Protection & Indemnity

Steamship | www.simsl.com

2016/17 financial year results

  • Premiums reduced by 12.8% (though Steamship rebated USD 25.8 million of mutual premium in the 2016/17 financial year, so the underlying reduction was only 5.4%)
  • Reinsurance costs and operating expenses reduced by 13.6% and 5.3% respectively
  • Gross and net paid claims increased by 15% and 6.2% respectively
  • USD 50.4 million reduction in estimates for outstanding claims
  • Total net incurred claims stable (increased by only 0.3%)
  • Underwriting surplus of USD 41.9 million
  • 2.8% investment return
  • Overall surplus USD 70 million
  • Assets and free reserves increased by 1.8% and 15.9% respectively

Consolidated Financial Year Summary (USD 000s)

2014/15 2015/16 2016/17
Income and Expenditure
Calls and Premiums 365,341 350,329 305,642
Reinsurance Premiums -69,002 -64,830 -56,033
Operating Expenses -45,421 -41,397 -39,219
Operating Income 250,918 244,102 210,390
Gross Paid Claims 425,452 269,945 310,335
Net Paid Claims 220,943 206,081 218,920
Net Change in Provision for Claims -33,329 -38,151 -50,465
Net Incurred Claims 187,614 167,930 168,455
Technical Surplus (Deficit) 63,304 76,172 41,935
Investment Income 11,684 -12,038 28,034
Overall Surplus for Year (Deficit) 74,988 64,134 69,969
       
Balance sheet
Net Assets 1,027,360 1,053,343 1,072,847
Net Outstanding Claims 651,173 613,022 562,557
Free Reserves 376,187 440,321 510,290
Entered tonnage (GT, millions) 2015 2016 2017
Owned / Mutual 74.3 77.8 84.6
Chartered / Fixed 46 51.2 66.7
Total 120.3 129 151.3
       
S&P Rating History 2015 2016 2017
   A-   A   A 
       
Average Expense Ratio (AER) 2015 2016 2017
Five years ending 20 February 11.8 12 12

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.