investment section v1 - steamship...mr h. l. f. schoeller, mr k. sheehan, mr b. k. sheth and mr a....

Annual Report and Accounts 2013

The Steamship Mutual Underwriting Association (Bermuda) Limited

02 Notice of Meeting

03 Directors

04 Report of the Directors

10 Appendix I – Policy Year Statement – All Classes

12 Appendix II – Policy Year Statement – P&I Class

14 Consolidated Income and Expenditure Account

15 Consolidated Balance Sheet

16 Consolidated Cash Flow Statement

17 Notes on the Accounts

26 Report of the Independent Auditor

Contents

The Steamship Mutual UnderwritingAssociation (Bermuda) Limited

(Incorporated under the laws of Bermuda)and its subsidiary companies

01


ManagersSteamship Mutual Management (Bermuda) LimitedWashington Mall 1, P.O. Box HM 447Hamilton HM BX, BermudaTelephone: (1441) 295 4502Telefax: (1441) 292 8787

Managers’ representativesSteamship Insurance Management Services LimitedAquatical House, 39 Bell Lane, London E1 7LUTelephone: 020 7247 5490/020 7895 8490

Steamship Mutual Management (Hong Kong) LimitedRoom 1901-02, Jubilee Centre18 Fenwick Street, Wanchai, Hong KongTelephone: (852) 2838 2722/(852) 2838 2873Telefax: (852) 2838 2009/(852) 2831 0826

Representative office in BrazilAvenida Rio Branco, 151/1305-1307, CentroRio de Janeiro, R.J. CEP 20040-006 BrazilTelephone: (55 21) 2221 6074/(55 21) 2221 6461Telefax: (55 21) 2221 8747

www.steamshipmutual.com


02

Notice is hereby given that the Thirty Ninth Annual General Meeting of the Members of the Association will be held atthe Westin Athens Astir Palace Hotel, Vouliagmeni, Athens, Greece, on Tuesday, 22nd October 2013 at 09:05 hours forthe following purposes:

1 The Secretary to confirm that Notice of the Meeting has been given.

2 To approve the Minutes of the last Meeting of the Members.

3 To receive the Directors’ Report and Accounts for the year ended 20th February 2013.

4 To fix the number of Directors for the ensuing year.

5 To elect Directors retiring in rotation.Under the Bye-laws of the Company, one-third of the Directors are required to retire annually by rotation.The Directors retiring by rotation are Mr C. J. Ahrenkiel, Mr S-M. Edye, Ms D. M. Ho, Mr S. Mehta,Mr H. L. F. Schoeller, Mr K. Sheehan, Mr B. K. Sheth and Mr A. Tung. Being eligible all Directors offer themselvesfor re-election.

6 To elect Director retiring in compliance with Bye-law 47.The Director retiring is Mr S. Hajara and, being eligible, he offers himself for re-election.

7 To appoint Auditors and to authorise the Directors to agree their remuneration.

8 Confirmation of Acts.

9 To transact any other ordinary business of the Company.

By Order of the Board

S. DavisSecretary

14th May 2013

N.B. A Member who is entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend, speakand vote in his place. The instrument appointing a proxy may be in the form enclosed and must be deposited with theSecretary at Clarendon House, Church Street West, P.O. Box HM 666, Hamilton HM CX, Bermuda, not less than 48 hoursbefore the time specified for the holding of the Meeting.

Notice of Meeting

DirectorsH. L. F. Schoeller, Columbia Shipmanagement Ltd.(Chairman)A. Abraha, Ethiopian Shipping Lines (retired 24th July2012)C. J. Ahrenkiel, Ahrenkiel Consulting ServicesA. Marques de Almeida, Vale (appointed 8th May 2012)M. W. Bayley, Royal Caribbean InternationalC. Bouch (appointed 21st January 2013)S-M. Edye, Sloman Neptun Schiffahrts AG.M. Frith, Conyers, Dill & Pearman (appointed 31st March2013)I. Grimaldi, Grimaldi Holdings SpA.S. HajaraD. M. Ho, Magsaysay Maritime Corp.H. M. Juniel, Reederei. F. Laeisz GmbH.J. M. Macdonald, Conyers, Dill & Pearman (retired 31stMarch 2013)C. J. Madinabeitia, Tradewind Tankers SA.A. L. Marchisotto, Moran Holdings Inc.S. J. Martin, Steamship P&I Management LLP (appointed29th January 2013)B. B. A. McAllister, McAllister Towing (resigned 22ndOctober 2012)S. A. Meenai, Pakistan National Shipping Corp. (retired28th February 2013)S. Mehta, Essar GlobalC. K. Ong, U-Ming Marine Transport Corp.R. Otoni Andrade, Log-In Logistica Intermodal SA.A. Pohan, New York WaterwayG. W. F. Rynsard, Steamship P&I Management LLP.(appointed 29th January 2013)K. Sheehan, Norwegian Cruise LineB. K. Sheth, The Great Eastern Shipping Co. Ltd.M. Sloan, Carnival Corporation & plc (appointed 23rdOctober 2012)A. Tung, Island Navigation Corp. International Ltd.M. Verde, Augustea Ship Management SrL. (retired 29thJanuary 2013)Wang, Y-G., China Shipowners Mutual AssuranceAssociationA. Zacchello, Seaarland Shipping Management BV.R. Zagari, Augustea Group (appointed 29th January 2013)

SecretaryS. Davis, Conyers, Dill & Pearman

ManagersSteamship Mutual Management (Bermuda) Ltd.

Registered officeClarendon House2 Church StreetHamilton HM 11Bermuda

Administrative officeWashington Mall 1P.O. Box HM 447Hamilton HM BXBermudaTelephone: (1441) 295 4502Telefax: (1441) 292 8787

03

Directors


04

The Directors have pleasure in presenting their Report andthe Accounts of the Association for the year ended 20thFebruary 2013.

Principal activitiesThe principal activities of the Association were theinsurance and reinsurance of Protection and Indemnity(P&I) risks, and of Freight, Demurrage and Defence (FD&D)risks on behalf of Members. The total entered tonnageas at 20th February 2013 stood at approximately102.3 million GT.

The Association is a member of the International Groupof Protection and Indemnity Clubs (“the Group”).

DirectorsThe Directors of the Association are as shown on page 3.

In accordance with the Act of Incorporation, as amendedon 18th April 1984, and the Bye-laws, the undermentioned Directors of the Association hold office untilthe Annual General Meeting to be held in Athens, on22nd October 2013:

Mr C. J. Ahrenkiel, Mr S-M. Edye, Ms D. M. Ho,Mr S. Hajara, Mr S. Mehta, Mr H. L. F. Schoeller,Mr K. Sheehan, Mr B. K. Sheth and Mr A. Tung.

Being eligible all Directors offer themselves for re-election.

Audit CommitteeThe Committee acts on behalf of the Board in consideringthe Association’s financial statements and its external andinternal audit activities. In so doing the Committee liaiseswith the Managers and external auditors in monitoring thequality of all reporting which contains material financialinformation, assessing the Association’s internal controlsystems, and advising the Board on the effectiveness andobjectivity of the internal and external auditors.

The Committee meets four times a year, prior to eachmeeting of the full Board and is currently comprised ofthe following Directors: Mr H. M. Juniel (Chairman),Mr C. J. Ahrenkiel, Mr M. W. Bayley, Mr C. Bouch,Mr C. J. Madinabeitia, Mr S. J. Martin, Mr A. Pohan,Mr G. W. F. Rynsard and Mr K. Sheehan, and attendedby H. L. F. Schoeller.

In discharging its responsibilities the Committee receivesregular financial and management reports from theManagers including a quarterly report from theCompliance Manager and the internal auditor.The Committee establishes the scope of the reporting,both to itself and the Board, and continually assesses thequality and adequacy of this information. The Committeemonitors the effectiveness of the Managers’ activities withrespect to their regulatory, audit and controlresponsibilities with a specific focus on any issues ofenhanced strategic importance or which present asignificant risk to the Association. Within the past year theCommittee’s work has included reviewing the followingmatters:

• the development of claims in prior years, the effect ofrecent deterioration on IBNR profiles for some claimscategories and the overall statistical confidence level ofthe reserves;

• internal audit reports on anti-bribery controls, ITcontrols, management of projects and out-sourcedservices, business continuity and disaster recoveryprocedures, claims controls and reinsuranceplacement;

• operational risk stress scenarios in which IT systemsmight become unavailable;

• the Own Risk and Solvency Assessment (ORSA) andlevel of standard increase required at the 2013renewal to meet the Club’s financial objectives;

• the case for appointing a non-Executive Directorindependent of Club Members;

• the preparations for Solvency II and application forapproval of an internal capital model;

• a terms of reference for a review of the internal controlframework by the newly appointed ComplianceManager; and

• the level of administration expenses in relation tobusiness volumes and overall operational efficiency.

Report of the Directors


05

Free reservesThe balance on the Technical Account was a surplus ofUS$ 3.4 million for the financial year.

The overall surplus for the financial year of US$ 3.8 millionreflects a net investment gain of US$ 0.4 million.

Free reserves increased from US$ 104.3 million toUS$ 108.2 million.

As at 20th February 2013, the combined free reserves ofthe Association and The Steamship Mutual Trust stood atUS$ 233.7 million. Discounting outstanding claims overa ten year period at a rate of 2.5% would increasecombined free reserves to US$ 279.3 million comparedwith US$ 310.4 million last year.

UnderwritingDuring the year mutual and additional premium waslevied as follows:

• for the year 2012/13 (Class 1 – P&I) 100% mutualpremium;

• for the year 2012/13 (Class 2 – FD&D) 100% mutualpremium.

The 2009/10 year was closed in May 2012.

Gross premium written totalled US$ 258.1 millioncompared to US$ 286.2 million last year.

The Directors have set the release call for both Class 1(P&I) and Class 2 (FD&D) at 20% of mutual premium forthe 2012/13 policy year, 15% of mutual premium for the2011/12 policy year, and 5% of mutual premium for the2010/11 policy year.

For the year under review, the Directors ordered a generalincrease of 5% in Class 1 premium.

At the 2013 renewal the general increase was set at 7.5%.

TonnageThe level of owned entered tonnage grew by 3.2 millionGT during the year. The 2013 renewal resulted in no netincrease in owned entered tonnage. However taking theyear on year increase into account for both owned andchartered entries, the overall total entered tonnage roseto 102.3 million GT.

The Association’s policy is to achieve diversity of vesseltypes and trades within its underwriting portfolio.Similarly, the Association seeks to keep a worldwidespread of owners. This policy of avoiding an overconcentration in any one area minimises the adverseeffects of market differences or economic difficulties inparticular trades or regions. Analysis of gross tonnageby geographical area will be included within theManagement Highlights to be published in June 2013.

Pooling and reinsuranceThe Association’s reinsurance programme for the 2012/13policy year was arranged in conjunction with othermembers of the Group. The policy provided an ultimatelimit of US$ 3,052 million in excess of US$ 8 million,except in relation to oil pollution claims, which weresubject to an overall limit of US$ 1,000 million.

PoolingFor 2013/14, the individual Club retention, beforePooling with other Members of the Group, will increaseby US$ 1 million to US$ 9 million, and the upper limit ofthe Pool will increase by US$ 10 million to US$ 70 millioneach event. This year, a Club bringing a claim to thePool will bear a 10% retention within the layer ofUS$ 45million to US$ 60million and bear a 5% retentionwithin the layer of US$ 60 million to US$ 70 million,with the balance being divided amongst all Clubs inthe usual way.


06

Pooling and reinsurance – continuedHydra Insurance Company Limited (“Hydra”)With effect from 20th February 2013, the liabilities ofthe Association under the Group Pooling Agreementfor the top layer of the Pool (from US$ 30 million toUS$ 70 million each event) and for the Group’s retentionof 30% of the first US$ 500 million layer of the GeneralExcess Loss contract will continue to be reinsured intoHydra. Hydra is a cell captive set up by the Group inBermuda under the Segregated Account Companies Act2000.

Excess Loss coverThe Group’s Excess of Loss programme was renewed withthe same structure as for the expiring year. The Group, viaHydra, retains a 30% co-insurance of the first layer of thecontract, from US$ 70 million to US$ 570 million eachevent.

The limit of the supplementary pooled cover for arestricted range of risks covered by the “Bio-Chem”exclusions in War Risk policies remains at US$ 30 million,any one event each vessel, for the 2012/13 policy year.

US oil pollutionThe Group continues to levy special surcharges for vesselscarrying persistent oil as cargo to the USA. The rates ofsurcharge for such voyages will reduce by 15% in2013/14.

Charterers’ coverThe Association provides cover for P&I and other risksfor charterers, reinsured outside the Pool. Limits up toUS$ 500 million are provided for P&I and a variety oflimits for other risks.

Non-Poolable coversThe Club continues to provide cover for a range of riskswhich are ancillary to Members’ core operations, reinsuredoutside the Pool with limits up to US$ 500 million.

The Steamship Mutual TrustAt the beginning of the financial year, the Associationarranged, through its wholly-owned subsidiary, TheSteamship Mutual Underwriting Association (Reinsurance)Limited, to extend the existing reinsurance contract withThe Steamship Mutual Underwriting Association Trustees(Bermuda) Limited as Corporate Trustee of The SteamshipMutual Trust (“the Trust”), a duly authorised insurer underthe Insurance Act 1978 of Bermuda, to cover all itsretained liabilities in respect of the 2012/13 policy year,on existing terms and conditions. The Chairman of theAssociation is an ex-officio Director of the CorporateTrustee which administers the Trust. The beneficiariesunder the Trust are the Members of the Association.These arrangements performed satisfactorily during theyear.

