Protection & Indemnity

North of England | www.nepia.com

North ‘only’ highlights

  • Owned tonnage increased by 1.4%
  • Premiums reduced by -6%
  • Gross and net paid claims reduced by -12.7% and -14.9% respectively
  • 7.4% increase in total net incurred claims
  • USD 11.9 million underwriting deficit

North (including Sunderland Marine) highlights

  • Overall group investment return 2.9%
  • North Group’s net assets and free reserves increased by 4.8% and 4.6% respectively

North of England acquired the Sunderland Marine in February 2014. North P&I combined ratio, as reported, was 104.3%. The North Group, including Sunderland Marine, combined ratio was very similar, at 104.9%.

“North P&I combined ratio was 104.3%”

Consolidated Financial Year Summary (USD 000s)

2015/16 2016/17 2017/18
Income and Expenditure (excluding Sunderland Marine)
Calls and Premiums 385,673 348,561 327,765
Reinsurance Premiums -75,852 -63,767 -53,714
Operating Expenses -50,463 -50,730 -55,558
Operating Income 259,358 234,064 218,493
Gross Paid Claims 337,702 244,463 213,439
Net Paid Claims 240,107 228,172 194,122
Net Change in Provision for Claims -75,976 -13,601 36,224
Net Incurred Claims 164,131 214,571 230,346
Technical Surplus (Deficit) 95,227 19,493 -11,853
Investment Income -3,201 -6,134 26,331
Overall Surplus for Year (Deficit) 92,026 13,359 14,478
       
Balance sheet (excluding Sunderland Marine)
Net Assets 975,024 977,154 1,007,480
Net Outstanding Claims 586,249 575,018 590,871
Free Reserves 388,775 402,136 416,609

Sunderland Marine and Club Diversification

North of England acquired the Sunderland Marine in February 2014. For the sake of completeness the table below shows the income, expenditure and balance sheet for the combined Group.

2015/16 2016/17 2017/18
Income and Expenditure (including Sunderland Marine)
Calls and premiums 489,810 428,348 387,599
Reinsurance premiums -128,757 -98,389 -81,326
Operating Expenses -81,542 -75,698 -77,410
Operating Income 279,511 254,261 228,863
Net Incurred Claims 196,040 246,013 243,994
Technical surplus (deficit) 83,471 8,248 -15,131
Investment Income 6,945 -5,736 34,943
Overall surplus for year (deficit) 90,416 2,512 19,812
       
Balance sheet (including Sunderland Marine)
Net Assets 1,050,888 1,043,711 1,093,874
Net Outstanding Claims 622,487 612,936 643,412
Free Reserves 428,401 430,775 450,462
Entered tonnage (GT, millions) 2016 2017 2018
Owned / Mutual 131 140 142
Chartered / Fixed 54 50 53
Total 185 190 195
       
S&P Rating History 2016 2017 2018
  A A A
       
Average Expense Ratio (AER) 2016 2017 2018
Five years ending 20 February 12.4 12 12.1

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.