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American Club reports solid progress during 2018

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Joseph E.M. Hughes, Chairman and CEO, Shipowners Claims Bureau, Managers for The American Club


NEW YORK, JUNE 21, 2019

Positive trends of recent years continue in 2019

P&I and FD&D entries grow by 8% and 6% respectively during 2018

  • Renewing tonnage for 2019 up 10% for P&I, 7% for FD&D
  • Net premium declines by 1% to $73.4 million for 2018 financial year
  • Incurred losses increase to $45.9 million, including sharp increase in exposure to other Group club Pool claims
  • Financial year-end combined ratio of 116% in line with experience of broader market
  • 2018 policy year claims for Club’s own account emerge at best levels since 2002
  • Early 2019 policy year retained claims development follows trend of 2018
  • 2018 year-end financial market turmoil reverses earlier investment gains, but earnings rebound in 2019
  • Mid-June 2019 investment return 6.24% year-to-date, significantly ahead of benchmark
  • First quarter of 2019 sees substantial recovery of GAAP and statutory surpluses
  • Eagle Ocean Marine enjoys steady expansion:  2019 sees strong premium and tonnage growth and continuingly excellent financial results
  • American Hellenic Hull sees rising profitability as premium rates harden
  • Loss prevention initiatives exert positive influence on Members’ exposures
  • Favorable risk profile of renewing membership encourages solid outlook for 2019 and beyond
  • Irene Marinakis of Marinakis Chartering, Inc. and Nicholas Tragakes of Global Maritime Group elected as new Members of the Board
  • George D. Gourdomichalis of Phoenix Shipping & Trading S. A. and Robert D. Bondurant of Marine Resource Management Corp. re-elected as Chairman and Deputy Chairman of the Board respectively

NEW YORK, JUNE 21, 2019:  Members attending the one hundred and second Annual Meeting of the Club in New York yesterday heard that, although the shipping and insurance sectors had continued to experience headwinds in 2018, the American Club had made solid progress in many areas over the previous twelve months, and that 2019 had started on an encouraging note.

Tonnage growth during 2018 had been similar to that of the previous year.  P&I entries increased by about 8% and those for FD&D by approximately 6%.  While year-on-year premium had decreased slightly, renewing business had continued to enjoy a benign risk profile, with a trailing five-year gross loss ratio of only 48%.

At the recent 2019 renewal, P&I tonnage grew by 10% and FD&D entries were up 7%.  Encouragingly, premium had risen in both classes of business, by 4% and 2% respectively, while the trailing five-year gross loss ratio on renewing business had improved yet again to 46%.  Moreover, the average rate per gross ton on renewing P&I entries was about 1.5% higher than the expiring figure, an auspicious sign for risk pricing into the future.

Net premium income for the 2018 financial year was $73.4 million, 1% lower than that recorded for 2017.  Incurred losses increased from $36.3 million to $45.9 million, but nearly 70% of that rise was attributable to exposure to other International Group clubs’ Pool claims.  Reinsurance costs reduced by 7% during the year, while other operating expenses were also down, by just over 1%.

A reduction in the Club’s GAAP and statutory surpluses at December 31, 2019 was largely the result of two unusual factors which characterized the Club’s financial fortunes toward year-end.  The first was a sharp increase, which emerged during the latter part of 2018, in the American Club’s exposure to other International Group clubs’ Pool claims.  Although 2018 policy year claims for its Members’ own account were the best since 2002, these significantly larger than usual Pool losses had a material effect in increasing the Club’s combined ratio to 116% for the 2018 financial year, a figure nonetheless in line with experience elsewhere in the market.

The second factor had been an episode of exceptional volatility in the investment markets which occurred during the closing days of December, 2018.  This induced a reversal of the previously solid investment earnings recorded earlier in the year, leading to an unrealized investment loss at the time of the Club’s calendar year-end financial reporting deadline.

However, these negative circumstances had in the meantime largely been dissipated by a rebound in the financial markets during the opening months of 2019 (the mid-June 2019 year-to-date return being 6.24%, 57 basis points ahead of benchmark) and a continuingly benign development of claims for the Club’s own account.  Accordingly, the position as of March 31, 2019 had improved substantially to almost the same as that of twelve months earlier, GAAP surplus having increased by some 11%, to just over $50 million, and the statutory amount by over 8%, to approximately $64 million, over the three months in question.

