Investment returns zoom Shipowners’ back into H1 profit

Shipowners’ Club booked a net gain of $15m in its first half, to June 20th 2021, helped by buoyant equity markets that generated an investment return of 2.9% for the club in the first half.

The Club reported a combined ratio of 100.9%, which it said “was slightly higher than budgeted”

“Members and vessel numbers and total gt are all up on 2020. Balanced against this positive position, we continue to see a high level of claims to the International Group Pool and arising from Covid-19”, the Club said, adding that “despite the emergence of a new claim type as a result of the global Covid-19 pandemic, we once again report stability in claims frequency”.

In the lead-up to the Feb 2021 renewal the club requested a 5% general increase, anticipating that 2020 underwriting year would result in an underwriting deficit.

After several years in its target range of a fraction under 100% combined ratio, Shipowner’s Club saw percentages of 104.2 in June 2018 and 105.1 in June 2019. Remedial action was taken, reducing it to 101.0 in June 2020 (according to the club’s chart) and 100.9 this year.

In May this year cyclone Tauktae passed through the offshore sector of Mumbai, India, and generated a number of claims for the club, the most significant one falling within the $7m-plus band.

Covid-19 claims continued to feature prominently. The frequency of new notifications has not abated. The Club said that “given the relatively slow progress in rolling out the vaccination programme in many parts of the world, and more transmissible variants, we must expect the level of claims will continue at the current level”.

Total incurred value of claims was $55.39m to June 2021, with 1,873 files open.

Financial Summary

  • Underwriting deficit $0.9m (June 2020: $2.2m)
  • Combined ratio 100.9% (June 2020: 102.2%)
  • Gross earned premiums $120m (June 2020: $113m)
  • Total Members 8,203 (December 2020: 8,182)
  • Total Tonnage 27.9m (December 2020: 27.8m)
  • Total Vessels 33,986 (December 2020: 33,831)
  • Capital and free reserves $394.1m (December 2020: $379.1m)

CFO Simon Peacock reported a modest technical loss of $0.9m at the half-way point. There was a total gain of 2.9% on investments – Shipowners’ Club has a greater weight in equities than many other insurers – and this was the main contributor to the club’s overall surplus of $15m in H1.

KPIs $’000 H1 2021 H1 2020
Gross premium earned 119,659 112,978
Outward reinsurance (12,136) (13,165)
Ultimate claims net of reinsurance (80,072) (75,131)
Underwriting account balance (941) (2,150)
Inv return 16,688 752
Result for period 15,001 (1,808)