NORTH P&I Club ‘on track’ despite office revaluation and modest investment return

P and I Clubs — By on May 30, 2012 at 7:57 PM

Directors of North of England P&I club confirm the club raised its free reserve to US$314.0 million at the annual renewal in February 2012 despite revaluation of its UK head office and a modest investment return. Chairman Pratap Shirke and fellow board members approved the club’s 2011/12 accounts on Friday 18 May 2012 and confirmed North‘s development remains ‘very much on track’.

‘The past year has been a difficult one for the club, though this was primarily due to non-technical matters”, says Shirke. ‘The headoffice in Newcastle on Tyne was valued at US$7.5 million lower than anticipated due to a weak UK commercial property market and we earned US$13.9 million on our low-risk investment portfolio against a target of US$20.0 million. Despite this, as well as a return to increased claims levels, we remain very much on track and have yet again emerged at the year-end with a stronger balance sheet and a bigger fleet.’

According to joint managing director Alan Wilson, ‘Our underwriting result was very close to break even in 2011/12, producing acombined ratio of 101.8%. Together with a return of 2.76% on our low-risk investment portfolio we made an overall surplus of US$1.6 million, raising free reserves to US$314.0 million. In January 2012 we also maintained our Standard and Poor’s ‘A’ (stable) rating for the eighth consecutive year and are firmly on track to exceed all EU Solvency II requirements.’

Wilson confirms that despite the modest investment income, North’s low-risk investment strategy continues. ‘A total of 80% ofthe portfolio is held in at least AA+ government bonds and cash with the remaining 20% split between absolute return funds and investment-grade corporate bonds. We have no appetite for additional risk in these uncertain and volatile financial times, ’ he says.

Joint managing director Paul Jennings reports that theclub’s strategy of developing quality owned tonnage also continues. ‘During the year to 20 February 2012 and subsequently, the club’s membership has continued to grow steadily and owned tonnage hasnow increased to 125 million GT. Together with estimated chartered entries of 45 million GT, this takes the total entered tonnage in the club to around 170 million GT, ’ he says.‘However, claims returned to increased levels following an exceptionally benign experience in 2010/11. There were 40 claims over US$1 million in 2011/12 compared to 17 the previous year and 24 the year before. We nevertheless continue to reserve all member claims at a conservative 95% confidence level.’

In conclusion Shirke points out that North is now entering its 21st consecutive year of not calling on members for unbudgeted supplementary funding. ‘We have every intention of continuing this record by securely building the club’s financial strength and resources to match our ongoing development in quality tonnage. We remain strong, healthy and focused on delivering a first-class service to members.’

North is a leading marine mutual liability insurer providing P&I, FD&D, war risks and ancillary insurance to 4000 ships entered by 400 members worldwide. It is based in Newcastle upon Tyne, UK with regional offices in Athens, Hong Kong, Singapore and Tokyo. The club is a leading member of the International Group, with over 13% of the group’s owned tonnage. The 13 group clubs provide liability cover for approximately 90% of the world’s ocean-going tonnage and, as a member ofthe group, North protects and promotes the interests of the international shipping industry.

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