24-06-2017

The American Club Reports Solid Progress In 2016 Despite Challenging Business Climate

Americanclub

Despite a challenging business climate, the American Club reported solid progress during 2016, the closing year of its first century of service to the global shipping community. Members attending the one-hundredth Annual Meeting of the Club in New York yesterday heard that its business was developing positively and that 2017, its centennial year, had started on an upbeat note.

Club tonnage had grown substantially during 2016 – P & I entries by 16% and FD & D business by 19%. 2017 had also started well in this respect, both tonnage and premium having grown by 6% over the four months since renewal. It was also encouraging that the business renewed by the Club continued to enjoy a favorable risk profile, with a trailing five-year loss ratio of only 51%.

The results of the financial year to December 31, 2016 disclosed a small operating loss of just under $2 million. Total premium was up 17% for the year at $95.3 million, as were net investment income and net realized investment gains which, at just under $7 million, were about 13% higher than 2015 ($6.2 million). However, losses and other expenses had risen from $83.3 million to $108.5 million, mainly due to two claims of unusual severity during the course of the 2016 policy year. This, combined with a small unrealized loss on investments of $2.9 million, had generated a total Members’ Equity at year-end of $51.4 million, just under $5 million less than it had been at the end of 2015.

Encouragingly, however, the Club’s surpluses had risen substantially as of March 31, 2017, by which time the balance of premium for the 2016 policy year had been fully recognized. The Club’s GAAP surplus had grown over the quarter by 17% to $60 million, a figure about 9% above that recorded twelve months earlier. Its statutory surplus also rose by nearly 10%, to $72.8 million.

Loss development continued to follow the favorable trends of recent years. Claims for 2015 were still at comparatively low levels and had moved the year into respectable surplus. Attritional exposures for the 2016 policy year were developing at a level largely the same as they had been for 2015 at a similar stage. Claims for the 2017 policy year, albeit at a very early point of development, were following the positive emergence of 2015 in particular. Losses within the International Group’s Pool also continued to develop favorably.

The Club’s investments had generated an overall return of some 2.4% during the period against a blended benchmark of 2.2%. This was a substantial improvement on the previous year’s return of only 28 basis points. It was a creditable result given the market uncertainties which prevailed during most of 2016.

The Club’s Eagle Ocean Marine fixed premium facility had performed strongly in 2016, and into the early part of 2017. With an aggregate combined ratio of just over 60%, the facility was making a very healthy contribution to mutual results.

Taking all these circumstances into account, the Club’s Board resolved formally to close the 2014 policy year without call in excess of the original forecast. At the same time, in view of its continuingly positive development, it was decided to reduce the release call margin for the 2015 policy year from 15% to 10%.

A highlight of 2016 had been the licensing of American Hellenic Hull by the Cypriot authorities. Fully capitalized and compliant under the Solvency II insurance regulations of the European Union, American Hellenic Hull had made excellent progress to date. Some 1700 vessels are now insured by the new company which continues to gain market share and promises to make a significant contribution to the Club’s business from a variety of perspectives over the years ahead.

On the service front, the Club’s Managers had opened an office in Houston, Texas in July, 2016 in order to extend the Club’s capabilities in the US Gulf and beyond.

In assessing the condition of the Club’s affairs in its centennial year, the Club’s Chairman, Arnold Witte of Donjon Marine Co. Inc., said: “2016 was yet another challenging period for the shipping industry and all those who serve its interests. But it was also a year of achievement for the American Club across a wide spectrum of activity. The Club remains well placed to exploit opportunities in the future. In this special, centennial year, my fellow Directors and I wish to thank the Members, and all those who act on their behalf, for their continuing support as we move into our second century of service to the global maritime community.”

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Joe Hughes, Chairman and CEO of the American Club’s managers, Shipowners Claims Bureau, Inc.

Joe Hughes, Chairman and CEO of the American Club’s Managers, Shipowners Claims Bureau Inc., echoed Mr. Witte’s remarks: “Notwithstanding difficult business conditions, 2016 was a solid year for the American Club. It advanced its business in many areas as the year unfolded. It was particularly encouraging to see a solid increase in tonnage, a trend which has continued into 2017. Claims continue to develop favorably, revenue is growing despite a weak pricing environment, investments are performing well, membership is expanding, free reserves are increasing, and the Club’s service capabilities continue to be enlarged.”

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Arnold Witte, Chairman of the American Club, Donjon Marine Co., Inc.

He concluded: “As we reflect on the American Club’s first century, we will continue to exploit the energy and enthusiasm which have driven its recent progress, fortifying the Club’s prospects for further success over the years ahead.”

The Annual Meeting saw the election of Ms. Judy L. Collins of Patriot Contract Services, LLC, Concord, California and Mr. Gary K. Cutler of Poling & Cutler Marine Transportation, Inc. of Freehold, New Jersey, as new members of the Board.

The retirement of Mr. James P. Corcoran, an independent member of the Board, and a former Superintendent of Insurance for the State of New York, was also noted. Mr. Corcoran was thanked most warmly for his outstanding contribution to the Club’s affairs over many years of diligent service.

THE AMERICAN CLUB 2016 ANNUAL REPORT [PDF]

Source: The American Club

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