American Club Circular No. 03/1 8 1 JANUARY 11, 2018 CIRCULAR NO. 03/18 TO MEMBERS OF THE ASSOCIATION Dear Member: THE AMERICAN CLUB – A NEW YEAR’S PROGRESS REPORT As 2018 begins, and as the American Club’s next policy year draws near, it is hoped that this report on the Club’s recent progress will prove both instructive and helpful. It amplifies several of the observations contained in Circular No. 29/17 of November 17, 2017 which, inter alia, provided the background to the Club’s premium requirements for the 2018 policy year. The report highlights some of the latest Club metrics in regard to tonnage, premium, claims, investment income and free reserves. It also includes news regarding recent progress made by Eagle Ocean Marine (EOM) and American Hellenic Hull Insurance Co., Ltd. Overview As foreshadowed in the commentary contained in the November Circular mentioned above, the Club’s key operational indicators have developed in a positive direction over the intervening period. Premium and tonnage have maintained their upward trajectory, claims have remained subdued – both in relation to attritional exposures and larger losses – and investment earnings have continued to outperform those of earlier years. The following sections, and the tables and graphs they contain, provide further detail of these trends, setting them against the longer-term background of recent policy years. Tonnage and premium development The table at the top of the following page indicates the distribution of the Club’s membership by management domicile and vessel type, weighted by reference to tonnage and premium. The Club’s profile in this respect has remained broadly stable over the past twelve months. In terms of tonnage and premium growth, the figures for the 2017 policy year reported in Circular No. 29/17 of November 17, 2017 have continued to exhibit positive trends. Class I (P & I) tonnage has grown by 10% since February 20, 2017 and Class II (FD & D) by 11%. Similarly, P & I premium has increased by about 7.5%, and by 10% for FD & D business. These tonnage increases over the past year have outperformed global industry growth, which was about 4%. In addition, the 24 month growth of the Club’s tonnage has been comfortably in excess of 20%, compared with about 8% across shipping as a whole. It is also pleasing to note that two-thirds of this growth is attributable to the organic expansion of existing Members’ fleets. It is reasonable to expect that these trends will continue into 2018 as the prospects for both world trade generally, and the maritime sector in particular, continue to improve. American Club Circular No. 03/ 18 2 Development of retained claims The table below indicates the development of the American Club’s retained claims since 2011 by reference both to the number of incidents per million GT and their average cost per GT. As will be seen, both the frequency and severity of losses have shown a downward trend in recent years. 2016 featured two unusually large claims early in the year. Absent those losses, the result for 2016 would have been better than that recorded for 2015 which was, itself, a record year. As to the development of the current policy year, figures as of December 20, 2017 show incurred claims 45% lower than those for 2016, and 8% better than those for 2015 at the same point of emergence. This augurs well for the year’s ultimate claims outturn in due course. It is also worth noting that the reinsurance of the American Club’s retain