Protection & Indemnity

West of England | www.westpandi.com

2017/18 financial year results

  • Owned tonnage increased by 14.2%
  • Premiums reduced by 3.6%
  • Net paid claims increased by 4.6%
  • 36.7% increase in net incurred claims
  • Underwriting defecit of USD 28.2 million
  • 4.8% return on investments
  • Overall defecit of USD 8.2m in 2017/18, following a surplus of USD 37m in 2016/17
  • Assets increased by 4.9% and Free Reserves increased by 0.7%
NB The West of England Income and Expenditure (I&E) Account does not include revaluation of owned property. Property valuation increased by USD 10.2m in 2017/18 which offset the overall I&E account loss (of USD 8.2m) to allow an increase in free reserves (of USD 2m)

Combined Ratio

The West of England’s net combined ratio deteriorated from 87% to 116% between 2016/17 and 2017/18. This is the first underwriting defecit reported by the Club since 2013/14.

Net combined ratio of 116% for 2017/18 is the first underwriting deficit since 2013/14.

Consolidated Financial Year Summary (USD 000s)

2015/16 2016/17 2017/18
Income and Expenditure
Calls and Premiums 227,614 221,849 213,797
Reinsurance Premiums -43,927 -40,172 -37,4962
Operating Expenses -35,466 -34,688 -35,392
Operating Income 148,221 146,989 140,909
Gross Paid Claims 150,528 151,540 230,979
Net Paid Claims 124,853 130,788 136,844
Net Change in Provision for Claims -6,781 -7,016 32,299
Net Incurred Claims 118,072 123,772 149,143
Technical Surplus (Deficit) 30,149 23,217 -28,234
Investment Income -4,527 13,758 20,017
Overall Surplus for Year (Deficit) 25,622 36,975 -8,217
       
Balance sheet
Net Assets 680,166 703,001 737,321
Net Outstanding Claims 403,505 396,489 428,788
Free Reserves 276,661 306,512 308,533
Entered tonnage (GT, millions) 2016 2017 2018
Owned / Mutual 72.1 82.5 90.6
Chartered / Fixed 28 30 29.4
Total 100.1 112.5 120.0
       
S&P Rating History 2016 2017 2018
  BBB+ A- A-
       
Average Expense Ratio (AER) 2016 2017 2018
Five years ending 20 February 15.5 15.2 14.8

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.