Gard group result and owners general discount in last instalment

FY 2022 produced a total comprehensive profit on an estimated total call (ETC) basis of USD 34 million. This is a good result considering that the COVID-19 pandemic has continued to negatively affect international trade, shipping and financial markets throughout the year.

Despite these challenges, Gard has given a five per cent Owners’ General Discount (OGD) to mutual entries renewed with Gard for the 2021 policy year amounting to USD 19 million, and five per cent for those renewing for the 2022 policy year. See also Note 5 in the financial statements.

In the comparative accounts of last year, a reduction in the last instalment for the 2020 policy year of 10 per cent was included amounting to USD 38 million. A deferred 15 per cent last instalment for the 2019 policy year amounting to USD 54 million was included. This reduction from the originally forecasted 20 per cent amounted to USD 18 million in return to our Members. The FY 2021 was the final time a last instalment was levied. 

The consolidated equity, which provides security and stability for the membership, was USD 1,278 million on 20 February 2022, compared to USD 1,263 million the previous year. The financial position of the group at the time of reporting remains strong, with a low probability of levying any unbudgeted supplementary call.

Gard group on estimated total call basis (ETC basis)

Gross written premium on ETC basis saw strong development in the year to 20 February 2022, reaching USD 1.036 million. This represents an increase of USD 114 million or 12.4 per cent compared to last year. The premium growth is driven by hardening rates across all classes of business and volume growth for both P&I and M&E.As a result of this, the Gard group has increased its overall market share.

The panel of reinsurers on the Gard group reinsurance programs remains stable. There is an upward market pressure on the cost of reinsurance, but the impact on Gard has been acceptable due to strong, long-term relationships with reinsurers, satisfactory claims records relative to the overall market and changes to our risk profile.

Claims incurred for own account totalled USD 629 million, a decrease of USD 3 million from last year. See also Note 6 in the financial statements. This is a satisfactory level considering the growth in volume, a high level of Covid-19 related claims and a higher-than-expected influx of pool claims from the International Group of P&I clubs in the first half of the 2022 financial year, which includes an adverse development on claims from prior years. The trend of increasing pool claims thus continued, as it has done since 2019. 

Operating costs have been lower than expected over the last two years due to limited activity level as a consequence of Covid 19. This is now expected to normalise. See also Note 7 in the financial statements.

The technical result is a profit of USD 44 million and a combined ratio net on an ETC basis of 94 per cent. Last year there was a loss of USD 26 million and a combined ratio net on an ETC basis of 104 per cent.

The non-technical result is below expectation at a negative USD five million. The Group’s investment portfolio experienced a volatile year due to the COVID-19 pandemic and the tension prior to the Russian invasion of Ukraine. The net return of the investment portfolio for the Gard group was 0.1 per cent, compared with -1.2 per cent for the strategic benchmark. The return for the previous year was 5.0 per cent. The reason for ending at a small negative non-technical result for the financial year 2022 is currency exchange losses.

Protection and indemnity on ETC basis

Gross written P&I premium on ETC basis saw a strong development in FY 2022, increasing with 5.7 per cent from last year to USD 534 million. The increase is driven by both hardening rates and increased volume within the P&I portfolio. After a period of declining rates, P&I premium levels have gradually started to recover. The main driver of higher rates is the increased level of International Group pool claims seen over the past years. Most Clubs have responded to the increase in costs by targeting higher rates in their renewals.

P&I claims incurred for own account totaled USD 384 million, a decrease of USD 28 million or 6.8 per cent from last year. See also Note 6 in the financial statements. This is at an acceptable level considering a high level of Covid 19 related claims. There has also been a higher than expected influx of pool claims from the International Group clubs in the first half of the 2022 financial year, which also includes an adverse development on certain claims from prior policy years. The level of claims from Gard’s own P&I portfolio is below expectation, and there was only one large claim above USD 5 million in the 2022 financial year.

The technical result for P&I is a small loss of USD two million and a combined ratio net on an ETC basis of 100 per cent. For P&I mutual the combined ratio net on ETC basis is 109 per cent and below expectations. The P&I area came out on an acceptable level due to the strong support from P&I Fixed. Last year the technical result for P&I was a loss of USD 47 million and a combined ratio net on an ETC basis of 112 per cent.

Marine & Energy

Gross written M&E premium grew to USD 502 million in the year to 20 February 2022, an increase of USD 85 million or 20.5 per cent from last year. The increase is driven by hardening rates for Marine, Energy and Builder Risk and growth in business volume for Marine.

M&E claims incurred for own account totaled USD 245 million, an increase of USD 25 million or 11.6 per cent from last year. See also Note 6 in the financial statements. This is at an acceptable level considering increases in the claims costs caused by Covid-19 due to restrained yard availability, delays and stricter infection control schemes. There has been an increase in frequency of Marine claims that exceeds the underlying volume growth, but the influx of energy and builder’s risk claims were lower than expected. There was only one large claim above USD 5 million in Gard’s Marine & Energy portfolio in the 2022 financial year. The technical result for M&E is a profit of USD 46 million and a combined ratio net of 87 per cent. Last year there was a profit of USD 20 million and a combined ratio net of 93 per cent.