American Club Results: Strong Headwinds

This Monday Aug. 28, 2017 image provided by the Port of Virginia shows the CMA CGM Theodore Roosevelt being unloaded at the Virginia International Gateway in Norfolk, Va. The arrival of the ship breaks the record for largest container ship ever to visit the Port of Virginia and the East Coast. (Keith Lanpher/Port of Virginia via AP)

For the first time since 2019, the American Club was able to hold the Annual Meetings of its Members and Directors in person last Thursday, June 23, in New York. Both were well attended, taking advantage of the recent relaxation of COVID-19 restrictions in North America and Europe.

The presentation of the Club’s Annual Report for the year ended December 31, 2021 took place at the Annual Meeting of the Members. It was simultaneously circulated in digital format to every Member of the Club and to other interested parties. Notwithstanding significant year-on-year growth in net premiums and calls earned during the period under review, supported by an increase in overall investment income attendant upon a respectable year-end investment return of 7.1%, incurred losses rose substantially, driven mainly by continuing Pool and retained claims emergence, and an adverse 2021 policy year loss development, particularly during the last quarter.

The unrelentingly high cost of pooling (the American Club itself not having had a Pool claim for its own account since 2016) featured in this development, as did the effect of “social inflation” on claims exposures not only in the United States but elsewhere in the world. Many clubs have commented on this phenomenon in recent times.

The accounting treatment, and presentation, of premium earned but unbilled (EBUB), was maintained for the 2021 financial statements. There was a year-on-year decline in Members’ Equity (GAAP free reserves) at year-end 2021 of just under $8.7 million by comparison with year-end 2020 in consequence of, among other factors, a combined ratio of 112% for 2021 on an EBUB-calculated basis, but 129% without EBUB being taken into account. These figures, as other clubs have commented, highlight the need for the continuing pursuit of sustainability in premium pricing for the future.

Despite the challenging results for the 2021 year of account, 2022 had commenced strongly in revenue and tonnage terms both for the Club and EOM. Annualized year-on-year premium for the Club was up by 20% or so, while EOM was approaching nearly $20 million in gross written premium for its latest year in account, its reinsurance arrangements for 2022/23 having recently been completed on favorable terms. The fortunes of the American Club (Europe) in Cyprus (including its American Hellenic Hull brand) were also proceeding well, with a first quarter-end solvency capital requirement (SCR) ratio in excess of 220%. Although the 2022 policy year was in its earliest stages of development, there were grounds for cautious optimism for a better result over time than that of its predecessor year.

As foreshadowed in the American Club’s pre-renewal circular of November 2021, the 2019 policy year was formally closed at the meeting on the basis of end-March 2022 figures which disclosed a breakeven result for the year. As notified in principle in the same circular, a supplementary call of 35% for the 2020 policy year was also ordered by the Directors, payable in January and July 2023.


About alastair walker 12514 Articles
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