Protection & Indemnity

American Club | www.american-club.com

2017/18 financial year results

  • Owned tonnage increased by 9.6% to 17.1 million
  • Premiums reduced by -10.1%
  • Reinsurance premiums increased by 71%
  • Gross and net paid claims reduced by -9.9% and -12.8% respectively
  • Net incurred claims reduced by -48.7%
  • USD 2.4 million underwriting loss (while still in deficit, the underwriting result is much improved from USD 13 million loss in 2016/17)
  • 8.1% investment return
  • USD 6.2 million overall surplus for 2017/18, driven by the excellent investment return
  • Assets reduced by -8.5% but free reserves increased by 12%

“An improvement on the 2016/17 combined ratio”

Consolidated Financial Year Summary (USD 000s)

2015/16 2016/17 2017/18
Income and Expenditure
Calls and Premiums 97,504 109,493 98,389
Reinsurance Premiums -16,128 -14,168 -24,194
Operating Expenses -33,978 -37,744 -40,300
Operating Income 47,398 57,581 33,895
Gross Paid Claims 71,465 87,499 78,797
Net Paid Claims 61,673 71,711 62,543
Net Change in Provision for Claims -12,309 -950 -26,241
Net Incurred Claims 49,364 70,761 36,302
Technical Surplus (Deficit) -1,966 -13,180 -2,407
Investment Income -224 8,188 8,603
Overall Surplus for Year (Deficit) -2,190 -4,992 6,196
       
Balance sheet
Net Assets 228,278 219,472 200,765
Net Outstanding Claims 171,868 168,054 143,151
Free Reserves 56,410 51,418 57,614
Entered tonnage (GT, millions) 2016 2017 2018
Owned/Mutual 14.1 15.6 17.1
Chartered/Fixed 1.1 1.3 1.5
Total 15.2 16.9 18.6
       
S&P Rating History 2016 2017 2018
  BBB- BBB- BBB-
       
Average Expense Ratio (AER) 2016 2017 2018
Five years ending 20 February 24.2 25.7 27.9

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:

Net 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.