North P&I Club has logged a $42.6m dip in premiums and a $13.1m underwriting loss in its latest policy year.
The Newcastle-based mutual said its combined ratio for the 2018 policy year, which ended on 20 February 2019, was 105.1%, indicating that claim costs and expenses exceeded premium income.
However, a strong investment return kept its substantial free reserves growing. It earned an investment return and foreign exchange gain of $29.5m.
This helped the club lift its free reserves by $12.6m to a whopping $463m, and retain its AAA capital strength rating. Fixed premium subsidiary Sunderland Marine also contributed $11m to North P&I’s earnings.
On the down side, estimated claims values were $23m higher than in the 2017 policy year, with an upturn in claims of more than $1m. The club also had a $3.8m reversal in its pension scheme deficit.
The club blamed five years of consecutive falls in premiums for the underwriting loss. Its premium income in the 2018 policy year was $345m, compared with a recent high of $490m in 2015.
Despite the dip, North P&I said it had protected its premium base at renewal by adjusting individual member rates to be “commensurate with operational performance”.
However, it described current premiums as “unsustainable” and hinted at a rate rise at the general increase review in the autumn.
Whilst we will endeavour to keep premiums as low as we can to support our members going forward, we continue to believe that an adjustment is needed to premium levels over future renewals if clubs are to underwrite sustainably
“Whilst we will endeavour to keep premiums as low as we can to support our members going forward, we continue to believe that an adjustment is needed to premium levels over future renewals if clubs are to underwrite sustainably,” its earnings statement stated.
North P&I chairman Pratap Shirke described the 2018 policy year as a “landmark year in the development of the club”.
Despite the set back in premiums, the club maintained a 99% retention rate at the February renewal. It also broke through the 200 million gt level, in terms of owned and chartered tonnage registered with the club.
Shirke said its future strategy would continue to focus on financial strength and mutuality.
He said: “We aim to continue delivering predictability in the club’s performance. Providing that predictability depends on keeping our focus on some key areas, notably maintaining financial strength and stability, and providing truly industry-leading and innovative service.
“It also requires us to continue pursuing our strategy of growth and diversification in a way that positively contributes to our overall ... results. In doing so, we hold fast to the concept of mutuality.”