Strong underwriting result underpins UK P&I Club finances

News Release U.K. P&I Club Thomas Miller(Americas)Inc. May 11, 2012

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The UK P&I Club (the
Club),
one of the oldest
shipping protection and indemnity insurance mutuals, announces its results for
the year ended 20 February 2012.
 
Highlights
·      
Combined
ratio 97% for 2012 financial year
·      
Surplus
of $11m for 2012 financial year
·      
Free
reserves and capital increased to $486m at 20 February 2012 
·      
Level of
capital puts the Club’s financial strength at the top level of its peer group in
the P&I sector
·      
Investment return reduced to 1.5% as
Club de-risks portfolio
·      
Improved
claims trend supported in part by falling claims frequency since
2008
·      
Total
assets of $ 1.6 billion 
·      
Free
reserves per gross ton: $4.33 per gt 
·      
Underlying claims inflation over the
longer term has been between 5% and 15%
·      
S&P
rating:  A- (Stable outlook)
 
 
Dino Caroussis, Chairman of the UK
P&I Club, said:
 “We are very pleased that for the
second financial year running, the UK Club is announcing a balanced underwriting
result with a combined ratio, the ratio of claims and expenses to premium
received, of 97 per cent. This very positive result demonstrates the Club’s
commitment to its long term target of maintaining a combined ratio of 100 per
cent or below. 
 
“This has meant that this year the
Club has produced an operating surplus of $11 million for the 2012 financial
year, generating a further increase in the free reserves and capital to $486
million. This level of capital puts our Club’s financial strength at the top
level of its peer group in the P&I sector.

“Continued improvement in previous
policy years’ claims reserves has brought the average of the last four years
into a position of underwriting balance, with average combined ratios below
100%.  Early indications are that 2011 will be a relatively low claims
year.
 
 
“Our return to the top level of the
P&I market has been rewarded by increased support from new and existing
Members. Tonnage was up over the year and now stands at 112 million gross tons
of owned tonnage and around 80 million gross tons of chartered tonnage.”

 
Hugo Wynn-Williams, chairman of Thomas
Miller P&I, the Club’s managers commented,:
 
“These results are particularly
satisfying as they come in a year that has seen results elsewhere in the market
adversely affected by an increase in claims and volatile investment
returns.
 
“Since 2008, the ongoing shipping
recession has significantly dampened the volume of claims. While this has been
beneficial to the Club, we have actively contributed to this improvement through
careful management of our risks: carefully monitoring the Club’s entry criteria,
running an extensive loss prevention program, and maintaining strong claims
management.
 
“Finally, these ongoing activities are
backed up by specialist reinsurance designed to avoid potential future claims
spikes, which may arise from increased shipping activity.”
 
Reduced claims frequency offsets
claims inflation
The improved claims position on all
policy years since 2008 was supported by an overall reduction in the number of
claims.  The 2011 policy year saw 5 per cent fewer claims than 2010, itself
a low year for the number of claims, and some 30 per cent fewer than in
2007.  
 
During the high claims levels of 2006
and 2007, the UK Club’s share of claims on the International Group Pool was well
below its share of the total Pool fleet. The UK Club has maintained the largest
credit balance on the Pool.
 
Despite an improving claims position,
the Club has maintained a prudent approach to claims reserving.  The
underlying long-term average cost per claim has been inflating at approximately
5 per cent each year. Some categories of claims, e.g. death and personal injury,
have been inflating at rates of up to 15 per cent.  Where shipping markets
remain depressed, the total cost of claims is expected to remain lower. While
improvements in regional markets e.g. intra-Asian trade or in particular
shipping sectors could change that outlook, the Club will ensure that premium
levels match likely claims trends at subsequent renewals. 
 
Positive investment
return
Investment income contributed $18.6
million to the Club’s overall results.  This lower return stemmed from the
decision to reduce risk in the Club’s investment portfolio.   The
proportion of the funds held in equities reduced from approximately 15 per cent
to approximately 10 per cent of the portfolio and correspondingly reduced the
gains from recent strengthening of these investments.  However, the Club is
confident in its decision to focus on the preservation of Members’ capital
remains a priority during a period of persistent uncertainty and market
volatility.
 
Comprehensive
reinsurance
As a member of the International Group
the Club benefits from the security of both Pooling of claims within the Group
and their excess of loss reinsurance program which provides cover in excess of
$3 billion.
 
Another measure taken to ensure the
Club is protected against adverse movements in future claims has been the
introduction of the Club’s own comprehensive reinsurance programme.  The
internal model developed for Solvency 2 compliance has guided the design of this
reinsurance programme to protect the Club from a potential run of larger than
usual claims, whether within its own retention or the Pool.  This program
will also protect the Club from any very large, one-off claims.
 
Downloads
 
The Financial
Report is available to download from <A
href="redir.aspx?C=978940b980b04a0db959903d5f61bd7b&URL=file%3a%2f%2f%2fG%3a%5cSHARED%5cWebsite%2520-%2520Dunelm%5cpublic_html%5cUKP%26I-REVIEW2012.pdf"
target=_blank>http://www.dunelmpr.co.uk/</A><A
href="redir.aspx?C=978940b980b04a0db959903d5f61bd7b&URL=file%3a%2f%2f%2fG%3a%5cSHARED%5cWebsite%2520-%2520Dunelm%5cpublic_html%5cUKP%26I-REVIEW2012.pdf"
target=_blank>UKP&I-REVIEW2012.pdf</A>
 
 
For further details, please
contact:
 
Nick Whitear, Communications Director
- Thomas Miller P&I Ltd
<A
href="redir.aspx?C=978940b980b04a0db959903d5f61bd7b&URL=mailto%3aNick.Whitear%40thomasmiller.com">Nick.Whitear@thomasmiller.com</A>
+44 (0) 20 7283 4646
 
David Cheslin – Dunelm Public
Relations Ltd
<A
href="redir.aspx?C=978940b980b04a0db959903d5f61bd7b&URL=mailto%3adavidcheslin%40dunelmpr.co.uk">davidcheslin@dunelmpr.co.uk</A>
+44 (0) 20 7345
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