ClaimsGross claims and related expenses, including Pool claims,paid during the financial year, increased by 37.7% toUS$ 383.5 million in respect of all policy years, ascompared to US$ 278.6 million during the previousfinancial year. After recoveries from the Group Pool andExcess of Loss contract, claims paid for all years duringthe financial year amounted to US$ 224.5 million, anincrease of US$ 24.5 million (12.3%) over the previousyear. Claims paid by the Association, net of reinsurancerecoveries but including claims handling costs, increasedby US$ 12.0 million to US$ 36.1 million during the year.

Gross claims arising in respect of the policy year 2012/13,including IBNR, are projected to be US$ 391.9 million, adecrease of 12.6% over 2011/12 (US$ 448.3 million).

Report of the Directorscontinued


07

During the policy year, the Managers have been closelyinvolved in the development and implementation ofreinsurance provision to enable certificates of financialresponsibility to be issued to passenger vessels in order tosatisfy the EU’s Passenger Liability Regulations. Throughthe Association’s membership of the International Group,the Managers have continued to monitor the developmentof China’s pollution prevention regulations, issues relatingto the use of dispersants in the United States, and thecontinuing discussions with the IOPC Fund regardinginterim funding, the definition of a ship, and the windingup of the 1971 Fund. Sanctions developed in the USA andthe EU have continued to be an issue; particularly inrelation to Iran and Syria. The problem of piracy remainedof great concern, both off Somalia and West Africa, andthe loss prevention DVD commissioned by the Managerson the subject of piracy – “Piracy: the Menace at Sea” –won the 2012 Seatrade Safety at Sea award.

The Association experienced two Pool claims during thepolicy year; one involved damage to a berth in Korea andthe other involved damage to a berth in Brazil.

The 20th issue of “Sea Venture” was published inDecember 2012 and throughout the year the Managersalso published on the Association’s website variouscirculars, Risk Alerts, articles and news bulletins on theissues described above and other matters of topicalinterest. The 2012/2013 edition of the Association’s DVDguide to casualty investigation and claims handling,“A Team Effort”, incorporating Spanish, Chinese, Korean,Russian and Brazilian Portuguese versions, was distributedto Members and correspondents in June 2012. Thesecond annual residential training course for Memberswas held in London and Southampton in June 2012.

The Managers have continued to work with VideotelMarine International in the production of onboard safetytraining programmes. New programmes on Leadershipand Team Working Skills, and Dangerous and Difficult BulkCargoes were completed. Revisions were made to existing

programmes on MARPOL Annex V, and Engine RoomWaste Management. Development work was undertakenon forthcoming programmes dealing with the CollisionRegulations and International Buoyage, and CargoContamination on Tankers. Further information on theAssociation’s loss prevention activities will be includedin the Management Highlights.

Policy year statementsThe figures in Appendices I and II to this Report areprepared under the accounting policies and in the formatused within the financial statements providing a summaryand breakdown by both class of business andunderwriting year. No allowance has been made forthe allocation of any future investment income.

InvestmentsThe total level of cash and investments held by theAssociation decreased by 20.5% to US$ 89.8 million.The total gain on financial investments wasUS$ 1.0 million.


08

RulesWith the support of advice from the Association’s lawyers,the Directors have approved Rule changes effective from20th February 2013, to clarify and in some cases broadenthe scope of existing cover, and to take account oflegislative changes.

Class 1 – Protection and IndemnityRule No. 2 – DefinitionsPolicy period – a separate definition of policy period hasbeen included to provide for policies which commence ona date other than 20th February. This definition is carriedinto Rule 14 Period of Cover in order to provide for serviceof notices of termination in respect of policies which donot span the standard 20th February to 20th Februarypolicy year.

Seaman – the existing definition in the Rules has beenexpanded to include a “Seafarer” as defined in theMaritime Labour Convention 2006 for the purposes ofcover for repatriation expenses under that Convention.

Rule No. 9 – Joint Members and AssuredsA new provision in Rule 9 i d clarifies the impact on entryof Joint Members as a whole where the entry of anotherJoint Member under the same entry ceases or isterminated. In conjunction with proposed changes underRule 35 (ii) (see below), this amendment is considereddesirable so as to avoid an automatic cessation of cover inrelation to all assureds under a joint entry where the entryof one ceases. An additional amendment to Rules 9 i aand 9 v (Fleet Entries) clarifies that Joint Members areliable for premium and all other sums due to the Club inrespect of that entry.

Rule No. 14 – Period of CoverSee note above under Rule No. 2 – Definitions – Policyperiod.

Rule No. 17 – RecoveryAn amendment to enable Club cover, where agreed by theManagers, to respond directly for liabilities incurred byMembers under the Maritime Labour Convention 2006(which will come into effect from 1st August 2013) inrespect of repatriation expenses of seafarers.

Rule No. 25 – Liabilities to Persons Covered RisksA new provision extending cover, where agreed by theManagers, to respond to liabilities in respect of seafarersfor repatriation expenses pursuant to Guideline B 2.5 ofRegulation 2.5 of the Maritime Labour Convention 2006incurred in the case of abandonment of crew. This may

arise, for example, upon the insolvency of an owner.Typically such expenses are likely to fall within the Club’sindividual retention and so liabilities arising will not bepooled. However in view of the possible aggregation riskarising upon the insolvency of an owner of a large enteredfleet of highly staffed vessels, cover for this risk is subjectto specific prior agreement by the Managers. Whereprovided, this cover, unless otherwise agreed by theManagers, will be subject to a US$ 3 million per vessellimit.

Rule No. 25 xxii – DeductiblesAn amendment to clarify that deductibles erode policylimits, i.e. that the policy limit is calculated from theground up.

Rule No. 35 – Cessation of MembershipThe substance of the existing provisions in relation tocessation and termination of membership by reason ofsanctions has not materially changed, but the provisionshave been restated, amended and re-ordered to addclarity, specifically:

• Insurance by the Club shall cease where theClub is prohibited from insuring the Member, itsship or activity, by reason of sanctions.

• Termination of a Member’s entry in accordancewith Rule 35 shall not result in termination ofthe entry of all associated Joint Members unlessthe Managers so decide.

• The existing provision in Rule 35 vii provided forautomatic termination of the entry in the eventof employment of a ship by the Member in asanctions offending voyage or activity. Theamendment restates proviso d to existing Rule35 vii and clarifies that cessation of entry shallrelate to the period of the sanctions offendingactivity.

• Given that swift action may be necessary inorder to protect the interests of the Club andthe membership as a whole, the Managers areauthorised to determine whether a sanctions riskor prohibition is operative, and to serveappropriate notices in writing terminating anentry and/or restricting the provision of cover.

Rule No. 37 – Non Payment of PremiumAn amendment to clarify that where an intermediaryacting for the Member fails to forward premium to theClub, the Member remains liable for payment of premium.This reflects the position under English law and the



09

Marine Insurance Act 1906, (to which the Club Rules aresubject) which provides that the provisions of the Actrelating to premium (including Section 53) do not apply inthe case of mutual insurance. In addition, a separateamendment makes clear that the rights set out in Rule 37in relation to non-payment of premium are not exclusiveand do not limit the other rights of the Managers set outelsewhere under the Rules, such as those relating todeduction and set-off.

The Steamship Mutual Underwriting AssociationLimited (“SMUA”)Under an agreement made on 20th February 2003, theAssociation entered into a reinsurance contract withSMUA under which, in return for a percentage of writtenpremium, the Association indemnified SMUA for apercentage of its net underlying liabilities in respect ofeach policy year. From 20th February 2009, the indemnitywas in respect of 90% of the first US$ 50 million ofSMUA’s net underlying liabilities and 100% of any excessover US$ 50 million. From 20th February 2013 theindemnity is in respect of 90% of the first US$ 100 millionof SMUA’s net underlying liabilities and 100% of anyexcess over US$ 100 million. All Members of SMUA areautomatically Members of the Association and thusbeneficiaries of the Trust.

Management HighlightsThe Management Highlights will be published inJune 2013.

Statement of Directors’ responsibilitiesThe Directors have prepared financial statements for eachfinancial year in accordance with European CommissionInsurance Accounts Directive (91/674/EEC) as adopted inthe United Kingdom through Section 396 of theCompanies Act 2006 and Schedule 3 of The Large andMedium-sized Companies and Groups (Accounts andReports) Regulations 2008 and United Kingdomaccounting principles applicable to insurers.

In preparing those financial statements the Directors arerequired to:

• select suitable accounting policies and then applythem consistently;

• make judgements and estimates that are reasonableand prudent;

• state whether applicable accounting standards havebeen followed, subject to any material departuresdisclosed and explained in the financial statements;and

• prepare the financial statements on the going concernbasis unless it is inappropriate to presume that theAssociation will continue in business.

The Directors are responsible for keeping properaccounting records which disclose with reasonableaccuracy at any time the financial position of theAssociation. They are also responsible for the system ofinternal control, for safeguarding the assets of theAssociation and hence for taking reasonable steps toprevent and detect fraud and other irregularities.

H. L. F. SchoellerChairman

Rome, Italy14th May 2013


2012/13) 2011/12) 2010/11) TToottaall))US$ 000) US$ 000) US$ 000) UUSS$$ 000000))

10

Gross premium 254,435) 288,813) 289,534) 883322,,778822))Less:Group Excess Loss reinsurance premium (22,917) (20,447) (21,551) ((6644,,991155))Other reinsurance premium (1,600) (1,381) (1,553) ((44,,553344))The Trust reinsurance premium (172,016) (209,592) (204,118) ((558855,,772266))

Net premium 57,902) 57,393) 62,312) 117777,,660077))

Gross claims paidOwn claims paid (22,790) (232,587) (101,878) ((335577,,225555))Group Pool claims (6,055) (25,099) (12,574) ((4433,,772288))Claims administration expenses (19,611) (17,286) (17,604) ((5544,,550011))

(48,456) (274,972) (132,056) ((445555,,448844))

Less:Group Excess Loss reinsurance recoveries –) 93,588) –) 9933,,558888)Group Pool reinsurance recoveries –) 57,196) 1,048) 5588,,224444))The Trust reinsurance recoveries 27,095) 93,726) 110,747) 223311,,556688))

Net claims paid (21,361) (30,462) (20,261) ((7722,,008844))

Own claims outstanding including IBNR (319,039) (460,575) (82,987) ((886622,,660011))Group Pool claims outstanding including IBNR (44,030) (16,092) (15,753) ((7755,,887755))Future claims administration expenses (9,216) (3,167) (1,085) ((1133,,446688))Less:Group Excess Loss reinsurance recoveries –) 185,815) –) 118855,,881155))Group Pool reinsurance recoveries 145,931) 154,157) 7,123) 330077,,221111))The Trust recoveries 197,901) 136,276) 86,594) 442200,,777711))

Net provision for claims outstanding (28,453) (3,586) (6,108) ((3388,,114477))

Brokerage (7,533) (7,348) (12,355) ((2277,,223366))Underwriting administration expenses (2,483) (1,657) (5,316) ((99,,445566))Other expenses (7,498) (6,548) (7,368) ((2211,,441144))

Balance on the technical account (9,426) 7,792) 10,904) 99,,227700))

Net investment income (including realised 959)) 4,219)) 1,577)) 66,,775555))and unrealised)Non-technical account administration expenses (583) (596) (722) ((11,,990011))Other income 39)) 30)) 100)) 116699))Taxation (1) (6) –) ((77))

Open policy years funds available (9,012) 11,439) 11,859) 1144,,228866))

Open Policy Years – All Classes

Appendix I – Policy Year StatementAll Classes


11

Available balance as at 20th February 2012 77,703)Add: Balance of 2009/10 year as at 20th February 2012 24,767)Movements during financial year:Net premium 318)Net claims paid (1,102)Expenses (47)Other income ––))

Available balance as at 20th February 2013 101,639)

Own claims outstanding including IBNR (274,909)Group Pool claims outstanding including IBNR (46,496)Future claims administration expenses (2,754)Less:Group Excess Loss reinsurance recoveries 4,597)Group Pool reinsurance recoveries 71,822)The Trust recoveries 239,197)

Net provision for claims outstanding (8,543)

Closed policy years funds available 93,096)

SummaryOpen and closed years funds available 107,382)Reinsurance balance and statutory reserve 772)

Total projected funds available 108,154)

Total))US$ 000))Closed Policy Years – All Classes



12

Gross premium 225,703) 251,712) 250,873) 772288,,228888))Less:Group Excess Loss reinsurance premium (22,917) (20,447) (21,551) ((6644,,991155))Other reinsurance premium (1,600) (1,381) (1,553) ((44,,553344))The Trust reinsurance premium (148,128) (178,499) (173,527) ((550000,,115544))

Net premium 53,058) 51,385) 54,242) 115588,,668855))

Gross claims paidOwn claims paid (19,177) (212,432) (82,784) ((331144,,339933))Group Pool claims (6,055) (25,099) (12,574) ((4433,,772288))Claims administration expenses (16,326) (14,375) (13,685) ((4444,,338866))

(41,558) (251,906) (109,043) ((440022,,550077))

