Associated Electric & Gas Services Limited
|For the years ended December 31,
(Expressed in thousands of U.S. dollars)
|Gross premiums written||$1,236,475||$1,344,705||$1,567,145||$1,815,733||$2,092,383|
|Net premiums written||821,955||880,647||1,028,021||1,156,788||1,322,551|
|Net premiums earned||838,455||852,131||961,028||1,071,783||1,213,640|
|Net investment income||117,725||147,935||58,073||218,981||112,999|
|Change in fair value of insurance and reinsurance contracts||(22,333)||(31,284)||(1,630)||(59,873)||(45,684)|
|Losses and loss expenses incurred||556,630||567,905||594,727||753,158||795,950|
|Other underwriting expenses||99,771||105,091||129,389||137,460||131,122|
|Income before continuity and other premium credits and income taxes||194,857||197,614||171,015||203,235||204,000|
|Continuity and other premium credits||29,275||37,837||44,709||58,817||63,346|
|Income before income taxes||165,582||159,777||126,306||144,418||140,654|
|Income tax provision||53,467||27,050||26,199||26,483||28,387|
|Other comprehensive income (loss) and other surplus changes, net of income tax (benefit) expense||26,478||(4,160)||(21,244)||28,490||5,414|
|Total surplus, beginning of year||$1,290,105||$1,428,698||$1,557,265||$1,636,128||$1,782,553|
|Total surplus, end of year||$1,428,698||$1,557,265||$1,636,128||$1,782,553||$1,900,234|
|Reserve for losses and loss expenses||$3,068,261||$3,306,617||$3,659,832||$4,028,487||$4,351,822|
This was a year that reminded everyone why AEGIS was formed.
The global pandemic, the resulting volatility in the financial markets, and the disruption in the commercial insurance market created significant challenges for our members.
Just as AEGIS has done every year since 1975, we were here when you needed us. The expanded limits and new products we developed over the past five years were in place and ready to respond to member needs in 2020. We also added the underwriting and loss control resources needed to support them. The expanded limits were particularly welcomed by members because many commercial carriers withdrew their support for the energy sector.
Despite the unforeseen and unprecedented challenges of 2020, we achieved several significant financial milestones. Thanks to member support of our stable approach to underwriting and our expanded limits, gross premiums written reached $2.1 billion and policyholder surplus topped $1.9 billion, both of which are the highest levels in the history of the company. We also paid a record amount in claims, $1.1 billion, bringing the total amount of claims paid since AEGIS was founded to more than $19 billion.
In addition, we delivered $63 million in premium credits in 2020. The credits have increased steadily over the past five years, with total credits paid to members exceeding $1.4 billion since the program began. Premium credits lower premium costs over the long term, which is yet another benefit that distinguishes AEGIS from the commercial insurance market.
Our operations in London continue to contribute significantly to policyholder surplus. AEGIS London is recognized as a top-quartile syndicate at Lloyd’s of London in terms of profitability and claims management, and its diverse book of business helps balance the risks associated with the energy sector.
The strong results we delivered in 2020 would not have been possible without the dedication and industry expertise of our members, brokers, Board of Directors, Risk Management Advisory Committee (RMAC), Task Forces and AEGIS employees in North America and London. We sincerely thank you.
We were deeply saddened when Tom Farrell, the Executive Chairman of Dominion Energy and a member of the AEGIS Board of Directors and AEGIS London Board of Directors, passed away on April 2, 2021. At Dominion, Tom served as the company’s Chairman, President and CEO from 2007 to 2020, where he championed the development of clean energy assets, advances in workplace safety, and diversity and inclusion. He also gave generously of his time and talents to a number of industry and philanthropic boards.
Tom joined the AEGIS Board in 2014 and served on our Executive, Audit & Finance, and Compensation & Benefits Committees. He was a member of the AEGIS London Board as well, and served on its Audit, Remuneration & Nominations, and Risk Committees. Tom was always ready to give wise counsel and support, as he believed strongly in the mutual mission. He made countless contributions to help ensure our long-term stability and success, while putting the needs of members first. Above all, Tom was a valued friend, and he will be greatly missed.
Wesley W. von Schack
Chairman of the Board
William P. Cullen
President & CEO
April 15, 2021
Members who renew their policies with AEGIS are eligible for premium credits that help lower the long-term cost of risk, which is one of the important ways AEGIS differs from the commercial insurance market. An additional credit — the Member Loyalty Credit — is paid to members who purchase multiple AEGIS products in a given year.
