BOTH MUTUAL AND FIXED PREMIUM SECTORS RECORD CREDITABLE PERFORMANCES
AMERICAN HELLENIC HULL SEES SHARP INCREASES IN PREMIUM AND PROFITABILITY
RECENT RESULTS AUGUR WELL FOR FORTHCOMING YEAR AND BEYOND
- Year-on-year premium revenue across Club’s mutual business remains flat at February 20.
- Year-on-year tonnage across Club’s mutual business declines by about 9% overall.
- Average rate per gross ton for Club’s mutual P&I business increases by 10% for 2020.
- Loss ratio on continuing business improves yet again, implying favorable claims outlook.
- Funds under investment generate a 10.6% return for 2019, best in a decade.
- 2019 financial year surplus forecast to grow by over 20% over previous year-end.
- Free reserves per ton expected to show considerable increase into first quarter of 2020.
- Retained claims for 2019 track higher than 2018, while Pool exposures remain above trend.
- Eagle Ocean Marine continues to make excellent progress in fixed premium sector.
- American Hellenic Hull’s impressive 2019 results gain further momentum as 2020 begins.
- Club sees bright future of expanding opportunities across all lines of business over the years ahead.
Despite challenging conditions in both the shipping and insurance sectors, the American Club enjoyed a solid performance over the 2020 P&I renewal season. Both its mutual and fixed premium P&I portfolios acquitted themselves well, while American Hellenic Hull has continued to grow its premium and profitability, gaining yet further momentum since the beginning of the year.
Year-on-year premium for the Club’s mutual P&I class remained flat, while a small decline in revenue for its Freight, Demurrage and Defense (FD&D) business was matched by a commensurate increase in premium for charterers’ entries, so that total income on renewal will be virtually identical for 2020 to that of the previous year.
Premium attributable to renewing P&I entries for 2020 saw an increase, in cash terms, of approximately 1.5%. However, taking into account increases in deductibles, in some cases significant, the modification of terms applying to the application of deductibles generally, and changes to other insurance conditions, the overall premium increase, as if expiring terms had prevailed, was closer to 5%.
Tonnage in the Club’s mutual P&I class declined by about 9% to approximately 17 million gt overall. Its Freight, Demurrage and Defense (FD&D) entries also moved lower somewhat in tonnage terms, again by about 9%, to 10.7 million gt but, as mentioned above, almost all of this was offset by an increase in daily tonnage on risk in regard to the Club’s charterers business.
However, in consequence of the countervailing trends described above, and notwithstanding the Club’s decision not to apply a standardized, or general, increase for 2020, average P&I rates per ton on mutual business increased by about 10% year-on-year, an encouraging sign for the future.
The Club’s P&I business renewing into the 2020 policy year enjoys a trailing five-year loss ratio of only 41% compared with 48% twelve months earlier. This suggests a positive trend for future losses, as an improving profile for continuing Members can be expected to moderate prospective exposures over the years ahead.
As to the performance of its funds under investment, the Club enjoyed a 10.6% return over the year to December 31, 2019, the best result in a decade.
Retained claims for 2019 are not emerging as favorably as they did in 2018, although they remain largely within the original budget set for the year. Pool claims for 2019 are developing in an above-trend direction, similar to that for 2018, notwithstanding that the American Club, once again, had no claim on the Pool for its own account during the year.
Although the American Club’s year-end 2019 financials remain to be formally concluded, preliminary indications point to the positive development of certain important metrics. Surplus is expected to grow by more than 20% by comparison with the previous year. Free reserves per ton for 2020 are also forecast to rise, being likely to settle in the area of $4.15 on a statutory basis within the first quarter of 2020.
The American Club’s fixed premium brand, Eagle Ocean Marine (EOM), has continued to make progress into the beginning of 2020. Premium for the 2019/20 policy period to date has grown by 23% over the figure for the previous year at the same point and is forecast to exceed $14.5 million in total for the current facility year, a record.
Aimed at the operators of smaller vessels in local and regional trades, with a substantial footprint in Asia, EOM continues to be a steady contributor to the American Club’s mutual membership, enjoying a cumulative combined ratio of about 77% since inception. As the fixed premium P&I space continues to undergo transition and realignment, the attraction of EOM as a haven of stability, and the gold standard for service provision, will continue to energize its development.
American Hellenic Hull, the Club’s hull and war risks underwriting subsidiary, has performed conspicuously well over the past twelve months. Preliminary results for the financial year to December 31, 2019 disclose sharp increases in both revenue and profitability, buoyed by higher levels of market pricing.
Earned premium grew by about 90% over the previous year to approximately $16.7 million in 2019, while pure underwriting profit rose by about 400% to $3.6 million. The bottom-line result for 2019 was marginally below break-even, a notable improvement on the comparatively small, but inevitable, losses sustained during the company’s start-up period.
Indeed, the strong earnings generated by American Hellenic Hull in the second half of 2019 have gained yet further momentum into the early part of the current year, with tonnage insured, underwriting income, operating profitability and balance sheet strength all maintaining an impressive upward trajectory.
Commenting upon the confluence of these positive trends across the American Club’s diversified portfolio of interests, Joe Hughes, Chairman and CEO of SCB, Inc., the Club’s managers, said: “Although difficult business conditions prevail in both the shipping and insurance sectors, the American Club’s recent experience has been highly encouraging. The 2020 renewal of the Club’s mutual P&I and FD&D entries proceeded in a very respectable direction, while both EOM and American Hellenic Hull have performed with real distinction over recent months.
“My colleagues and I see exciting prospects ahead of us. We live in challenging times, but we are certain that the difficulties of the present will generate opportunities for the future. These opportunities will be found across the increasingly broad marine insurance landscape which the American Club, by virtue of its diversified capabilities, is now richly equipped to develop over the years to come.”
Sea News, February 25