Less:Group Excess Loss reinsurance recoveries –) 93,588) –) 9933,,558888))Group Pool reinsurance recoveries –) 57,196) 1,048) 5588,,224444))The Trust reinsurance recoveries 23,482) 73,571) 91,653) 118888,,770066))

Net claims paid (18,076) (27,551) (16,342) ((6611,,996699))

Own claims outstanding including IBNR (300,803) (441,734) (69,845) ((881122,,338822))Group Pool claims outstanding including IBNR (44,030) (16,092) (15,753) ((7755,,887755))Future claims administration expenses (8,471) (2,714) (927) ((1122,,111122))Less:Group Excess Loss reinsurance recoveries –) 185,815) –) 118855,,881155))Group Pool reinsurance recoveries 145,931) 154,157) 7,123) 330077,,221111))The Trust recoveries 179,665) 117,435) 73,452) 337700,,555522))



Balance on the technical account (8,327) 6,961) 11,300) 99,,993344))

Net investment income (including realised 859) 3,760) 1,323) 55,,994422))and unrealised)Non-technical account administration expenses (516) (524) (590) ((11,,663300))Other income 39) 30) 100) 116699))Taxation (1) (6) –) ((77))

Open policy years funds available (7,946) 10,221) 12,133) 1144,,440088))

Open Policy Years – P&I Class

Appendix II – Policy Year StatementP&I Class


13

Available balance as at 20th February 2012 72,851)Add: Balance of 2009/10 year as at 20th February 2012 24,089)Movements during financial year: )Net premium 335)Net claims paid (1,102)Expenses (49)Other income –))


Own claims outstanding including IBNR (259,146)Group Pool claims outstanding including IBNR (46,496)Future claims administration expenses (2,623)Less:Group Excess Loss reinsurance recoveries 4,597)Group Pool reinsurance recoveries 71,822)The Trust recoveries 223,434)


Closed policy years funds available 87,712)

Summary All Classes FD&D Others P&I)

Open and closed years funds available 107,382 (3,305) 8,567 102,120)Reinsurance balance and statutory reserve 772

Total projected funds available 108,154

Total)US$ 000)Closed Policy Years – P&I Class


22001133)) 2012)Note UUSS$$ 000000)) US$ 000)

14

Earned premium, net of reinsuranceGross premium 2 225588,,009922)) 286,217)Outward reinsurance premiumGroup Excess Loss ((2244,,220088)) (21,910)The Trust 3 ((117755,,116655)) (208,080)

Earned premium, net of reinsurance 5588,,771199)) 56,227)

Claims incurred, net of reinsuranceClaims paidGross amount 4 338833,,551100)) 278,589)Reinsurers’ share:Group Pool and Excess Loss 4 ((115599,,005577)) (78,634)The Trust 4 ((118888,,331100)) (175,866)

Net claims paid 3366,,114433)) 24,089)

Change in the provision for claimsGross amount 5 334400,,005544)) 230,537)Reinsurers’ share:Group Pool and Excess Loss 5 ((229955,,442299)) (148,547)The Trust 5 ((4433,,007755)) (69,442)

Change in the net provision for claims 11,,555500)) 12,548)

Claims incurred, net of reinsurance 3377,,669933)) 36,637)

Net operating expenses 6 1177,,662266)) 18,428)

Balance on the technical account for general business 33,,440000)) 1,162)

Non-Technical AccountBalance on the general business technical account 33,,440000)) 1,162)Investment income 7 990055)) 49)Unrealised gains on investments 8 5555)) 83)Investment management expenses ((558866)) (609)Other income 9 3399)) 4,117)Taxation 10 ((11)) (6)

Surplus for the financial year 33,,881122 4,796)

The results for both years are in respect of continuing operations.

There are no recognised gains or losses in either year other than the transactions reported in the above income andexpenditure account.

The accompanying notes to these accounts form an integral part of this income and expenditure account.

Technical Account

Consolidated Income and Expenditure Accountfor the year ended 20th February 2013


InvestmentsLand and buildings 11 1100,,999977 10,997Other financial investments 12 6699,,335522 93,948

Reinsurers’ share of technical provisionsClaims outstanding 5 11,,222299,,441155 890,911

DebtorsDebtors arising out of direct insurance operations 1100,,118866 11,459Debtors arising out of reinsurance operations 13 7722,,443344 29,974Other debtors 14 55,,664422 7,988

Other assetsCash at bank and in hand 99,,449999 8,121

Prepayments and accrued incomeDeferred acquisition costs 8800 88Other prepayments and accrued income 11,,007788 656

Total assets 11,,440088,,668833 1,054,142

LiabilitiesCapital and reservesFree reserves 15 110088,,115544 104,342

Technical provisionsProvision for unearned premium 555500 585Claims outstanding 5 11,,227766,,110066 936,052

Provisions for other risks and chargesProvision for taxation 10 11 3

CreditorsCreditors arising out of direct insurance operations 33,,551199 5,177Creditors arising out of reinsurance operations 16 1188,,224400 4,454Other creditors 22,,111133 3,529

Total liabilities 11,,440088,,668833 1,054,142

The accompanying notes to these accounts form an integral part of this balance sheet.

These financial statements were approved by the Board of Directors on 14th May 2013.

H. L. F. Schoeller H. M. Juniel Managers:Chairman Director Steamship Mutual Management (Bermuda) Limited

15

22001133 2012Note UUSS$$ 000000 US$ 000

Consolidated Balance Sheetas at 20th February 2013

Assets


22001133)) 2012)UUSS$$ 000000)) US$ 000)

16

Operating surplus before taxation after interest 33,,881133) 4,802)

Increase in general insurance technical provisions 11,,551155)) 12,528)Unrealised gains on investments ((5555)) (83)Unrealised gain on revaluation of property ––)) (4,087)Increase in debtors ((3399,,225555)) (4,481)Increase/(decrease) in creditors 1100,,771122)) (399)

((2277,,008833)) 3,478)

Net cash (outflow)/inflow from operating activities ((2233,,227700)) 8,280)

Cash flow statementNet cash (outflow)/inflow from operating activities ((2233,,227700)) 8,280)Taxation paid ((33)) (4)

((2233,,227733)) 8,276)

Cash flows were invested as follows:Increase in cash holdings 11,,337788)) 266)Net portfolio investmentPurchase of bonds and loans ––)) 6,300)Sale of money market instruments ((1188,,999988)) (29,141)(Decrease)/increase in cash on short term deposit ((55,,665533)) 30,851)

((2244,,665511)) 8,010)

Net investment of cash flows ((2233,,227733)) 8,276)

Movement in opening and closing portfolio investments net of financingNet cash inflow for the period 11,,337788)) 266)Portfolio investments ((2244,,665511)) 8,010)

Movement arising from cash flows ((2233,,227733)) 8,276)Changes in market values and exchange rate effects 5555)) 83)

Total movement in portfolio investments net of financing ((2233,,221188)) 8,359)

Portfolio investments net of financing at 20th February 2012 110022,,006699)) 93,710)


Surplus on ordinary activities before tax

Consolidated Cash Flow Statementfor the year ended 20th February 2013


17

1. Accounting policies(a) Accounting conventionThe consolidated accounts have been prepared in accordance with the European Commission Insurance AccountsDirective (91/674/EEC) as adopted in the United Kingdom through Section 396 of the Companies Act 2006 and Schedule3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and generallyaccepted United Kingdom accounting principles applicable to insurers. The Association has adopted all materialrecommendations of the Statement of Recommended Practice on Accounting for Insurance Business issued in December2005 and amended in December 2006 by the Association of British Insurers (“ABI SORP”).

After making enquiries, the Directors have a reasonable expectation that the Association has adequate resources tocontinue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concernbasis in preparing the accounts.

(b) Basis of consolidationThe Group accounts consolidate the accounts of The Steamship Mutual Underwriting Association (Bermuda) Limited andits subsidiary undertakings The Steamship Mutual Underwriting Association (Reinsurance) Limited, Steamship MutualProperty Holdings Limited and its share of Hydra Insurance Company Limited at 20th February 2013.

(c) Calls and premiums writtenCalls and premiums, less returns, comprise the total premiums receivable for the whole period of cover provided bycontracts incepting during the financial year. All premiums are shown gross of commission payable to intermediaries.

(d) Unearned premiumsThe proportion of the premiums written relating to periods of cover after the year end is carried forward as a provision forunearned premiums.

(e) Deferred acquisition costsAcquisition costs, comprising commission and other costs related to the acquisition of new business are deferred to theextent that they are attributable to premiums unearned at the balance sheet date.

(f) Claims and related expensesClaims and related expenses are charged to the income and expenditure account when they have been settled. Aprovision is made on a claim by claim basis for the estimated cost of claims notified but not settled by the balance sheetdate. A provision for claims incurred but not reported is established on a statistical basis having regard to past experienceas to the number and magnitude of claims reported after previous balance sheet dates.

(g) Reinsurance premiums and recoveriesPayments made to and recoveries from other Associations under the Group Pooling arrangements are recognised in theincome and expenditure account when debited or credited. Other reinsurance premiums are recognised on an accrualsbasis.

(h) Land and buildingsLand and buildings are revalued every three years and are held at the revalued amount. Any losses or reversal of lossesarising upon revaluation are recognised in the income and expenditure account.

(i) Other financial investmentsQuoted investments have been valued at their bid value as at the balance sheet date. Unquoted investments are held atcost less any provision for impairment in value. Unrealised gains and losses on the movement in the market value ofinvestments, compared to their cost are included in the non-technical account.

Notes on the Accounts


18

1. Accounting policies continued(j) DebtorsReceivables arising from insurance and reinsurance operations are reviewed for impairment throughout the financial yearand as at the balance sheet date.

(k) Foreign currenciesMonetary assets and liabilities, other than unquoted investments, are converted to US dollars at the rate of exchangeruling at the balance sheet date. Unquoted investments are included at their original dollar cost.

Income and expenditure items are translated to US dollars at the rate of exchange ruling at the relevant month end. Allexchange differences are included in the income and expenditure account. Land and buildings have been translated at thehistoric rate of exchange prevailing on the date of revaluation.

The rates of exchange ruling on the balance sheet date and used for the purpose of preparing the accounts were asfollows:

(l) Allocation to policy years and classesMutual premium, additional premium, fixed premium, reinsurance premium payable, claims and reinsurance recoveriesare allocated to the policy years and classes to which they relate. Administration expenses, investment income andexchange gains or losses are allocated to the current policy year in line with total premium income.

22001133 2012

Canadian dollars C$ 11..001122 0.997Euro € 00..774499 0.760UK sterling £ 00..664488 0.632

22001133)) 2012)2. Gross premium UUSS$$ 000000)) US$ 000)

Mutual and fixed premiums written 225566,,336688)) 285,275)Deferred premium and releases 11,,773300)) 1,024)Additional premium ((4411)) (102)Movement in unearned premiums 3355)) 20)

225588,,009922)) 286,217)

Gross premium by destinationEurope 7755,,551100)) 99,849)North America 6688,,333388)) 77,170)Far East 6655,,887733)) 60,038)Africa and Middle East 88,,333355)) 12,300)Latin America 2255,,994477)) 24,356)Indian Sub-Continent 1144,,008899)) 12,504)

225588,,009922)) 286,217)

Gross premium relates predominantly to one class of business: Protection and Indemnity.

Notes on the Accountscontinued


19

3. Reinsurance contracts(a) Under contracts dated 11th March 1983, the Association, through its subsidiary company, The Steamship Mutual

Underwriting Association (Reinsurance) Limited (note 18), reinsured with The Steamship Mutual Underwriting Association Trustees (Bermuda) Limited all of its Protection and Indemnity risks and Freight, Demurrage and Defence risks for the period up to 20th February 1983 and subsequently further contracts for each of the policy years ended, respectively, 20th February 1984 through to 20th February 2013.

(b) Under an agreement made on the 20th February 2003, the Association agreed to indemnify SMUA in respect of 95% of the first US$ 30 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 30 million for all policy years through to 2005/06; in respect of 90% of the first US$ 30 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 30 million for all policy years from 2006/07 through to 2008/09; in respect of 90% of the first US$ 50 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 50 million for all policy years from 2009/10 through to 2012/13, and in respect of 90% of the first US$ 100 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 100 million for the 2013/14 policy year.

4. Claims paid – gross amount22001133 2012)

UUSS$$ 000000 US$ 000)

Claims and related expenses 331199,,332233 238,275)Group Pool claims 4444,,554400 19,663)Claims administration expenses 1199,,664477 20,651)

338833,,551100 278,589)

Less reinsurers’ shareGroup Pool 6622,,335511 43,016)Group Excess Loss 9966,,770066 35,618)The Trust 118888,,331100 175,866)

334477,,336677 254,500)

Net claims paid 3366,,114433 24,089)


20

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Gross outstanding claimsProvision brought forward ((993366,,005522)) (705,515)Provision carried forward 11,,227766,,110066)) 936,052)

334400,,005544)) 230,537)

Group Pool and Excess Loss reinsurers’ share of outstanding claimsProvision brought forward 227744,,001166)) 125,469)Provision carried forward ((556699,,444455)) (274,016)

((229955,,442299)) (148,547)

The Trust’s share of outstanding claimsProvision brought forward 661166,,889955)) 547,453)Provision carried forward ((665599,,997700)) (616,895)

((4433,,007755)) (69,442)

Change in net provision for claims 11,,555500)) 12,548)

The estimates for known outstanding claims are based on the best estimates and judgement of the Managers of the finalcost of individual cases based on current information. The individual estimates are reviewed regularly and include thisAssociation’s share of other Associations’ Pool claims. Provision is also made for claims incurred but not reported by thebalance sheet date using detailed statistical analysis having regard to past experience as to the number and magnitude ofclaims reported after previous balance sheet dates.


