Protection & Indemnity

Japan P&I club | www.piclub.or.jp

2017/18 financial year results

  • Owned tonnage increased by 2.4%
  • Premiums reduced by -3.1%
  • Operating expenses increased by 10%
  • Gross and net paid claims increased by 17% and 14.6%
  • Stable net incurred claims (less than 1% difference from 2016/17)
  • USD 15.5 million underwriting surplus
  • Investment return 2.5%
  • Overall surplus USD 7.9 million
  • Assets and free reserves increased by 6.2% and 8.7%

"The 2017/18 combined ratio was 91%, considerably lower than the market average"

Consolidated Financial Year Summary (USD 000s)

2015/16 2016/17 2017/18
Income and Expenditure
Calls and Premiums 226,280 221,126 214,241
Reinsurance Premiums -59,229 -49,132 -50,681
Operating Expenses -24,290 -24,134 -26,536
Operating Income 142,761 147,860 137,024
Gross Paid Claims 163,741 122,032 142,809
Net Paid Claims 119,902 108,987 124,927
Net Change in Provision for Claims 5,514 13,617 -3,394
Net Incurred Claims 125,416 122,604 121,533
Technical Surplus (Deficit) 17,345 25,256 15,491
Investment Income -13,578 -3,096 -7,574
Overall Surplus for Year (Deficit) 3,767 22,160 7,917
 
Balance Sheet
Net Assets 465,589 501,715 532,848
Net Outstanding Claims 278,459 293,292 306,324
Free Reserves 187,130 208,423 226,524
Entered tonnage (GT, millions) 2016 2017 2018
Owned/Mutual 89.6 89 91.1
Owned/Fixed 2.6 2.5 2.5
Chartered/Fixed 12.5 12.2 12.1
Total 104.7 103.7 105.7
       
S&P Rating History 2016 2017 2018
   BBB+   BBB+   BBB+ 
       
Average Expense Ratio (AER) 2016 2017 2018
Five years ending 20 February 5.18 5.46 6.21

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.