During what has been another difficult year for the shipping industry, North has continued to provide its Members with high levels of service whilst ensuring it remains a financially solid Club that is well positioned to meet future challenges. North’s strategic goals are to deliver service excellence and to enhance financial strength and membership quality, I am pleased to report that these goals were achieved.
When we announced our renewal strategy and General Increase back in November 2015, we highlighted the fact that the relatively low increase of 2.5% for both the P&I and FD&D Classes reflected the improvement in the Club’s financial position, the favourable claims development during 2015/16 and our claims projections going forward, and recognised the depression in the global freight markets and volatility in investment markets. The relatively benign claims environment and difficult freight markets coupled with the relative financial strength of all International Group (IG) clubs resulted in most of our IG peers announcing low general increases.
It therefore gives me great pleasure to report that we achieved an excellent set of results for the financial year to 20 February 2016. The combination of the benign claims environment, significant improvements on past Policy Year and Pool claims and a successful strategy to improve our underwriting performance have led to an exceptionally strong financial performance for the North Group overall. Free reserves increased by US$90 million to US$428.4 million and delivered a combined ratio of 73.3%. This brings the combined ratio average of the past five years down to 95.7%, amongst the best in the IG.
This result was achieved in spite of an overall loss of almost US$13 million on investments which was countered by a reduction of just over US$18 million in the Group’s Pension Scheme deficit. Volatility in investment markets however still persists and the UK’s recent decision to leave the European Union will fuel this further and for some time yet, presenting continuing challenges.
We are nevertheless determined to ensure financial security for our Members and continue our proud record of not having made unbudgeted calls for 25 years. We remain a well-capitalised Club that has more than met the Solvency II requirements, maintained our Standard & Poor’s ‘A’ rating, and vitally, we are capable of providing the industry leading levels of service to our Members that they have come to expect from us.
Owned entered tonnage reached 131 million GT at the conclusion of the 2016 renewal, representing a growth of almost 4% year on year, which is broadly in line with world fleet growth. Chartered tonnage has reached a record level of 54 million GT.
Our strategy to refine the membership in order to improve the overall performance has been successful and our financial results have demonstrated this over the past year.
Our acquisition and ongoing successful integration of Sunderland Marine is further testament to the success of our overall strategy by delivering a platform for further diversification benefits for the mutual membership. Although Sunderland Marine made a small loss this year, it represents a significant improvement on the previous year as we continue to simplify the business, reduce costs and improve profitability.
Doing things the ‘North way’ is at the heart of what we do and we will continue to focus our attention on ensuring that our Members receive the service they deserve, for example – providing industry leading in-house legal solutions, advice on ship’s technical and operational issues and encouraging early intervention in disputes, which is an initiative I am keen to promote. I truly believe that North provides the benchmark for service in the industry.
Looking forward, North will continue to support the International Group’s initiatives, devoting significant management resources to the important work of the various sub-committees and working groups. We will also monitor developments following the UK’s recent decision to leave the European Union, managing the risks and engaging with regulators where necessary.
A commitment to mutuality is part and parcel of the ‘North way’, but this commitment does not mean that the Club should not diversify and provide new and innovative solutions in other areas to support our Members. We will work with our Members as we strive to achieve our vision of being “a world leading marine insurance group, providing the highest quality of cost-effective service”
I would like to take this opportunity to thank North’s Directors and Board members for their dedication to North’s affairs and I look forward to working with them over the coming year.
I would also like to thank all of the Club’s Members for their ongoing support and commitment to the Club and to North’s staff for their passion and drive towards achieving North’s strategic vision and objectives.