S&P confirms North of England's 'A' / stable rating
for fifth year

19 Jan 2008

Leading ratings agency Standard and Poor's (S&P) has confirmed North of England P&I club's ‘A' financial strength rating and stable outlook for a fifth consecutive year. According to S&P, the rating reflects the 95 million GT club's continued ‘strong competitive position' and ‘very strong financial flexibility'.

S&P analysts Ali Karakuyu and Peter McClean said the stable outlook reflects their belief that North is better placed than most of its competitors to weather the global financial crisis. ‘Although the economic downturn has weakened the club's earnings, we believe it will be more resilient to these effects than most of its peers because of its historically strong underwriting performance with a track record of outperforming most of its peers.'

The analysts attributed North's strength to its firmer underwriting of risks, including maintaining call levels and tightening terms and conditions, as well as its low expense base. ‘This is best illustrated by the club's 11-year average combined ratio over 1998-2008, which stood at 107% compared with International Group clubs' weighted average (excluding the impact of unbudgeted supplementary calls) of 119% over the same period,' they said.

S&P confirmed North now ranks as the fifth-largest member of the International Group by total owned tonnage, which has reached 70 million GT compared with 56 million GT at the February 2007 renewal. ‘The club's competitive position will remain strong and tonnage growth - expected to be higher than the International Group average - will be carefully managed to ensure that financial strength and member service are not negatively affected, nor the club's portfolio quality diluted,' said the analysts.

S&P also believes that North's management contributes positively to the rating, with the club placing a strong emphasis on quality of service and commitment to member support. The analysts added that North's competitive position has also benefited from its historical avoidance of making unbudgeted supplementary calls - particularly in the current financial year. ‘We do not expect the club to make supplementary calls in the near term, in spite of the actions of some other members of the International Group,' they said.

Responding to S&P's comments, deputy managing director Alan Wilson said, ‘I am delighted we have again maintained our ‘A' / stable rating, which is a testament to the quality and spread of our membership as well as the way we operate the business, our ethos and the service we provide. It also demonstrates the importance of achieving the 17.5% general increase we have set for premiums at next month's renewal to ensure our financial strength and maintain our rating.'

North currently insures some 350 member groups from around the world, with a total P&I entry of 3750 vessels of 95 million GT. The club is based in Newcastle-upon-Tyne, UK with regional offices in Hong Kong, Piraeus and Singapore.

North of England P&I Association, press release