OIL Posts Strong 2003 Earnings, $420 Million Net

Bermuda-based Oil Insurance Limited announced that its overall 2003 performance was strong, both in terms of underwriting and investment results. The Company reported net income of $420 million.

“Prior to general and administrative expenses, 2003 underwriting and investment income were $78 million and $353 million respectively,” said the announcement.

OIL, founded in 1971 by 16 energy companies, is a mutual insurance company originally designed to service the needs of the petroleum industry. It was mainly concerned with coverage for pollution liability, but expanded in 2001 cover the entire “energy” sector. Its membership has continued to grow, with 10 new members joining during 2003. As of January 1, 2004 it had 81 members who “represent a very international group of energy industry companies ranging in size from some of the world’s largest energy entities to smaller regional enterprises.”

Jack L. Wesley, President and CEO, commented that “OIL’s Shareholders have cause to be pleased with the performance of their Company.” He noted that for an uninterrupted 32 years, the Company has provided one of the largest blocks of catastrophe property damage and pollution liability insurance coverage available anywhere in the world. “During a period of instability in the commercial markets, the value of a large block of stable capacity, available to shareholders year in, year out, cannot be underestimated. For most of our members, their OIL entry forms the cornerstone of their overall insurance program,” he added.

Wesley indicated that the insurer had taken steps to insure its financial health, following two “adverse overall financial results of 2001 and 2002.” OIL’s balance sheet was strengthened through the issuance of $300 million of Deferrable Subordinated Debentures in August 2003 and the issuance of $500 million of Contingent Capital Notes in October 2003. ” The strong ratings and highly attractive pricing of both transactions represented a powerful endorsement by the external investment community of OIL’s business model,” he noted. The company is rated “A+” by S&P and “A1” by Moody’s.

Commenting on the new members who had joined OIL, Douglas A. Kline, Senior Vice President and COO, said they “were a truly diverse group representing a broad range of energy operations throughout the world.” He noted that despite 7 members withdrawing from OIL at the end of the year, the gross assets insured in OIL by its current members now comprise some $1.8 trillion of energy business operations around the globe.

Kline reported that the losses experienced by OIL’s members were slightly better than expected for 2003. Members reported 12 losses from occurrences taking place in 2003, resulting in 18 claims to OIL with a total value of $177 Million. Additionally, there were 32 adjustments to known losses and 8 new losses advised for incidents that occurred prior to 2003, bringing total losses incurred for the year to $313 Million.

Total Assets and Shareholders’ Equity at December 31, 2003 were $3.7 Billion and $1.5 Billion, respectively. Kline stressed that the “picture OIL presents at the outset of 2004 is one of excellent financial health and reinforces the Company’s creditability in the market place and its ability to perform at a world-class level in the interests of our entire membership.”

Roger P. Paschke, Senior Vice President and CFO, reported that the performance of the Company’s two investment subsidiaries – Oil Investment Corporation Ltd. and Oil Investment (Barbados) Ltd. – produced the second best annual rate of return on the total portfolio in the Company’s 32-year history.