5. Change in net provision for claims


21

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Acquisition costsBrokerage 77,,661155)) 7,948)Underwriting administration expenses 22,,550033)) 2,715)

1100,,111188)) 10,663)

Administrative expensesOther administration expenses 66,,994466)) 7,180)Directors’ remuneration 442288)) 454)Auditor’s remuneration – audit fees 113344)) 131)

77,,550088)) 7,765)

1177,,662266)) 18,428)

Transactions with related partiesSteamship Mutual Management (Bermuda) Limited (“SMM(B)”) provides management and administrative services to theAssociation. Under the terms of its management contract SMM(B) receives as remuneration for its services, a fee which isbased in part on premiums payable by Members in each accounting year together with reimbursement of its office andadministration expenses and those of its worldwide Representatives.

For the financial year to 20th February 2013 these fees and expenses amounted to US$ 26.7 million (2012: US$ 28.4 million). US$ 3.3 million was prepaid at the year end (2012: US$ 5.4 million). Since 21st February 2000 the Association has provided SMM(B) with an unsecured, indefinite long term loan amounting to US$ 2.03 million. There were no other related parties transactions requiring disclosure under FRS 8.

22001133)) 2012)7. Investment income UUSS$$ 000000)) US$ 000)

Dividends and interest 110055)) 137)

Realised gains/(losses)Investments ––)) ––))

Exchange 880000)) (88)

––)) (88)

990055)) 49))

6. Net operating expenses


22

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Investments 5533)) 88)Exchange 22)) (5)

5555)) 83)

22001133)) 2012)9. Other income UUSS$$ 000000)) US$ 000)

Surplus on revaluation of property (see note 11) ––)) 4,087)Bail commission 3399)) 30)

3399)) 4,117)

10. TaxationThe charge for the year consists of an estimated liability for the accounting year to 20th February 2013 of US$ 794 (2012: US$ 2,573 and an under-provision of US$ 3,697 in respect of the previous financial year) based uponnegotiations with the United Kingdom HM Revenue & Customs and assessed on the investment income of theAssociation and SMUA for the year.

At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda. Accordingly no provision forsuch taxes has been recorded by the Association. In the event that such taxes are levied, the Association has received anundertaking from the Bermuda government exempting it from all such taxes until 31st March 2035.

11. Land and buildingsThe freehold property consists of office premises in London E1. It is occupied under licence, free of rent, by the LondonRepresentatives of SMM(B). The property was valued by CB Richard Ellis Limited at £6,950,000 (US$ 10,996,835)reflecting the market value at 20th February 2012. This resulted in a revaluation surplus of US$ 4,086,964 since the lastvaluation at 20th February 2009. The original costs incurred when the property was purchased in 1987 amounted to US$ 16,952,226.


8. Unrealised gains on investments


23

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Market valueBonds and loans 77,,668811)) 7,629)Equities 114488)) 146)Money market instruments 2288,,448877)) 47,484)Deposits with credit institutions 3333,,003366)) 38,689)

6699,,335522)) 93,948)

CostBonds and loans 77,,446666)) 7,466)Equities 448855)) 485)Money market instruments 2288,,448877)) 47,484)Deposits with credit institutions 3333,,003366)) 38,689)

6699,,447744)) 94,124)

Unquoted investments of US$ 148,398 (2012: US$ 146,307) are carried in the accounts at their original euro cost less aprovision for a permanent diminution in value.

22001133)) 2012)13. Debtors arising out of reinsurance operations UUSS$$ 000000)) US$ 000)

Group Clubs and Excess Loss reinsurer 2211,,668833)) 589)The Trust 4488,,995577)) 22,726)SMUA ––)))) 4,865)Other reinsurance debtors 11,,779944)) 1,794)

7722,,443344)) 29,974)

22001133)) 2012)14. Other debtors UUSS$$ 000000)) US$ 000)

Balances with agents 332277)) 519)Other debtors 55,,331155)) 7,469)

55,,664422)) 7,988)

12. Other financial investments


24

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Statutory reserve 224400)) 240)Accumulated fund brought forward 110044,,110022)) 99,306)Surplus for year 33,,881122)) 4,796)

110088,,115544)) 104,342)

The balance carried forward, of US$ 108,153,636 together with any additional premium to be ordered by the Board ofDirectors and recoveries under the reinsurance contracts, will be available to meet liabilities not yet passed or ascertained.The Members of the Association are liable for their rateable proportion of any deficiency arising from an excess ofliabilities over premium. The Directors and Managers are of the opinion that the Association has adequate assets andcontractual arrangements to meet known and anticipated liabilities.

22001133)) 2012)16. Creditors arising out of reinsurance operations UUSS$$ 000000)) US$ 000)

Group Clubs and Excess Loss reinsurers 44,,337733)) 4,454)SMUA 1133,,886677)) ––)))

1188,,224400)) 4,454)

17. Contingent liabilitiesThe Association provides guarantees to third parties on behalf of Members. For guarantees issued in respect of coveredclaims, provision is made within the claims outstanding technical provision. For uncovered claims, guarantees are issuedwhen appropriate counter security is obtained. As at 20th February 2013 the total value of guarantees issued in respectof uncovered claims was US$ 9.201 million.


15. Free reserves


25

18. Wholly-owned subsidiary companiesThe Steamship Mutual Underwriting Association (Reinsurance) Limited is a wholly-owned subsidiary company which inturn holds 100% of the share capital of Steamship Mutual Property Holdings Limited.

19. Hydra Insurance Company Limited (“Hydra”)Hydra is a reinsurance captive created by the Members of the Group. Each Member has its own cell which is legally separate from the liabilities of the other cells. Under the provisions of FRS 5 this cell has been classified as a quasi-subsidiary and has been consolidated.

20. SecurityDuring the course of the year to 20th February 1997, the Directors authorised the setting up of a trust to secure thepayment of recoveries to US resident Members of the Association in accordance with the standard terms of the US National Association of Insurance Commissioners. As at the balance sheet date assets with a total value of US$ 5.4 million (2012: US$ 5.4 million) had been allocated to the trust. For many years the Association has depositedfunds with the Wells Fargo Bank, NA as trustee of the Trust Agreement dated 7th April 1966, between various Membersof the Group and the US Federal Maritime Commission in connection with the provision of evidence of financialresponsibility under Sections 2 and 3 of US Public Law 89-777. As at the balance sheet date the funds deposited had a total value of US$ 1.4 million (2012: US$ 1.4 million).


26

To the Members of The Steamship MutualUnderwriting Association (Bermuda) LimitedWe have audited the financial statements of TheSteamship Mutual Underwriting Association (Bermuda)Limited for the year ended 20th February 2013, whichcomprise the consolidated income and expenditureaccount, the consolidated balance sheet, the consolidatedcash flow statement and the related notes 1 to 20. These financial statements have been prepared under the accounting policies set out therein. These financialstatements have been prepared for the purpose ofMember and policy holder information.

This report is made solely to the Company’s Members inaccordance with Section 90 of the Bermuda CompaniesAct 1981. Our audit work has been undertaken so that we might state to the Company’s Members those matterswe are required to state to them in an independentauditor’s report and for no other purpose. To the fullestextent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and theCompany’s Members as a body, for our audit work, forthis report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs described in the statement of Directors’ responsibilities,the Company’s Directors are responsible for thepreparation of the financial statements in accordance withthe European Commission Insurance Accounts Directive(91/674/EEC) as adopted in the United Kingdom throughSection 396 of the Companies Act 2006 and Schedule 3of The Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 and generallyaccepted United Kingdom accounting principles applicableto insurers.

Our responsibility is to audit the financial statements inaccordance with International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financialstatements give a true and fair view and are properlyprepared in accordance with the relevant financialreporting framework and whether the financial statementshave been properly prepared in accordance with theBermuda Companies Act 1981. We also report to youwhether in our opinion the information given in theDirectors’ Report is consistent with the financialstatements.

Report of the Independent Auditor


27

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amountsand disclosures in the financial statements sufficient togive reasonable assurance that the financial statementsare free from material mis-statement, whether caused byfraud or error. This includes an assessment of: whether theaccounting policies are appropriate to the company’scircumstances and have been consistently applied andadequately disclosed; the reasonableness of significantaccounting estimates made by the directors; and theoverall presentation of the financial statements. Inaddition, we read all the financial and non-financialinformation in the annual report to identify materialinconsistencies with the audited financial statements. If webecome aware of any apparent material mis-statements orinconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the Company’saffairs as at 20th February 2013 and of its surplus for the year then ended;

• have been properly prepared in accordance with the European Commission Insurance Accounts Directive (91/674/EEC) as adopted in the United Kingdom through S396 of the Companies Act 2006 and Schedule 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and generally accepted United Kingdom accounting principles applied to insurers; and

• have been properly prepared in accordance with the Bermuda Companies Act 1981.

Opinion on other matterIn our opinion the information given in the Directors’Report is consistent with the financial statements.

Deloitte LLPChartered Accountants and Registered Auditor

London14th May 2013


The Steamship Mutual Underwriting Association Limited

02 Notice of Meeting

03 Directors

04 Report of the Directors



12 Income and Expenditure Account

13 Balance Sheet

14 Cash Flow Statement



Contents


01

ManagersSteamship P&I Management LLPAquatical House, 39 Bell LaneLondon E1 7LUTelephone: 020 7247 5490/020 7895 8490www.steamshipmutual.com



02

Notice is hereby given that the One Hundred and Fourth Annual General Meeting of the Members of the Company will beheld at the Westin Athens Astir Palace Hotel, Vouliagmeni, Athens, Greece, on Tuesday, 22nd October 2013 at 09:10hours for the following purposes:

1 To receive and if thought fit, to adopt the balance sheet and accounts for the year ended 20th February 2013, they having been recommended for adoption by the Board.

2 To elect Members of the Board.The Member of the Board retiring by rotation and in accordance with Article 11.2 of the Association is Mr C. J. Ahrenkiel. Being eligible, he offers himself for re-election. The Members of the Board appointed during the year who, in accordance with Article 11.9 of the Association, are obliged to retire at their first Annual General Meeting are Mr C. Bouch, Mr C. J. Madinabeitia, Mr S. J. Martin, Mr A. Pohan and Mr G. W. F. Rynsard. Being eligible they offer themselves for re-election.

3 To authorise the Managers to fix the remuneration of the Auditors. A Resolution proposing the appointment of Auditors to the Company will be put to the Meeting.

4 To transact any other ordinary business of the Company.

By Order of the Board

S. A. Ward Secretary

14th May 2013

N.B. A Member who is entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend, speakand vote in his place. The instrument appointing a proxy may be in the form enclosed and must be deposited with theSecretary at Aquatical House, 39 Bell Lane, London E1 7LU, United Kingdom, not less than 48 hours before the timespecified for the holding of the Meeting.

Notice of Meeting

DirectorsA. L. Marchisotto, Moran Holdings Inc.C. J. Ahrenkiel, Ahrenkiel Consulting ServicesC. Bouch (appointed 21st January 2013)I. Grimaldi, Grimaldi Holdings SpA.H. M. Juniel, Reederei F. Laeisz GmbH.C. J. Madinabeitia, Tradewind Tankers S.A. (appointed 23rd October 2012)S. J. Martin, Steamship P&I Management LLP (appointed 29th January 2013)A. Pohan, New York Waterway (appointed 23rd October 2012)G. W. F. Rynsard, Steamship P&I Management LLP (appointed 29th January 2013)

SecretaryS. A. Ward, Steamship P&I Management LLP

ManagersSteamship P&I Management LLP

Registered officeAquatical House39 Bell LaneLondon E1 7LU Telephone: 020 7247 5490/020 7895 8490 www.steamshipmutual.com

Registered number105461

03

Directors


04

The Directors have pleasure in presenting their Report andthe Accounts of the Association for the year ended 20thFebruary 2013.

Principal activitiesThe Association is a company limited by guaranteeincorporated in the United Kingdom. The principalactivities of the Association were the insurance andreinsurance of Protection and Indemnity risks (P&I), and ofFreight, Demurrage and Defence (FD&D) risks on behalf ofMembers.

The Association is a member of the International Group ofProtection and Indemnity Clubs (“the Group”) and isreinsured by The Steamship Mutual UnderwritingAssociation (Bermuda) Limited (“SSM Bermuda”).

DirectorsThe Directors of the Association are as shown on page 3.

In accordance with Article 11.2 of the Articles ofAssociation, one-third of the Directors retire from office ateach Annual General Meeting. The Director retiring byrotation is Mr C. J. Ahrenkiel. Being eligible, he offershimself for re-election.

In accordance with Article 11.9 of the Association, newMembers of the Board appointed during the year areobliged to retire at their first Annual General Meeting.Directors retiring in accordance with this Article are Mr C. Bouch, Mr C. J. Madinabeitia, Mr S. J. Martin, Mr A. Pohan and Mr G. W. F. Rynsard and, being eligiblethey offer themselves for re-election.

Audit CommitteeThe Committee was established in October 2011 and actson behalf of the Board in considering the Association’sfinancial statements and its external and internal auditactivities. In so doing the Committee liaises with theManagers and external auditors in monitoring the qualityof all reporting which contains material financialinformation, assessing the Association’s internal controlsystems, and advising the Board on the effectiveness andobjectivity of the internal and external auditors.

