Protection & Indemnity

Steamship | www.simsl.com

2017/18 financial year results

  • Owned tonnage increased by 8.7%
  • Premiums reduced by 3.4%
  • Reinsurance costs reduced by 7%, though operating expenses increased 3.4%
  • Gross and net paid claims reduced by 5.2% and 2.1% respectively
  • Net incurred claims increased by 43.3%
  • Underwriting deficit of USD 38.7 million (though the club rebated USD 25.6 million of premium in the 2017/18 financial year)
  • 3.5% investment return
  • USD 27.1 million increase in net outstanding claims (4.8%)
  • Assets and free reserves increased by 3.1% and 1.1% respectively
  • Overall surplus USD 5.7 million

Combined Ratio

Steamship reported a combined ratio of 112.8% in the 2017/18 financial year (significantly worse than the equivalent figure of 83.5% reported in 2016/17). Had the Steamship not reurned USD 25.5 million of premiums in the 2017/18 financial year, then the combined ratio would have been a far more acceptable 102%.

“Steamship would have reported a combined ratio of 102% in 2017/18 had they not rebated USD 25.6m of premium. (Similarly in the 2016/17 finaincial year the combined ratio would have been 75.7% had the club not returned USD 25.8m in premium.)”

Consolidated Financial Year Summary (USD 000s)

2015/16 2016/17 2017/18
Income and Expenditure
Calls and Premiums 350,329 305,642 295,318
Reinsurance Premiums -64,830 -56,033 -52,089
Operating Expenses -41,397 -39,219 -40,570
Operating Income 244,102 210,390 202,659
Gross Paid Claims 269,945 310,335 294,209
Net Paid Claims 206,081 218,920 214,265
Net Change in Provision for Claims -38,151 -50,465 27,104
Net Incurred Claims 167,930 168,455 241,369
Technical Surplus (Deficit) 76,172 41,935 -38,710
Investment Income -12,038 28,034 44,388
Overall Surplus for Year (Deficit) 64,134 69,969 5,678
       
Balance sheet
Net Assets 1,053,343 1,072,847 1,105,629
Net Outstanding Claims 613,022 562,557 589,661
Free Reserves 440,321 510,290 515,968
Entered tonnage (GT, millions) 2016 2017 2018
Owned / Mutual 77.8 84.6 85.1
Chartered / Fixed 51.2 66.7 73.5
Total 129 151.3 158.6
       
S&P Rating History 2016 2017 2018
   A   A   A 
       
Average Expense Ratio (AER) 2016 2017 2018
Five years ending 20 February 12.1 12.1 12.2

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.