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Financial Profile
WE PUT FINANCIAL STRENGTH AND STABILITY FIRST
Our strategy is as straightforward as it is simple. We make sure that we hold enough capital to provide our Members with a high enough level of security to meet their claims. A strong balance of capital also offers greater certainty of what costs might be, not least because it all but eliminates unbudgeted calls. In fact, we haven’t had to make an unbudgeted call in over 40 years.
On February 20, 2021, our capital stood at USD449m. But we also benefit from a reinsurance arrangement with Boudicca Insurance Company Limited, which is based in Bermuda. Boudicca’s surplus investment assets – that is to say, those that are not backing actual reinsurance liabilities – are available to support future claims by Group. This means that, in effect, these surplus investment assets act as an additional general reserve. On February 20, 2021, these surplus assets were valued at USD178m. So, if you add the Group’s capital to Boudicca’s surplus assets, you will see that we have total reserves of USD627m to call upon. This is after capital distributions amounting to USD95m to members since May 2017.
AN ‘A’ CREDIT RATING FROM STANDARD & POOR’S
Standard and Poor’s are regarded as the world’s leading independent credit ratings agency. In September 2020, they confirmed their ‘A’ long term financial strength (‘AAA’ capital) and counterparty credit ratings for our P&I Club. This is based on their expectation that our capital adequacy will remain at a level that is consistent with S&P’s ‘AAA’ benchmark.
WE’RE CONSERVATIVE WITH OUR INVESTMENTS
We employ a cautious investment strategy. Our aim is always to preserve capital yet, at the same time, achieve a respectable rate of return, one that supports our underwriting activity. As you might expect, this calls for us to invest in a diverse range of assets. In detail, these are cash, to maintain liquidity, and five types of bond: government, conventional, index-linked, corporate and absolute return. In addition, we invest in diversified growth funds and equities. On February 20, 2021 these investments totalled USD819m.
In the year to February 20, 2021, the overall return on investments was 7.2% which is equivalent to a return of USD59m.
WE’RE COST EFFICIENT
Because we are efficiently managed, our cost base is one of the lowest amongst international P&I Clubs. As of February 20, 2021, our average ratio of expense was 11.66 percent.
| KEY FINANCIAL
DATA |
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|---|---|---|---|
|
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|
|
|
| ENTERED TONNAGE (OWNED) | 125.2 | 117.5 | 111.9 |
| ENTERED TONNAGE (CHARTERED) | 53.5 | 45.0 | 19.0 |
| USD(000) | USD(000) | USD(000) | |
| CALLS AND PREMIUMS | 200,086 | 201,185 | 204,415 |
| NET CLAIMS INCURRED | (118,257) | (111,667) | (119,599) |
| INVESTMENT INCOME | 58,970 | 61,868 | (2,643) |
| NET OPERATING EXPENSES | (32,520) | (31,891) | (28,649) |
| NET INCOME AFTER TAXATION | 36,967 | 56,427 | (9,296) |
| FREE RESERVES* | 449,055 | 422,088 | 390,661 |
| TOTAL ASSETS | 1,695,650 | 1,634,662 | 1,572,143 |
| NET LOSS RATIO | 90.8% | 79.9% | 83.8% |
| AVERAGE EXPENSE RATIO | 11.66% | 11.50% | 10.90% |
| STANDARD & POOR’S RATING | A (stable) | A (stable) | A (stable) |
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*The Association also retains the benefit of its reinsurance contract with Boudicca Insurance Company Limited |
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| USD(000) | USD(000) | USD(000) | |
| ASSETS IN BOUDICCA | 177,800 | 172,300 | 196,900 |