The American Club reported positive developments during 2011, and into the first half of 2012, at yesterday’s annual meeting of its members in New York. Its business had made steady progress, notwithstanding the challenges which continued to confront the global economy in general, and the shipping industry in particular.
Entered tonnage grew during 2011 but premium levels had been reduced to some extent by the replacement of older, higher-rated vessels with newer ships which typically attracted lower rates in what was a very competitive climate, especially for newbuildings.
Retained claims emergence had been subdued during the early part of 2011, much in line with the benign results recorded for the previous year, but had showed an upward trend in the second half. However, it was noted that 2012 was developing favourably, early results being even better than those of 2010 at the same stage, although the year remained immature.
The level of claims on the International Group’s pool during 2011 was a source of concern. Whether the exposure for the year emerged as an exceptionally adverse singularity, or as part of an inexorably rising longer-term trend, remained to be seen.
The club’s funds under investment generated a return of 3.5% overall during the 12 months to December 31, 2011, a respectable result given the extreme volatility of the capital markets over the period. A measured derisking of the portfolio was undertaken during the second half of the year.
A modest unrealised loss on investments recorded at year-end of $5.8m had reversed itself during the first quarter of 2012, but had nonetheless eliminated a small operating profit for the 2011 financial year, resulting in a small reduction in members’ equity compared with the figure of 12 months earlier. This stood at $60.2m at December 31, 2011 ($63.6m at December 31, 2010). However, at March 31, 2012, only three months later, the figure had increased to $66.2m, some 10% greater than at year-end.
Moreover, free reserves per ton at the end of the first quarter, being approximately $4.10, were higher than 12 months earlier, and at a level bearing favourable comparison with those of other IG clubs at a similar stage of development.
Speaking at the annual meeting, Arnold Witte, president of Donjon Marine Co., Inc. and chairman of the board of the American Club, said: “2011 was a challenging year for the American Club – as it was for its members who continue to feel the effects of a lethargic global economy and desperately anaemic freight markets. Nonetheless, and with its characteristic energy, the club continued to make progress across a wide variety of areas, operationally, financially and, most importantly, in the provision of service to its members. The club remains optimistic as to its future which continues to hold many exciting prospects.”
Speaking in conjunction with Mr. Witte, Joe Hughes, chairman and ceo of managers Shipowners Claims Bureau, Inc., said: “The American Club did well in all its core constituencies during 2011 despite an extraordinarily difficult economic climate, especially for the shipping industry itself. The club’s business remained steady throughout the period: tonnage and membership grew modestly, pricing remained solid despite some reduction in overall revenue because of the “churn effect”, and retained claims developed in line with expectations. Pool exposures for 2011 were high, but whether this year proves the exception rather than the rule remains to be seen.
“One of the highlights of the year was a steady growth of the club’s fixed-premium facility, Eagle Ocean Marine. The initiative has got off to a good start, and its early success augurs well for the further development of the club – and in particular its product diversification – over the years ahead. Overall, the progress made during the year, and within the first half of 2012, has provided a firm foundation for future success. We look forward with optimism to the club’s centennial, now less than five years away. And we remain dedicated to the service of our members”.