The Committee meets four times a year, prior to eachmeeting of the full Board and is currently comprised of the following Directors: Mr H. M. Juniel (Chairman), Mr C. J. Ahrenkiel, Mr C. Bouch, Mr C. J. Madinabeitia, Mr S. J. Martin, Mr A. Pohan and Mr G. W. F. Rynsard.

In discharging its responsibilities the Committee receivesregular financial and management reports from the

Managers including a quarterly report from theCompliance Manager and the internal auditor. TheCommittee establishes the scope of the reporting, both toitself and the Board, and continually assesses the qualityand adequacy of this information. The Committeemonitors the effectiveness of the Managers’ activities withrespect to their regulatory, audit and controlresponsibilities with a specific focus on any issues ofenhanced strategic importance or which present asignificant risk to the Association. Within the past year theCommittee’s work has included reviewing the followingmatters:

• the development of claims in prior years, the effect of recent deterioration on IBNR profiles for some claims categories and the overall statistical confidence level ofthe reserves;

• internal audit reports on anti-bribery controls, IT controls, management of projects and out-sourced services, business continuity and disaster recovery procedures, claims controls and reinsurance placement;

• operational risk stress scenarios in which IT systems might become unavailable;

• the Own Risk and Solvency Assessment (ORSA) and level of standard increase required at the 2013 renewal to meet the Club’s financial objectives;

• the case for appointing a non-Executive Director independent of Club Members;

• the preparations for Solvency II and application for approval of an internal capital model;

• a terms of reference for a review of the internal controlframework by the newly appointed Compliance Manager; and

• the level of administration expenses in relation to business volumes and overall operational efficiency.

Free reservesThe balance on the technical account for general businesswas a surplus of US$ 27.77 million for the financial year. The overall surplus of US$ 27.14 million reflectsinvestment losses of US$ 0.63 million. Free reservesincreased from US$ 25.34 million to US$ 52.48 million.The Association’s exposure to liquidity or cash flow risk isminimal given the support of its reinsurer and that it holdsall investments in cash and money market instruments.The Association does not engage in hedging or any othertype of derivative activity.

Report of the DirectorsCompany registration number 105461


05

UnderwritingDuring the year mutual premium was levied as follows:

• for the year 2012/13 (Class 1 – P&I) 100% mutual premium;

• for the year 2012/13 (Class 2 – FD&D) 100% mutual premium.

The 2009/10 year was closed in May 2012.

Gross premium written totalled US$ 205.82 millioncompared to US$ 220.50 million last year, a 6.7%decrease. The combined ratio, a key financial performanceindicator, fell from 82.5% to 51.4%.

The reduction in the combined ratio and consequentincrease in free reserves was due to a change in the termsof the reinsurance contract with SSM Bermuda reducingthe percentage of written premium required to be cededto the reinsurer for the 2012/13 policy year. The terms ofthe contract for the 2013/14 and future years havereverted to the previous percentage.

The Directors have set the release call for both Class 1(P&I) and Class 2 (FD&D) at 20% of mutual premium forthe 2012/13 policy year, 15% of mutual premium for the2011/12 policy year, and 5% of mutual premium for the2010/11 policy year.

For the year under review, the Directors ordered a generalincrease of 5% in Class 1 premium. At the 2013 renewalthe Directors ordered a general increase of 7.5%.

TonnageThe level of entered tonnage fell during the year from46.0 million to approximately 39.6 million gross tons.

Pooling and reinsuranceThe Association’s reinsurance programme for the 2012/13policy year was arranged in conjunction with othermembers of the Group. The policy provided an ultimatelimit of US$ 3,052 million in excess of US$ 8 million,except in relation to oil pollution claims, which weresubject to an overall limit of US$ 1,000 million.

PoolingFor 2013/14, the individual Club retention, before Poolingwith other members of the International Group, willincrease by US$ 1 million to US$ 9 million and the upperlimit of the Pool will increase by US$ 10 million to US$ 70 million each event. This year, a Club bringing aclaim to the Pool will bear a 10% retention within the

layer of US$ 45 million to US$ 60 million and a 5%retention within the layer of US$ 60 million to US$ 70million, with the balance being divided amongst all Clubsin the usual way.

Hydra Insurance Company Limited (“Hydra”)With effect from 20th February 2013, the liabilities of the Association under the Group Pooling Agreement for the top layer of the Pool (from US$ 30 million to US$ 70 million each event) and for the Group’s retentionof 30% of the first US$ 500 million layer of the GeneralExcess Loss contract will continue to be reinsured intoHydra. Hydra is a cell captive set up by the Group inBermuda under the Segregated Account Companies Act2000.

Excess Loss coverThe Group’s Excess of Loss programme was renewed withthe same structure as for the expiring year. The Group, viaHydra, retains a 30% co-insurance of the first layer of thecontract, from US$ 70 million to US$ 570 million eachevent.

The limit of the supplementary pooled cover for arestricted range of risks covered by the “Bio-Chem”exclusions in War Risk policies remains at US$ 30 million,any one event each vessel, for the 2013/14 policy year.

US oil pollutionThe Group continues to levy special surcharges for vesselscarrying persistent oil as cargo to the USA. The rates ofsurcharge for such voyages will reduce by 15% in2013/14.

Charterers’ coverThe Association provides cover for P&I and other risks forcharterers, reinsured outside the Pool. Limits up to US$ 500 million are provided for P&I and a variety oflimits for other risks.

Non-Poolable coversThe Club continues to provide cover for a range of riskswhich are ancillary to Members’ core operations, reinsuredoutside the Pool with limits up to US$ 500 million.


06

The Steamship Mutual Underwriting Association(Bermuda) Limited (“SSM Bermuda”)Under an agreement made on 20th February 2003, theAssociation entered into a reinsurance contract with SSM Bermuda under which, in return for a percentage ofwritten premium ceded to SSM Bermuda, the Associationis indemnified for a percentage of its net underlyingliabilities in respect of each policy year. From 20thFebruary 2009 the indemnity was in respect of 90% of thefirst US$ 50 million of the Association’s net underlyingliabilities and 100% of any excess over US$ 50 million.From 20th February 2013 the indemnity is in respect of90% of the first US$ 100 million of the Association’s netunderlying liabilities and 100% of any excess over US$100 million. All Members of the Association areautomatically Members of SSM Bermuda and thusbeneficiaries of The Steamship Mutual Trust.

Policy year statementsThe figures in Appendices I and II to this Report areprepared under the accounting policies and in the formatused within the financial statements providing a summaryand breakdown by both class of business andunderwriting year. No allowance has been made for theallocation of any future investment income.

RulesWith the support of advice from the Association’s lawyers,the Directors have approved Rule changes effective from20th February 2013, to clarify and in some cases broadenthe scope of existing cover, and to take account oflegislative changes.

Class 1 – Protection and IndemnityRule No. 2 – DefinitionsPolicy period – a separate definition of policy period hasbeen included to provide for policies which commence ona date other than 20th February. This definition is carriedinto Rule 14 Period of Cover in order to provide for serviceof notices of termination in respect of policies which donot span the standard 20th February to 20th Februarypolicy year.

Seaman – the existing definition in the Rules has beenexpanded to include a “Seafarer” as defined in theMaritime Labour Convention 2006 for the purposes ofcover for repatriation expenses under that Convention.

Rule No. 9 – Joint Members and AssuredsA new provision in Rule 9 i d clarifies the impact on entryof Joint Members as a whole where the entry of anotherJoint Member under the same entry ceases or is

terminated. In conjunction with proposed changes underRule 35 (ii) (see below), this amendment is considereddesirable so as to avoid an automatic cessation of cover inrelation to all assureds under a joint entry where the entryof one ceases. An additional amendment to Rules 9 i aand 9 v (Fleet Entries) clarifies that Joint Members areliable for premium and all other sums due to the Club inrespect of that entry.

Rule No. 14 – Period of CoverSee note above under Rule No. 2 – Definitions – Policyperiod.

Rule No. 17 – RecoveryAn amendment to enable Club cover, where agreed by theManagers, to respond directly for liabilities incurred byMembers under the Maritime Labour Convention 2006(which will come into effect from 1st August 2013) inrespect of repatriation expenses of seafarers.

Rule No. 25 – Liabilities to Persons Covered RisksA new provision extending cover, where agreed by theManagers, to respond to liabilities in respect of seafarersfor repatriation expenses pursuant to Guideline B 2.5 ofRegulation 2.5 of the Maritime Labour Convention 2006(“MLC”) incurred in the case of abandonment of crew. Thismay arise, for example, upon the insolvency of an owner.Typically such expenses are likely to fall within the Club’sindividual retention and so liabilities arising will not bepooled. However in view of the possible aggregation riskarising upon the insolvency of an owner of a large enteredfleet of highly staffed vessels, cover for this risk is subjectto specific prior agreement by the Managers. Whereprovided, this cover, unless otherwise agreed by theManagers, will be subject to a US$ 3 million per vessellimit.

Rule No. 25 xxii – DeductiblesAn amendment to clarify that deductibles erode policylimits, i.e. that the policy limit is calculated from theground up.

Rule No. 35 – Cessation of MembershipThe substance of the existing provisions in relation tocessation and termination of membership by reason ofsanctions has not materially changed, but the provisionshave been restated, amended and re-ordered to addclarity, specifically:

• Insurance by the Club shall cease where the Club is prohibited from insuring the Member, its ship or activity, by reason of sanctions.



07

• Termination of a Member’s entry in accordance with Rule 35 shall not result in termination of the entry of all associated Joint Members unless the Managers so decide.

• The existing provision in Rule 35 vii provided for automatic termination of the entry in the event of employment of a ship by the Member in a sanctions offending voyage or activity. The amendment restates proviso d to existing Rule 35 vii and clarifies that cessation of entry shall relate to the period of the sanctions offending activity.

• Given that swift action may be necessary in order to protect the interests of the Club and the membership as a whole, the Managers are authorised to determinewhether a sanctions risk or prohibition is operative, and to serve appropriate notices in writing terminatingan entry and/or restricting the provision of cover.

Rule No. 37 – Non Payment of PremiumAn amendment to clarify that where an intermediaryacting for the Member fails to forward premium to theClub, the Member remains liable for payment of premium.This reflects the position under English law and theMarine Insurance Act 1906, (to which the Club Rules aresubject) which provides that the provisions of the Actrelating to premium (including Section 53) do not apply inthe case of mutual insurance. In addition, a separateamendment makes clear that the rights set out in Rule 37in relation to non-payment of premium are not exclusiveand do not limit the other rights of the Managers set outelsewhere under the Rules, such as those relating todeduction and set-off.

Statement of Directors’ responsibilitiesUnited Kingdom company law requires the Directors toprepare financial statements for each financial year whichgive a true and fair view of the state of affairs of theAssociation as at the end of the financial year and of thesurplus or deficit of the Association, for that period.

In preparing those financial statements, the Directors arerequired to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Association will continue in business.

The Directors are responsible for keeping properaccounting records which disclose with reasonableaccuracy at any time the financial position of theAssociation and to enable them to ensure that thefinancial statements comply with the Companies Act2006. They are also responsible for the system of internalcontrol, for safeguarding the assets of the Association and hence for taking reasonable steps for the preventionand detection of fraud and other irregularities. TheAssociation’s Directors are responsible for the preparationof the financial statements in accordance with applicableUnited Kingdom law and accounting standards.

Disclosure of information to the auditorEach of the persons who is a Director at the date ofapproval of this report confirms that:

• so far as the Director is aware, there is no relevant audit information of which the Association’s auditor is unaware; and

• the Director has taken all steps that they ought to have taken as a Director in order to make themself aware of any relevant audit information and to establish that the Association’s auditor is aware of that information.

This confirmation is given and should be interpreted inaccordance with the provisions of Section 418 of theCompanies Act 2006.

