Steamship Mutual Addresses Underwriting Imbalance

Steamship Mutual released interim financial results for the year ending February 20, 2013.

As with all international group clubs, underwriting performance for the year ended February 20, 2013 was adversely affected by the worst pool experience on record. Claims within the club retention were also at higher levels than predicted, reflecting continued upward pressure upon claims despite the economic downturn. Nevertheless there was an improvement in prior year results, which is consistent with the club’s normal experience. These factors resulted in a financial year combined ratio of 112.5% and an increase in the three year average ratio to 106.4%.

The club benefited from an investment gain of $27.0 million, a 3% return, and the total of cash and investments increased by 5.2% to $944.7 million.

These investment gains largely offset an adverse underwriting result, and free reserves stand at $286.2 million for 2013, a reduction of $9.6 million from the position at February 20, 2012.

Colin Williams, Head of Claims, said, “During 2012 the club experienced fewer claims in the layers below $250,000 and up to the club retention as compared to the preceding year. However the average cost of claims was higher, in particular for claims above $1.8 million, and the club had two claims on the pool as opposed to one. Net estimated claims for the 2012/13 policy year, including IBNR provision and after reinsurance recoveries, are $247.8 million, 6.7% above the comparable figure for the 2011/12 policy year at the same point.”

Stephen Martin, COO, said, “At renewal, the overall achieved increase – including individual adjustments for record and the value of significantly higher deductibles in some cases – was above the 7.5% increase set by the club board. This will enhance the club’s ability to accommodate the possibility of another adverse year for claims.”

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