Eagle Ocean Marine, the American Club’s fixed premium facility, made excellent progress in 2018.  Following an exceptionally positive 2019 renewal period, during which its year-on-year premium grew by over 40%, it had continued to expand market share over the intervening months.  The aggregate combined ratio for the business remained below 70%, a result which inured both to the benefit of the Club and to its coventurers at Lloyd’s of London.

The fortunes of American Hellenic Hull Insurance Company, Ltd. – the Solvency II-accredited investment of the American Club domiciled in Cyprus – had also enjoyed a positive trajectory during 2018.  Having largely exceeded its commercial targets since its establishment in mid-2016, the financial prospects for American Hellenic had continued to improve over recent months.  Since the beginning of 2019 average renewal premium rates had increased by nearly 15%, while overall renewal premium had increased by more than 20% over the same period, a result impelled by market hardening across the hull and machinery sector in general.  This augured well for the future.

As to safety and loss prevention, the initiatives taken in recent years to enhance the American Club’s capabilities in this domain had continued with undiminished vigor during 2018.  As in previous years, the Club’s loss prevention program had embraced a diverse range of initiatives in the variety of spheres, seeking to respond to a risk landscape undergoing continuous change.  A highlight was the production of Caring for Seafarers’ Mental Wellbeing, a document published the Club in cooperation with the Seamen’s Church Institute, a renowned US-based ministry to seafarers.  It was released on October 10, 2018 – World Mental Health Day – and provided guidance on responding to both the routine and extreme stress which affect the quality of life of mariners both ashore and afloat, and promoting awareness generally of the importance of seafarers’ psychological well-being.

At the Annual Meeting of the Members, Ms. Irene Marinakis of Marinakis Chartering, Inc. and Mr. Nicholas Tragakes of Global Maritime Group Inc. were elected as new Directors of the Club.  They were welcomed with enthusiasm to the Board, in anticipation of their making a valuable contribution to the business of the Club over the months and years ahead.

The meeting also noted, with regret, the retirement of Mr. Markos Marinakis who had first been elected as a Director of the Club in June 1997.  Mr. Marinakis had served with great distinction during his tenure, having been Deputy Chairman of the Board between 2007 and 2018.  Members and Directors alike thanked Mr. Marinakis most warmly for his outstanding service, and joined in wishing him the very best of good health and good fortune on his retirement from the Club’s affairs.

At the Annual Meeting of the Club’s Directors, which took place immediately after that of the Members, Mr. George D. Gourdomichalis of Phoenix Shipping and Trading S.A. and Mr. Robert D. Bondurant of Martin Resource Mgmt. Corp. were re-elected as, respectively, Chairman and Deputy Chairman of the Board.

Speaking in connection with the Annual Meeting, Mr. Gourdomichalis, the Club’s Chairman, said: “2018 was a challenging year for all International Group clubs.  While P&I pricing remained flat, many insurers saw a rise in both attritional claims and larger losses.  The market may be experiencing a transitional phase where club capabilities will become ever more important to Members in the future.  Wherever these trends lead, the American Club will remain dedicated to the principles which have animated its mission over the years and will guide its commitment to providing unrivalled service and security in the future.”

Speaking in conjunction with Mr. Gourdomichalis, Joe Hughes, Chairman and CEO of Shipowners Claims Bureau, Inc., the Club’s managers, commented: “2018 was a challenging year for the P&I world as it confronted a changing landscape of risk.  Nevertheless, the American Club made progress in several areas.  Tonnage grew respectably.  Claims for Member’s own account were the best since 2002.  Eagle Ocean Marine continued to prosper.  The profitability outlook for American Hellenic Hull showed significant improvement, as market rates moved upward.  Loss prevention initiatives advanced into new areas of risk mitigation.  While a demanding regulatory environment continues to complicate commerce, and the business climate remains challenging, the Club looks to the future with optimism, buoyed by an encouraging 2019 renewal season, and clearly focused on its mission to provide exceptional support to its Members in these difficult times.”

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