned tonnage increased by 10.6%
  • Premiums increased by 12.3%
  • Reinsurance premiums reduced by 12.2%
  • Gross and net paid claims increased by 22.4% and 16.3% respectively
  • Net incurred claims increased by 43.4%
  • Deteriorated underwriting loss (from a USD 2 m deficit 2015/16 to a USD 13 m loss in 2016/17)
  • 2.4% investment return
  • USD 5 million overall deficit for 2016/17
  • Assets and free reserves reduced by 3.9% and 8.8% respectively

Consolidated Financial Year Summary (USD 000s)

2013/14 2014/15 2015/16
Income and Expenditure
Calls and Premiums 114,798 97,504 109,493
Reinsurance Premiums -20,553 -16,128 -14,168
Operating Expenses -34,795 -33,978 -37,744
Operating Income 59,450 47,398 57,581
Gross Paid Claims 87,418 71,465 87,499
Net Paid Claims 64,751 61,673 71,711
Net Change in Provision for Claims 1,211 -12,309 -950
Net Incurred Claims 65,962 49,364 70,761
Technical Surplus (Deficit) -6,512 -1,966 -13,180
Investment Income 7,768 -224 8,188
Overall Surplus for Year (Deficit) 1,256 -2,190 -4,992
       
Balance sheet
Net Assets 241,098 228,278 219,472
Net Outstanding Claims 182,498 171,868 168,054
Free Reserves 58,600 56,410 51,418
Entered tonnage (GT, millions) 2015 2016 2017
Owned/Mutual 14 14 15.6
Chartered/Fixed 1 1 1
Total 15 15 17
       
S&P Rating History 2015 2016 2017
  BBB- BBB- BBB-
       
Average Expense Ratio (AER) 2015 2016 2017
Five years ending 20 February 22 24 26

Combined Ratio

Combined ratios provide a direct comparison of club underwriting performance. The combined ratio is essentially the net loss ratio for the club and is defined as follows:

Combined ratio =

(Net incurred claims + operating expenses)
(Premium – reinsurance costs)
  • A combined ratio of 100% represents an underwriting break-even position
  • Anything in excess of 100% would be an underwriting loss
  • A combined ratio less than 100% would represent an underwriting surplus.

Average Expense Ratio (AER)

Average Expense Ratios (AERs) were introduced in 1999 following pressure from the European Commission in an attempt to enable direct comparisons of operating costs between clubs within the International Group. The formula that all clubs are required to adhere to when calculating their AER figure is as follows:

The AER formula is the
five-year average of:

(Operating expenses x 100)
(Premium income + Investment income)

In principle the AER is a reasonable idea, but in reality it is only ever a very approximate guide to the relative operating costs of individual clubs. For example different membership profiles, disproportionately high levels of premium or investment, whether the club owns or rents their office space, how much the club spends on loss prevention, global office network, member portals etc all have an impact on the AER.