A.M. Best Assigns Ratings to Shipowners' Mutual Protection & Indemnity Association
A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Shipowners' Mutual Protection & Indemnity Association (the Club) (Luxembourg). The outlook for both ratings is stable.
The Club is expected to maintain excellent risk-adjusted capitalisation throughout 2012 and 2013. Although the Club is a mutual, A.M. Best believes that the members are supportive of its business approach to focus on underwriting profitability and to retain operating surpluses. Accordingly, good operating performances over the last three years have increased free reserves from USD 95.6 million at February 2009 to USD 234.5 million at February 2012. Whilst recognising that large claims or substantial investment losses could have a significant impact on future operating performance, A.M. Best expects this level of free reserves to be maintained in the near term at least.
The Club reported excellent pre-tax earnings of USD 47.5 million in the year to February 2012 (2011: USD 53.8 million), reflecting a strong technical result and solid investment earnings. In 2013, a good pre-tax profit is expected, albeit lower than in 2012 due in part to favourable prior year reserve development in 2012, which reduced the loss ratio by nearly 10 percentage points. The Club has a good underwriting record with a five-year (2008-2012) average combined ratio of 92.3%, although there has been some volatility in underwriting results. Investment earnings also have been volatile due to the high proportion of equity investments, the Club's investment strategy having a target asset allocation of 25% equities.
The Club has a good niche business profile providing protection and indemnity (P&I) insurance for over 31,000 small and specialised vessels operated by 6,000 members worldwide. It is the only one of the International Group of P&I Clubs to focus on smaller vessels. Its business is greatly diversified in terms of tonnage, with eight categories of vessel entered from thirteen distinct geographic areas. In addition to the P&I cover written within the International Group pool, the Club offers members with smaller vessels, who do not require the high limits available through the pool, cover on a fixed premium basis, which enables the Club to compete with local insurers.
Following the assignment of the current ratings, continued good operating performance is likely to lead to positive movement on the ratings. Conversely, unexpectedly poor operating results or a material decrease in the Club's free reserves could lead to negative pressure on the ratings.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Understanding Universal BCAR”; and “Understanding BCAR for Property/Casualty Insurers”. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
David Drummond, +(44) 20 7397 0327
Senior Financial Analyst
Catherine Thomas, +(44) 20 7397 0281
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations