GARD: Status report as at 20 February 2019: Review of policy years
The Board of Directors of the parent company, Gard P. & I. (Bermuda) Ltd. (the “Association”), met on 11 and 13 May 2019 in Bermuda and is pleased to report that as at 20 February 2019, and on a consolidated basis, the financial position of the Association remains strong.
• On an Estimated Total Call (ETC) basis, the net result before the reduction in the Last Instalment (previously known as the Deferred Call)2 was negative USD 53 million.
• Total equity for the Gard group, which provides security and stability for the joint membership, stands at USD 1,159 million (compared to USD 1,249 million as at 20 February 2018) based on a reduction in the Last Instalment to 10 per cent of ETC, against the original estimate of 20 per cent, which equates to a total reduction of USD 37 million for the membership.
• P&I mutual operations produced a technical surplus of USD 30 million on an Estimated Total Call (ETC) basis. Taking into account the reduction in the Last Instalment, P&I mutual had a final result of negative USD 7 million thus reducing total equity by USD 90 million.
More detailed information is provided in the Directors’ Report and Financial Statements for the Gard group, which is available on www.gard.no.
REVIEW OF POLICY YEARS
As at 20 February 2019, the estimated surplus for all closed years stood at USD 1,032 million, an increase of USD 31 million from 20 February 2018. The increase is in particular attributable to improvements in policy years 2007 and 2012 due to positive development on some old large cases.
All other closed years have improved by USD 5 million over the last year.
Policy year 2016 contributed USD 103 million to the Association’s total equity. This is an increase of USD 4 million from 20 February 2018. Results for this policy year include a technical result of USD 36 million and a non-technical result of USD 67 million which includes a dividend payment of USD 30 million received from Gard Marine & Energy Limited.
Policy year 2017 contributed USD 82 million to total equity. This is an increase of USD 46 million from 20 February 2018. This policy year had a technical result of minus USD 24 million after the decision not to call the last instalment of 20 per cent of the ETC, and a non-technical result of USD 106 million.
Following the reduction in the last instalment of USD 37 million and an impairment of an IT project, the 2018 policy year suffered a loss of USD 81 million. On an ETC basis, the technical result was minus USD 104 million. The non-technical result was USD 60 million which includes a dividend payment of USD 45 million received from Gard Marine & Energy Limited.
The Association’s Board of Directors, and the Boards of its subsidiaries, have determined that the following procedures and factors shall be followed and taken into account when forecasting the Last Instalment and when determining the Release Call percentages and the collection of Release Calls when an entry is terminated or ceases:
The following factors will be considered by the Board when determining the Release Call percentages:
• The risk that any previously published levels of estimated premiums may be exceeded, when assessed by using the Association’s methodology for calculating the capital required, which is determined by taking into account premium risk, reserve risk, market risk, and other significant risk categories.
• The wish to maintain a set structure for reducing the Release Call percentage per policy year under normal circumstances.
The following procedures and terms have been determined by the Board for the payment of the Release Call and the Last Instalment when an entry is terminated or shall cease:
• The Release Call percentage shall be separated from the Last Instalment for the relevant policy year and calculated as a percentage of the Estimated Total Call premium for the relevant entry (ETC premium) for the relevant year.
• The forecast Last Instalment for the relevant entry for the relevant policy year, which has not yet been levied, in addition to the Release Call, shall be paid on demand when an entry is terminated or shall cease.
• In addition to the Release Call, when the relevant proportion of the Last Instalment has been decided by the Board of Directors but not yet been paid by the Member, it is this proportion of the Last Instalment that shall also be paid when an entry is terminated or has ceased.