A. L. MarchisottoChairman

ManagersSteamship P&I Management LLP




08

Gross premium 203,355) 223,819) 136,416) 556633,,559900))Less:SSM Bermuda reinsurance premium (146,526) (180,089) (115,253) ((444411,,886688))

Net premium 56,829) 43,730) 21,163) 112211,,772222))

Gross claims paidOwn claims paid (16,487) (213,733) (54,657) ((228844,,887777))Claims administration expenses (3,908) (4,443) (2,360) ((1100,,771111))

(20,395) (218,176) (57,017) ((229955,,558888))

Less:SSM Bermuda reinsurance recoveries 14,839) 208,733) 49,657) 227733,,222299))

Net claims paid (5,556) (9,443) (7,360) ((2222,,335599))

Claims outstanding including IBNR (188,439) (412,197) (41,778) ((664422,,441144))Less:SSM Bermuda reinsurance recoveries 185,068) 412,197) 41,778) 663399,,004433))

Net provision for claims outstanding (3,371) –) –) ((33,,337711))


Balance on the technical account 27,215) 7,897) (319) 3344,,779933))

Investment income (including realised and unrealised) (644) (247) (327) ((11,,221188))Other income 14) 25) –) 3399))Taxation (1) –) –) ((11))

Open policy years funds available 26,584) 7,675 (646) 3333,,661133))




09

Available balance as at 20th February 2012 20,384)Add: Balance of 2009/10 year as at 20th February 2012 2,060)Movements during financial year:Net premium (9)Net claims paid (1,607)Expenses 2)


Claims outstanding (55,510)Less:Group Pool recoveries –)SSM Bermuda reinsurance recoveries 53,294))


Closed policy years funds available 18,614))

SummaryOpen and closed years funds available 52,227)Reinsurance balance 253))

Total projected funds available 52,480))

Total))US$ 000))Closed Policy Years – All Classes


2012/13) 2011/12) 2010/11) TToottaall ))US$ 000) US$ 000) US$ 000) UUSS$$ 000000))

10

Gross premium 180,128) 192,955) 125,242) 449988,,332255))Less:SSM Bermuda reinsurance premium (129,617) (155,285) (105,570) ((339900,,447722))

Net premium 50,511) 37,670) 19,672) 110077,,885533))

Gross claims paidOwn claims paid (13,753) (196,650) (47,959) ((225588,,336622))Claims administration expenses (3,300) (3,576) (2,069) ((88,,994455))

(17,053) (200,226) (50,028) ((226677,,330077))

Less:SSM Bermuda reinsurance recoveries 12,378) 191,984) 43,492) 224477,,885544))

Net claims paid (4,675) (8,242) (6,536) ((1199,,445533))

Claims outstanding including IBNR (172,813) (396,622) (33,365) ((660022,,880000))Less:SSM Bermuda reinsurance recoveries 169,722) 396,622) 33,365) 559999,,770099))

Net provision for claims outstanding (3,091) –) –) ((33,,009911))


Balance on the technical account 24,101) 6,536) (131) 3300,,550066)))

Investment income (including realised and unrealised) (573) (214) (301) ((11,,008888))Other income 14) 25) –) 3399))Taxation (1) –) –) ((11))

Open policy years funds available 23,541) 6,347) (432) 2299,,445566))




11

Available balance as at 20th February 2012 19,722))Add: Balance of 2009/10 year as at 20th February 2012 2,105))Movements during financial year:Net premium (1)Net claims paid (1,484)Expenses 1))

Available balance as at 20th February 2013 20,343))

Claims outstanding including IBNR (52,547)Less:Group Pool recoveries –))SSM Bermuda reinsurance recoveries 50,463))



Summary All Classes FD&D Others P&I

Open and closed years funds available 52,227 1,449 3,063 47,715Reinsurance balance 253


Total))US$ 000))Closed Policy Years – P&I Class


22001133)) 2012)Note UUSS$$ 000000)) US$ 000)

12

Earned premium, net of reinsuranceGross premium 2 220055,,882211)) 220,498)Outward reinsurance premium 3 ((114488,,664488)) (177,069)

Earned premium, net of reinsurance 5577,,117733)) 43,429)

Claims incurred, net of reinsuranceClaims paidGross amount 4 224499,,226611)) 71,791)Reinsurers’ share ((223377,,999900)) (61,129)

Net claims paid 1111,,227711)) 10,662)

Change in the provision for claimsGross amount 227777,,996633)) 252,500)Reinsurers’ share ((228800,,554477)) (253,776)

Change in the net provision for claims ((22,,558844)) (1,276)


Net operating expenses 5 2200,,771144)) 26,435)

Balance on the technical account for general business 2277,,777722)) 7,608)

Non-Technical AccountBalance on the general business technical account 2277,,777722)) 7,608)Investment income ((664455)) (247)Other income 1144)) 25)

Surplus on ordinary activities before taxation 2277,,114411)) 7,386)

Taxation 6 11)) –)

Surplus for the financial year 2277,,114400)) 7,386)

Free reserves brought forward 2255,,334400)) 17,954)

Free reserves 5522,,448800)) 25,340)




Technical Account

Income and Expenditure Accountfor the year ended 20th February 2013


InvestmentsOther financial investments 7 3399,,550055 30,055)

Reinsurers’ share of technical provisionsClaims outstanding 669922,,333388 411,791)

DebtorsDebtors arising out of direct insurance operations 1111,,116622 12,543)Debtors arising out of reinsurance operations 1133,,886677 –)Other debtors 771199 587)

Other assetsCash at bank and in hand 66,,887777 4,615)

Prepayments and accrued incomeDeferred acquisition costs 225522 460)Other prepayments and accrued income 66 –)

Total assets 776644,,772266 460,051)

LiabilitiesCapital and reservesFree reserves 8 5522,,448800 25,340)

Technical provisionsProvision for unearned premium 11,,551100 3,382)Claims outstanding 669977,,992244 419,961)

Provisions for other risks and chargesProvision for taxation 11 –)

CreditorsCreditors arising out of direct insurance operations 1111,,440066 1,367)Creditors arising out of reinsurance operations –– 4,865)Other creditors including taxation and social security 11,,440055 5,136)

Total liabilities 776644,,772266 460,051)


These financial statements were approved by the Board of Directors on 14th May 2013.

A. L. Marchisotto H. M. Juniel Managers:Chairman Director Steamship P&I Management LLP

13

22001133)) 2012)Note UUSS$$ 000000)) US$ 000)

Balance Sheetas at 20th February 2013

Assets


22001133)) 2012)UUSS$$ 000000)) US$ 000)

14

Operating surplus before taxation after interest 2277,,114411)) 7,386)

(Decrease)/increase in general insurance technical provisions ((44,,445566)) 1,116)Increase in debtors ((1122,,441166)) (6,368)Increase in creditors 11,,444433)) 7,607)

((1155,,442299)) 2,355)

Net cash inflow from operating activities 1111,,771122)) 9,741)

Cash flow statementNet cash inflow from operating activities 1111,,771122)) 9,741)Taxation paid ––)) –)

1111,,771122)) 9,741)

Cash flows were invested as follows:Increase/(decrease) in cash holdings 22,,226622)) (2,509)Net portfolio investmentPurchase of money market instruments 99,,445500)) 12,250)

Net investment of cash flows 1111,,771122)) 9,741)

Movement in opening and closing portfolio investments net of financingNet cash inflow/(outflow) for the period 22,,226622)) (2,509)Portfolio investments 99,,445500)) 12,250)

Total movement in portfolio investments net of financing 1111,,771122)) 9,741)



Surplus on ordinary activities before tax

Cash Flow Statementfor the year ended 20th February 2013


15

1. Accounting policies(a) Accounting conventionThe accounts have been prepared in accordance with the European Commission Insurance Accounts Directive(91/674/EEC) as adopted in the United Kingdom per Section 396 of the Companies Act 2006 and Schedule 3 of The Largeand Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, and applicable United Kingdomaccounting standards. The Association has adopted all material recommendations of the Statement of RecommendedPractice on Accounting for Insurance Business issued in December 2005, and amended in December 2006 by theAssociation of British Insurers (“ABI SORP”).

After making enquiries, the Directors have a reasonable expectation that the Association has adequate resources tocontinue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concernbasis in preparing the accounts.

(b) Premium writtenPremium, less returns, comprise the total premium receivable for the whole period of cover provided by contractsincepting during the financial year. All premium is shown gross of commission payable to intermediaries.

(c) Unearned premiumThe proportion of the premium written relating to periods of cover after the year end is carried forward as a provision forunearned premium.

(d) Deferred acquisition costsAcquisition costs, comprising commission and other costs related to the acquisition of new business, are deferred to theextent that they are attributable to premium unearned at the balance sheet date.

(e) Claims and related expensesClaims and related expenses are charged to the income and expenditure account when they have been settled. Aprovision is made on a claim by claim basis for the estimated cost of claims notified but not settled by the balance sheetdate. A provision for claims incurred but not reported is established on a statistical basis having regard to past experienceas to the number and magnitude of claims reported after previous balance sheet dates.

(f) Reinsurance premium and recoveriesReinsurance premium and recoveries are recognised in the income and expenditure account on an accruals basis.

(g) InvestmentsQuoted investments have been valued at their bid-value as at the balance sheet date. Bond income is accounted for onan accruals basis. Unrealised gains and losses on the movement in the market value of investments, compared to theircost are included in the non-technical account.

(h) Allocation to policy years and classesMutual premium, fixed premium, additional premium, reinsurance premium payable, claims and reinsurance recoveriesare allocated to the policy years and classes to which they relate. Administration expenses, investment income andexchange gains or losses are allocated to the current policy year in line with total calls and premium income.



16

1. Accounting policies continued(i) Foreign currenciesThe functional currency is US dollars. Monetary assets and liabilities are converted at the rate of exchange ruling at thebalance sheet date. Income and expenditure items are translated at the rate of exchange ruling at the relevant monthend. All exchange differences are included in the income and expenditure account.

The rates of exchange ruling on the balance sheet date and used for the purpose of preparing the accounts were asfollows:

22001133)) 2012)

Euro € 00..774499)) 0.760)UK sterling £ 00..664488)) 0.632)

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Mutual and fixed premium written 220022,,663311)) 222,446)Deferred premium and releases 11,,331199)) 567)Additional premium ((11)) (123)Movement in unearned premium 11,,887722)) (2,392)

220055,,882211)) 220,498)

Gross premium by class of businessProtection and Indemnity 118811,,882244)) 191,514)Freight, Demurrage and Defence 66,,777733)) 6,520)Other 1177,,222244)) 22,464)

220055,,882211)) 220,498)

Gross premium by destinationUnited States of America 8888,,228855)) 90,750)Germany 2233,,880055)) 25,475)Netherlands 1188,,774455)) 19,956)Brazil 1144,,770044)) 10,961)Cyprus 1133,,998888)) 22,593)United Kingdom 1100,,443311)) 9,620)Italy 77,,661177)) 8,333)France 77,,114455)) 12,266)Greece 33,,888800)) 3,794)Spain 22,,339911)) 2,269)Mexico 22,,220088)) 2,253)Other countries 1122,,662222)) 12,228)

220055,,882211)) 220,498)

The Association’s activities relate predominantly to one class of business: Protection and Indemnity.



2. Gross premium

17

3. Reinsurance contractsThe Association has the following reinsurance arrangement:

Under an agreement made on the 20th February 2003, SSM Bermuda agreed to indemnify the Association in respect of95% of the first US$ 30 million of the Association’s net underlying liabilities and 100% of any such liabilities whichexceed US$ 30 million in respect of all policy years through to 2005/06; in respect of 90% of the first US$ 30 million ofthe Association’s net underlying liabilities and 100% of any such liabilities which exceed US$ 30 million for all policyyears from 2006/07 through to 2008/09; in respect of 90% of the first US$ 50 million of the Association’s net underlyingliabilities and 100% of any such liabilities which exceed US$ 50 million for all policy years from 2009/10 through to2012/13, and in respect of 90% of the first US$ 100 million of the Association’s net underlying liabilities and 100% ofany such liabilities which exceed US$ 100 million for the 2013/14 policy year.

22001133)) 20124. Claims paid – gross amount UUSS$$ 000000 US$ 000

Claims and related expenses 224455,,229999 67,545Claims administration expenses 33,,996622 4,246

224499,,226611 71,791

22001133)) 20125. Net operating expenses UUSS$$ 000000 US$ 000

Acquisition costsBrokerage 1144,,005577 16,684Underwriting administration expenses 55,,003333 5,347

1199,,009900 22,031

Administrative ExpensesOther administration expenses 11,,441166 4,233Regulatory fees 111199 88Directors’ remuneration 77 3Auditor’s remuneration – audit fees 8822 80

11,,662244 4,404

2200,,771144 26,435

The Association had no employees in either financial year.

Transactions with related partiesSteamship P&I Management LLP (“SPIM”) provides management and administrative services to the Association. Under the terms of its management contract SPIM receives, as remuneration for its services, a fee which is based in part onpremiums payable by Members in each accounting year together with reimbursement of its office and administrationexpenses. For the financial year to 20th February 2013, these fees amounted to US$ 10.143 million (2012: US$ 13.648 million). US$ 0.627 million was prepaid at the year end (2012: US$ 0.543 million).


6. TaxationThe charge represents the estimated liability for the accounting year to 20th February 2013, of US$ 1,343 (2012: US$ 91)based upon negotiations with the United Kingdom tax authorities, assessed on the investment income of the Associationfor the year.

18

22001133)) 2012)UUSS$$ 000000)) US$ 000)

Analysis of tax charge on ordinary activitiesUnited Kingdom corporation tax at 20% (2012: 20%) based on the surplus for the financial year 11)) –)Adjustment in respect of prior years ––)) –)

11)) –)

Factors affecting tax charge for the current periodThe tax assessed for the financial year is lower than that resulting from applying the standard rate of corporation tax in the United Kingdom.The differences are explained below.

Surplus on ordinary activities before tax 2277,,114400)) 7,386)Tax at 20% (2012: 20%) thereon 55,,442288)) 1,477)Effect of income not subject to corporation tax ((55,,442277)) (1,477)Prior period adjustments ––) –)

Current tax charge for period 11)) –)


22001133)) 2012)7. Other financial investments UUSS$$ 000000)) US$ 000)

Market valueMoney market instruments 3399,,550055)) 30,055)

CostMoney market instruments 3399,,550055)) 30,055)

All investments are listed.


19

22001133)) 2012)8. Free reserves UUSS$$ 000000)) US$ 000)

Free reserves brought forward 2255,,334400)) 17,954)Surplus for year 2277,,114400)) 7,386)

5522,,448800)) 25,340)

The balance carried forward of US$ 52,480,269 together with any further additional premium to be ordered by the Board of Directors and recoveries under the reinsurance contracts, will be available to meet liabilities not yet passed orascertained. The Members of the Association are liable for their rateable proportion of any deficiency arising from anexcess of liabilities over premium. The Directors and Managers are of the opinion that the Association has adequateassets and contractual arrangements to meet known and anticipated liabilities.

