West reports 6.5% investment return, combined ratio of 107%, for 2019-20 policy year

West of England Club has released some financial details of policy year 2019-20, ahead of its full financial results for the policy year.

The Free Reserve increased by more than 10% to its highest-ever level of $338.1m, from $306.4m 12 months previously.

The Club generated an investment return of 6.5% ($44.9m). CEO Tom Bowsher said that “this strategy has enabled the Club to withstand the volatility in global financial markets post 20 February.” Asset allocation was 74% Fixed income with an average rating of A+. Of the rest, 10% was in equities, 5% in real estate & infrastructure, and 11% in cash.

The combined ratio was 107% for 2019, which was its best performance for three years. West said that the primary driver was a positive development of Members’ claims. In particular, 2018 developed better than expectations from its 12 month point and claims for 2019 were lower than the high levels experienced in the preceding two years with the number of large-value claims returning to a more normal level.

West noted that other Clubs’ Pool claims were “less positive”, with 2018 deteriorating beyond expectations and 2019 also suffering from a higher number of notifications and a greater incurred cost than expected.

Both years contributed adversely to the Club’s operating result.

The Club said that it remained cautious in its expectations of claims developments and continued to increase its reserving strength as it navigates the challenging operating conditions in 2020.

On renewals West said that “the Club’s approach to renewal focused on redressing rates for Members with adverse records and an overall increase in premium was achieved”, adding that there was “increased support from both new and existing Members which has led to an increase in the Club’s mutual entry to in excess of GT 100m for the first time”.

Looking ahead, CEO Tom Bowsher said that the “unprecedented” development of Covid-19 outbreak since February 20th had created a significant amount of uncertainty. However, he said that the Club’s capital strength and investment strategy placed the West “in a strong position to meet these challenges, allowing the Club to focus on supporting its Membership throughout this difficult period”.

Bowsher said that “The West” was committed to a conservative diversification strategy. He said that various initiatives resulting from this strategy would be launched during the course of the year.

Finally, the Club’s gave details of policy years and release calls, which were the same for Class 1 (P&I) and Class 2 (FD&D). These were:

  • 2017/18 – Closed in surplus without further call
  • 2018/19 – Release call reduced to 0% of the estimated total mutual call
  • 2019/20 – Release call reduced to 7.5% of the estimated total mutual call
  • 2020/21 – Release call maintained at 15% of the estimated total mutual call

https://www.westpandi.com/Publications/Notice-to-Members/2020-2021/No-4-2020-2021-West-of-England-Annual-Review-and-R