9. Contingent liabilities The Association provides guarantees to third parties on behalf of Members. For guarantees issued in respect of coveredclaims, provision is made within the claims outstanding technical provision. For uncovered claims, guarantees are issuedwhen appropriate counter security is obtained. As at 20th February 2013 the total value of guarantees issued in respectof uncovered claims was US$ 3.24 million.


20

Independent Auditor’s Report to the Members of TheSteamship Mutual Underwriting Association LimitedWe have audited the financial statements of TheSteamship Mutual Underwriting Association Limited forthe year ended 20th February 2013, which comprise theincome and expenditure account, the balance sheet, thecash flow statement and the related notes 1 to 9. Thefinancial reporting framework that has been applied intheir preparation is applicable law and United KingdomAccounting Standards (United Kingdom GenerallyAccepted Accounting Practice).

This report is made solely to the Company’s Members, asa body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has beenundertaken so that we might state to the Company’sMembers those matters we are required to state to themin an auditor’s report and for no other purpose. To thefullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Companyand the Company’s Members as a body, for our auditwork, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs explained more fully in the Directors’ ResponsibilitiesStatement, the Directors are responsible for thepreparation of the financial statements and for beingsatisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on thefinancial statements in accordance with applicable lawand International Standards on Auditing (UK and Ireland).Those standards require us to comply with the AuditingPractices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amountsand disclosures in the financial statements, sufficient togive reasonable assurance that the financial statementsare free from material mis-statement, whether caused byfraud or error. This includes an assessment of: whether theaccounting policies are appropriate to the Company’scircumstances and have been consistently applied andadequately disclosed; the reasonableness of significantaccounting estimates made by the Directors; and theoverall presentation of the financial statements. In addition, we read all the financial and non-financialinformation in the annual report to identify materialinconsistencies with the audited financial statements. If webecome aware of any apparent material mis-statements orinconsistencies we consider the implications for our report.



21


• give a true and fair view of the state of the Company’saffairs as at 20th February 2013 and of its surplus for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by theCompanies Act 2006In our opinion the information given in the Directors’Report for the financial year for which the financialstatements are prepared is consistent with the financialstatements.

Matters on which we are required to report byexceptionWe have nothing to report in respect of the followingmatters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with theaccounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

David Rush ACA (Senior Statutory Auditor) For and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

London14th May 2013


The Steamship Mutual Trust

Contents

01 Directors of the Corporate Trustee

02 Report of the Corporate Trustee



08 Income and Expenditure Account

09 Balance Sheet

10 Cash Flow Statement



The Steamship Mutual TrustDirectors of the Corporate Trustee

01


The Steamship Mutual Underwriting Association Trustees (Bermuda) Limited

H. S. Frank, Carnival Corporation & plc (Chairman)S. von Appen, Sociedad Naviera Ultragas Ltda. (retired 23rd July 2012)J. G. ConyersA. E. Exel, ISIS (Asia Pacific) Pty. Ltd.B. B. A. McAllister, McAllister Towing (appointed 22nd October 2012)H. L. F. Schoeller, Columbia Shipmanagement Ltd. C. C. Tung, Orient Overseas (International) Ltd.

SSeeccrreettaarryy ooff tthhee CCoorrppoorraattee TTrruusstteeeeA. R. Anderson, Conyers, Dill & Pearman

MMaannaaggeerr ooff tthhee CCoorrppoorraattee TTrruusstteeeeHamilton Investment Management Ltd.

RReeggiisstteerreedd ooffffiiccee ooff tthhee CCoorrppoorraattee TTrruusstteeeeClarendon House2 Church StreetHamilton HM 11Bermuda

AAddmmiinniissttrraattiivvee ooffffiicceess ooff tthhee CCoorrppoorraattee TTrruusstteeeeWashington Mall 1P.O. Box HM 447Hamilton HM BXBermuda Telephone: (1441) 295 4502Telefax: (1441) 292 8787


02

The Steamship Mutual Underwriting Association Trustees(Bermuda) Limited has pleasure in presenting its Reportand the Accounts of The Steamship Mutual Trust (“theTrust”) for the year ended 20th February 2013.

Principal activitiesThe Trust’s principal activity during the year was thereinsurance of Protection and Indemnity (P&I) and Freight,Demurrage and Defence (FD&D) risks. At the beginning ofthe accounting period, the Corporate Trustee extended itscurrent year contract, entered into on behalf of the Trust,with The Steamship Mutual Underwriting Association(Reinsurance) Limited, to cover the period from 20thFebruary 2012 to 20th February 2013 on existing termsand conditions. The total premium receivable by the Trustin respect of all its reinsurance contracts during theaccounting period amounted to US$ 175.2 million.

AccountsThe surplus of funds available to meet outstanding claimsas at 20th February 2013 decreased by US$ 40.6 millionto US$ 125.6 million before taking into accountanticipated future investment income. No transfers to thecapital reserve of the Trust were made during the year.The total assets of the Trust at the balance sheet dateamounted to US$ 875.7 million, an increase of US$ 57.0 million on the previous year.

Policy year statementsThe figures in Appendices I and II to this Report areprepared under the accounting policies and in the formatused within the financial statements, providing a summaryand breakdown by both class of business andunderwriting year. No allowance has been made for theallocation of any future investment income.

MarketsOverall 2012 was a more positive year for investmentmarkets. Politicians in the Eurozone and the US avoidedseveral crises of confidence stemming from the solvencyproblems of heavily indebted countries. However thestatements which underpinned central and internationalbank support for markets often came very late in the day.Although fiscal austerity measures have been

implemented by some governments, the absence ofmeaningful economic growth and an under capitalisedbanking sector has meant there has been littleimprovement in the fundamental factors behind sovereigndeficits in most countries.

US equity markets posted double digit returns for thefinancial year with European equities not far behind in USdollar terms. Most bond indices registered low single digitreturns while gold fell by 6.8% reflecting the return ofinvestor risk appetite.

The level of sovereign debt in developed countries willcontinue to be a concern but there is now more optimismthat a modest level of global economic growth can beachieved over the next few years. The supportivemonetary policy being pursued by a growing number ofcentral banks should lead to a gradual improvement infinancial conditions with intermittent periods of riskaversion along the way. The US and Chinese economiesare likely to respond more quickly to these conditions,followed by developing countries with the Eurozonelagging behind. The price to be paid for the supportivepolicy will be inflation substantially reducing real returnsfor investors.

Investment performanceThe Trust’s overall investment return of 3.5% was madeup of a 2.9% return on fixed income investments, a 7.8%return on hedge funds of funds and a 7.5% return onequities.

The 4.6% return last year was dominated by unrealisedgains on bonds, partly reduced by losses on revaluingeuro and UK sterling denominated bonds. This year thereturn was more balanced and included a small gain onrevaluing euro and UK sterling bonds. Corporate bond andhedge fund of fund managers exceeded benchmarkperformance by a considerable margin while the relativelynew emerging market managers, while generatingpositive returns, fell short of their benchmarks.

Report of the Corporate Trustee

03

Risk management and asset allocationRisk in the combined portfolio was steady through theyear and remained at the lower end of the approvedbudget range. A number of stress scenarios werereviewed during the year. Estimated losses, likelihood ofoccurrence and actions that could be taken to reduce theimpact of the scenarios were reviewed by the Board.

The objective of the matching portfolio is to providesecurity and liquidity for the settlement of claims liabilitiesarising from the reinsurance contract, taking into accountthe cash flow and currency profile of those liabilities.During the year the Board put in place a collateralagreement which provides for assets in the matchingportfolio to be pledged to the reinsured as security foramounts recoverable. This agreement is a natural use ofthe already segregated matching portfolio and mitigatesthe credit risk arising in the reinsured.

The very low yields on developed country governmentbonds and concentration in US Treasuries lead the Boardto diversify the asset allocation in the matching portfolioduring the year, moving a total of US$ 105 million to highgrade US mortgage backed and global corporate bondmandates with existing investment managers. Theincremental credit risk associated with these investmentswas managed within the overall risk budget.

The Corporate Trustee has continued to consult regularlywith the Board of The Steamship Mutual UnderwritingAssociation (Bermuda) Limited, which is the ultimatereinsured and whose Members are the beneficiaries of theTrust. That Board receives regular presentations on theutilisation of the agreed risk budget, investmentperformance and asset allocation.

ClaimsNet claims and related expenses paid increased by 13.9% year on year to US$ 179.8 million.

During the year the Corporate Trustee reviewed with the ultimate reassured the development of prior yearclaims and the terms of its inward reinsurance contract.The Corporate Trustee remains satisfied that the reassuredis taking appropriate steps to ensure that a prudentunderwriting policy is maintained.

Statement of Corporate Trustee’s responsibilitiesThe Corporate Trustee has prepared financial statementsfor each financial year in accordance with EuropeanCommission Insurance Accounts Directive (91/674/EEC) asadopted in the United Kingdom through Section 396 ofthe Companies Act 2006 and Schedule 3 of The Large andMedium-sized Companies and Groups (Accounts andReports) Regulations 2008 and United Kingdomaccounting principles applicable to insurers.

In preparing those financial statements the CorporateTrustee is required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Trust will continue in business.

The Corporate Trustee is responsible for keeping properaccounting records which disclose with reasonableaccuracy at any time the financial position of the Trust. It is responsible for the system of internal control, forsafeguarding the assets of the Trust and hence for takingreasonable steps to prevent and detect fraud and otherirregularities.

H. S. FrankChairman





04

Gross premium 172,016) 209,592) 204,117) 558855,,772255))Less:Reinsurance premium (22,250) (29,317) (24,417) ((7755,,998844))

Net premium 149,766) 180,275) 179,700) 550099,,774411))

Gross claims paidOwn claims and related expenses (27,095) (93,726) (110,747) ((223311,,556688))Less:Reinsurance recoveries 73) 4,542) 5,087) 99,,770022))

Net claims paid (27,022) (89,184) (105,660) ((222211,,886666))

Claims outstanding including IBNR (197,901) (136,276) (86,594) ((442200,,777711))Less:Other reinsurance recoveries 3,152) 15,787) 6,343) 2255,,228822))


Administration expenses (116) (58) (84) ((225588))

Balance on the technical account (72,121) (29,456) (6,295) ((110077,,887722))

Allocated net investment income 74,626) 33,132) 11,586) 111199,,334444))Non-technical account administration expenses (2,332) (1,993) (1,762) ((66,,008877))

Open policy years funds available 173) 1,683) 3,529) 55,,338855))




05

Available balance as at 20th February 2012 208,325))Add: Balance of 2009/10 year as at 20th February 2012 96,975))Movements during financial year:Other net premium (41)Net claims paid (67,331)Movement in allocated Trust investment income (25,116)


Claims outstanding including IBNR (239,197)Less:Other reinsurance recoveries 31,754))))Net provision for claims outstanding (207,443)


SummaryOpen and closed years funds available 10,754))Investment income available for allocation 114,535))Reinsurance balance 285))

Total projected funds available 125,574)

Total))US$ 000)Closed Policy Years – All Classes



06

Gross premium 148,127) 178,500) 173,527) 550000,,115544))Less:Reinsurance premium (14,350) (19,536) (18,286) ((5522,,117722))

Net premium 133,777) 158,964) 155,241) 444477,,998822))

Gross claims paid (23,482) (73,571) (91,653) ((118888,,770066))Own claims paid and related expensesLess:Reinsurance recoveries –) –) 380) 338800))

Net claims paid (23,482) (73,571) (91,273) ((118888,,332266))

Claims outstanding including IBNR (179,665) (117,435) (73,452) ((337700,,555522))Less:Other reinsurance recoveries 2,219) 14,248) 497) 1166,,996644))


Administration expenses (103) (51) (73) ((222277))

Balance on the technical account (67,254) (17,845) (9,060) ((9944,,115599))

Allocated net investment income 69,332) 19,589) 10,603) 9999,,552244))Non-technical account administration expenses (2,078) (1,744) (1,543) ((55,,336655))

Open policy years funds available –) –) –) ––)




07

Available balance as at 20th February 2012 187,992)Add: Balance of 2009/10 year as at 20th February 2012 86,733))Movements during financial year:Other net premium 55)Net claims paid (61,588)Movement in allocated Trust investment income (21,064)


Claims outstanding including IBNR (223,434)Less:Other reinsurance recoveries 31,306))


Closed policy years funds available –))

Summary All Classes FD&D Others P&I

Open and closed years funds available 10,754 5,385 5,369 –))Investment income available for allocation 114,535Reinsurance balance 285


Total))US$ 000)Closed Policy Years – P&I Class


22001133)) 2012))Note UUSS$$ 000000)) US$ 000)

08

Earned premium, net of reinsuranceGross premium written 3 117755,,116655)) 208,080)Outward reinsurance premium ((2200,,111155)) (29,560)

115555,,005500)) 178,520)

Claims incurred, net of reinsuranceClaims paidGross amount 4 118888,,331100)) 175,866)Reinsurers’ share ((88,,552299)) (18,010)

Net claims paid 117799,,778811)) 157,856)

Change in the provision for claimsGross amount 4433,,007755)) 69,442)Reinsurers’ share ((22,,997755)) 874)

Change in the net provision for claims 5 4400,,110000)) 70,316)


Net operating expenses 6 111166)) 58)

Balance on the technical account for general business ((6644,,994477)) (49,710)

Non-Technical AccountBalance on the technical account for general business ((6644,,994477)) (49,710)Investment income 7 1199,,443300)) 18,651))Unrealised gains on investments 8 77,,226666)) 13,401))Investment management expenses ((22,,333311)) (1,993)

Deficit for the financial year ((4400,,558822)) (19,651)




Technical Account

Income and Expenditure Accountfor the year ended 20th February 2013


InvestmentsOther financial investments 9 880088,,446600 750,606)

Reinsurers’ share of technical provisionsClaims outstanding 5 5577,,003366 54,061)

DebtorsDebtors arising out of reinsurance operations 11 55,,660000 9,271)

Prepayments and accrued incomeAccrued interest 44,,557788 4,768)

Total assets 887755,,667744 818,706)

LiabilitiesCapital and reservesFree reserves 12 112255,,557744 166,156)

Technical provisionsClaims outstanding 5 665599,,997700 616,895)

CreditorsCreditors arising out of reinsurance operations 13 5566,,119922 35,132)Other creditors 14 3333,,993388 523)

Total liabilities 887755,,667744 818,706)


These financial statements were approved by the Corporate Trustee on 13th May 2013.


09

22001133)) 2012)Note UUSS$$ 000000)) US$ 000)

Balance Sheetas at 20th February 2013

Assets


10

Cash Flow Statementfor the year ended 20th February 2013

22001133)) 2012)UUSS$$ 000000)) US$ 000)Deficit on ordinary activities before tax

Operating deficit before taxation after interest ((4400,,558822)) (19,651)

Increase in general insurance technical provisions 4400,,110000)) 70,316)Unrealised gains on investments ((77,,226666)) (13,401)Decrease/(increase) in debtors 33,,886611)) (712)Increase in creditors 5544,,447755)) 2,036)

9911,,117700)) 58,239)

Net cash inflow from operating activities 5500,,558888)) 38,588)

Cash flow statementNet cash inflow from operating activities 5500,,558888)) 38,588)

Cash flows were invested as follows:Movement in cash holdings ––) –)Net portfolio investmentNet purchase of bonds and loans 5500,,224466)) 110,934)Net purchase of equities 3366)) 10,050)Net purchase/(sale) of alternative investments 22,,449988)) (2,750)Decrease in money market instruments ((22,,119922)) (79,646)

5500,,558888)) 38,588)

Net investment of cash flows 5500,,558888)) 38,588)

Movement in opening and closing portfolio investments net of financingNet cash inflow for the period ––)) –)Portfolio investments 5500,,558888)) 38,588)

Movement arising from cash flows 5500,,558888)) 38,588)Changes in market values and exchange rate effects 77,,226666)) 13,401)

Total movement in portfolio investments net of financing 5577,,885544)) 51,989)Portfolio investments net of financing at 20th February 2012 775500,,660066)) 698,617)



1. ConstitutionThe Trust was created by a settlement under Bermudian law. The Corporate Trustee is The Steamship Mutual UnderwritingAssociation Trustees (Bermuda) Limited, a company incorporated under the laws of Bermuda and registered as an insurerunder the Bermuda Insurance Act 1978, so enabling the Trust to undertake reinsurance business.

2. Accounting policies(a) Accounting conventionThe accounts have been prepared in accordance with the European Commission Insurance Accounts Directive(91/674/EEC) as adopted in the United Kingdom through Section 396 of the Companies Act 2006 and Schedule 3 of TheLarge and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and generally accepted UnitedKingdom accounting principles applicable to insurers. The Trust has adopted all material recommendations of theStatement of Recommended Practice on Accounting for Insurance Business issued in December 2005, and amended inDecember 2006 by the Association of British Insurers (“ABI SORP”).

After making enquiries, the Trustees have a reasonable expectation that the Trust has adequate resources to continue inoperational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis inpreparing the accounts.

(b) Premium writtenPremium comprises the total premium receivable for the whole period of cover provided by contracts incepting during thefinancial year. All business is ceded from The Steamship Mutual Underwriting Association (Reinsurance) Limited, acompany incorporated in Bermuda.

(c) Claims and related expensesFull provision is made on a claim by claim basis for the estimated cost of claims notified but not settled by the balancesheet date. A provision for claims incurred but not reported is established on a statistical basis having regard to pastexperience as to the number and magnitude of claims reported after previous balance sheet dates.

(d) Reinsurance premium and recoveriesReinsurance premium and recoveries are recognised in the income and expenditure account on an accruals basis.

(e) Foreign currenciesAssets and liabilities including investments and bank balances have been converted to US dollars at the rate of exchangeruling at the balance sheet date. Income and expenditure items including foreign exchange transactions are converted toUS dollars at the rate of exchange ruling at the date of the transaction. All exchange differences are included in theincome and expenditure account.

(f) Other financial investmentsInvestments and cash balances have been valued at their bid value as at the balance sheet date. Bond income isaccounted for on an accruals basis. Equity income is accounted for on an ex-dividend basis. Forward exchange contractsare valued at the exchange rate prevailing at the year end. Unrealised gains and losses on the movement in the marketvalue of investments compared to their cost are included within the non-technical account.


11


12

22001133)) 2012)3. Gross premium written UUSS$$ 000000)) US$ 000)

Premium receivable under reinsurance contracts 117755,,116655)) 208,080)

Under contracts dated 11th March 1983, as amended, the Corporate Trustee, on behalf of the Trust, accepted reinsurancebusiness in respect of all the Protection and Indemnity risks and Freight, Demurrage and Defence risks of The SteamshipMutual Underwriting Association (Reinsurance) Limited for the period up to 20th February 1983 and subsequently furthercontracts for each of the policy years ended, respectively, 20th February 1984 through to 20th February 2013.

22001133) 2012)4. Claims paid – gross amount UUSS$$ 000000)) US$ 000)

Claims paid 118888,,330044)) 175,864)Claims handling charge 66)) 2)

118888,,331100)) 175,866)

22001133)) 2012)5. Change in the net provision for claims UUSS$$ 000000)) US$ 000)

Gross outstanding claimsProvision brought forward ((661166,,889955)) (547,453)Provision carried forward 665599,,997700)) 616,895)

4433,,007755)) 69,442)Reinsurers’ shareProvision brought forward 5544,,006611)) 54,935)Provision carried forward ((5577,,003366)) (54,061)

((22,,997755)) 874)

Change in the net provision for claims 4400,,110000)) 70,316)

A favourable net run-off deviation of US$ 2.7 million was experienced during the year (2012: US$ 13.2 million adversenet run-off deviation).

The estimates for known outstanding claims are based on the best estimates and judgement of the Managers of TheSteamship Mutual Underwriting Association (Reinsurance) Limited of the final cost of individual cases based on currentinformation. Provision is also made for claims incurred but not reported by the balance sheet date using detailedstatistical analysis having regard to past experience as to the number and magnitude of claims reported after previousbalance sheet dates.



13

22001133)) 2012)6. Net operating expenses UUSS$$ 000000)) US$ 000)

Administrative expensesNon-investment management expenses payable to Corporate Trustee 7711)) 13)Auditor’s remuneration – audit fees 4455)) 45)

111166)) 58)

22001133)) 2012))7. Investment income UUSS$$ 000000)) US$ 000))

Dividends and interest 1188,,330055)) 17,535)

Realised gains/(losses)Investments 33,,555588)) 1,183)Exchange ((22,,443333)) (67)

11,,112255)) 1,116)

1199,,443300)) 18,651)

22001133)) 2012))8. Unrealised gains on investments UUSS$$ 000000)) US$ 000))

Investments 55,,119911)) 16,244)Exchange 22,,007755)) (2,843)

77,,226666)) 13,401)


22001133)) 2012))9. Other financial investments UUSS$$ 000000)) US$ 000))

Market valueEquities 3322,,555544)) 30,286)Alternative investments 7700,,772277)) 65,416)Bonds and loans 669900,,558855)) 638,042)Money market instruments 77,,553388)) 9,838)Cash accounts 77,,552299)) 7,442)Open forward exchange contracts ((447733)) (418)

880088,,446600)) 750,606)

CostEquities 2255,,008866)) 25,050)Alternative investments 6655,,331199)) 62,821)Bonds and loans 668822,,220088)) 631,962)Money market instruments 77,,553388)) 9,838)Cash accounts 77,,552200)) 7,412)

778877,,667711)) 737,083)

10. Rates of exchange

The rates of exchange ruling at the accounting dates were as follows: 22001133)) 2012))

UK sterling £ 00..664488)) 0.632)Euro € 00..774499)) 0.760)

22001133)) 2012))11. Debtors arising out of reinsurance operations UUSS$$ 000000)) US$ 000)

The Steamship Mutual Underwriting Association (Reinsurance) Limited ––)) –)Other reinsurance debtors 55,,660000)) 9,271)

55,,660000)) 9,271)

14



15

22001133)) 2012))12. Free reserves UUSS$$ 000000)) US$ 000))

Capital reserve 3333,,882277)) 33,827))Accumulated fund brought forward 113322,,332299)) 151,980))Deficit for year ((4400,,558822)) (19,651)

112255,,557744)) 166,156))

22001133)) 2012))13. Creditors arising out of reinsurance operations UUSS$$ 000000)) US$ 000))

The Steamship Mutual Underwriting Association (Reinsurance) Limited 4488,,995577)) 22,726))Other reinsurance creditors 77,,223355)) 12,406))

5566,,119922)) 35,132))

22001133)) 2012))14. Other creditors UUSS$$ 000000)) US$ 000))

Unsettled investment transactions 3333,,447755)) 37))Other creditors 446633)) 486))

3333,,993388)) 523))

15. TaxationAt the present time, no income, profit, capital or capital gains taxes are levied in Bermuda. Accordingly no provision forsuch taxes has been recorded by the Trust. In the event that such taxes are levied the Trust has received an undertakingfrom the Bermuda government exempting it from all such taxes until 31st March 2035.

16. Transactions with related partiesThe Steamship Mutual Underwriting Association Trustees (Bermuda) Limited is the Corporate Trustee of the Trust. Itreceives a fee for investment management costs and related expenses. For the financial year to 20th February 2013 thisfee amounted to US$ 2.4 million (2012: US$ 2.1 million) of which US$ 0.4 million (2012: US$ 0.4 million) wasoutstanding at the balance sheet date.


16

To the Corporate Trustee of The Steamship Mutual TrustWe have audited the financial statements of TheSteamship Mutual Trust for the year ended 20th February2013, which comprise the income and expenditureaccount, the balance sheet, the cash flow statement andthe related notes 1 to 16. These financial statements havebeen prepared under the accounting policies set outtherein. These financial statements have been prepared forthe purpose of Member and policy holder information.

This report is made solely to the Corporate Trustee inaccordance with Section 90 of the Bermuda CompaniesAct 1981. Our audit work has been undertaken so that wemight state to the Corporate Trustee those matters we arerequired to state to them in an independent auditor’sreport and for no other purpose. To the fullest extentpermitted by law, we do not accept or assumeresponsibility to anyone other than the Trust and theCorporate Trustee as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective responsibilities of Trustees and AuditorsAs stated in the Statement of Trustee’s Responsibilities, theCorporate Trustee is responsible for the preparation of thefinancial statements in accordance with the EuropeanCommission Insurance Accounts Directive (91/674/EEC) asadopted in the United Kingdom through Section 396 ofthe Companies Act 2006 and Schedule 3 of The Large andMedium-sized Companies and Group (Accounts andReports) Regulations 2008 and generally accepted UnitedKingdom accounting principles applicable to insurers.

Our responsibility is to audit and express an opinion onthe financial statements in accordance with applicable lawin Bermuda and International Standards on Auditing (UKand Ireland). Those standards require us to comply withthe Auditing Practices Board’s Ethical Standards forAuditors.

We report to you our opinion as to whether the financialstatements give a true and fair view and are properlyprepared in accordance with the relevant financialreporting framework and whether the financial statementshave been properly prepared in accordance with theBermuda Companies Act 1981. We also report to youwhether, in our opinion, the information given in theReport of the Corporate Trustee is consistent with thefinancial statements.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amountsand disclosures in the financial statements sufficient togive reasonable assurance that the financial statementsare free from material mis-statement, whether caused byfraud or error. This includes an assessment of: whether theaccounting policies are appropriate to the company’scircumstances and have been consistently applied andadequately disclosed; the reasonableness of significantaccounting estimates made by the directors; and theoverall presentation of the financial statements. Inaddition, we read all the financial and non-financialinformation in the annual report to identify materialinconsistencies with the audited financial statements. If webecome aware of any apparent material mis-statements orinconsistencies we consider the implications for our report.


• give a true and fair view of the state of the Trust’s affairs as at 20th February 2013 and of its deficit for the year then ended;

• have been properly prepared in accordance with the European Commission Insurance Accounts Directive (91/674/EEC) as adopted in the United Kingdom through Section 396 of the Companies Act 2006 and Schedule 3 of The Large and Medium-sized Companies and Group (Accounts and Reports) Regulations 2008 and generally accepted United Kingdom accounting principles applicable to insurers; and

• have been properly prepared in accordance with the Bermuda Companies Act 1981.

Opinion on other matterIn our opinion the information given in the Report of theCorporate Trustee is consistent with the financialstatements.

Deloitte LLPChartered Accountants and Registered Auditor

London13th May 2013



Notes

17


18

Notes


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