We continued to provide broad, market-leading coverage across all product lines in 2020. Member support for our fair pricing, which is based on technical underwriting and the risk exposure of each individual member company, enables us to provide the coverage and pay claims year after year.
Policyholder surplus and gross premiums written both reached record highs in 2020 thanks to member support of our stable coverage and expanded limits. Even as we added products, services and professional staff to meet member needs, we managed expenses closely and paid a record high level of claims and member credits.
We believe capacity and foresight go hand in hand. Anticipating that the market would tighten, we built our Property Consortium and increased our excess liability, D&O and cyber limits several years ago so members would have the capacity when they needed it. In 2020, looking ahead to the need for renewable capacity and expertise, we expanded AEGIS renewable capacity and hired a team of seasoned renewable energy underwriters.
Members took advantage of expanded limits across all lines, including excess liability, directors & officers liability, property and cyber. At a time when the commercial insurance market restricted capacity or withdrew from the energy sector entirely, we increased limits and added underwriters to keep pace with demand for our products.
We keep a close eye on member needs through our regional member meetings, renewal meetings, member contact team calls, claims discussions, risk assessments, webinars and training sessions. When we sense that additional staff, new products and services, and new approaches are needed, we are prepared to provide them while maintaining our consistently low expense ratio.
We added to our capabilities across all areas of the company in 2020. Our singular focus on the energy industry has earned us a reputation for being energy risk management experts, and we strengthened this expertise to help support member needs for coverage, loss control services and timely information.
The number of underwriters has doubled in the past ten years in response to member demand for AEGIS products across all lines, including excess liability, property, contingent outage, renewables, D&O and cyber. In recent years, we have doubled the number of traditional property underwriters and made strategic additions to the excess liability and D&O teams as well. In 2020, we added a team of renewable energy underwriters led by Tom Cain, Vice President & Renewable Energy Product Manager. Tom’s group is supported by the AEGIS Loss Control Renewable Energy Working Groups, which provide renewables engineering and loss control expertise to members, and by the AEGIS Claims team, which brings the collaborative approach to managing claims that has always distinguished us from the commercial insurance market.
The team of AEGIS Loss Control professionals has grown dramatically in the past ten years. As members have purchased more property and renewables coverage, the need for account reviews, risk assessments, training and consulting services has grown as well. When the pandemic restricted travel and access to member facilities in 2020, we found new ways to conduct risk assessments, training programs and incident investigation workshops virtually through video sharing and other collaborative technology. While hands-on risk assessments and face-to-face training have their advantages, members have also discovered value in the virtual options. Virtual classes can be larger because there are fewer limitations on classroom space and other resources, and without the time and expense of travel, training is more accessible to geographically dispersed teams.
Our Loss Control division is launching its new RADAR system to provide members with the real-time status of their risk assessments and digital copies of the risk assessments. Members can also use RADAR to compare the risk profiles of their individual facilities with each other and benchmark their company’s overall risk profile against the risk profiles of other member companies with similar operations. Over time, as the system amasses and analyzes data, we will be able to identify loss trends and model practices across the membership. This will help improve the safety and reliability of operating systems, and reduce the long-term cost of risk for member companies and the mutual as a whole.
We refreshed the look of our website in 2020 and used responsive design so the experience is optimized for mobile phones, tablets and laptops. The content is continuously updated to provide the information members need to navigate the pandemic and the constricting commercial insurance market, including:
Janaize Markland, Director, Enterprise and Operational Risk Management and Insurance at Pacific Gas and Electric Company, stepped down from both the Risk Management Advisory Committee (RMAC) and the ERM Task Force upon her resignation from PG&E. Heidi Gossett, Director of Corporate Insurance at NiSource, joined the RMAC after leaving the Loss Control Task Force. Neil Cayabyab, Manager – Insurance and Risk Management at Sempra Energy, joined the RMAC as well.
Kirk A. Cresto, Vice President, Quality Management at NiSource, stepped down from the Claims Task Force upon his resignation from NiSource. Mark Boone resigned from the Loss Control Task Force after leaving Dominion Energy, where he served as Manager – Corporate Risk Engineering, and joining AEGIS Loss Control as National Property Manager. Gary Escobar, a financial analyst in CPS Energy’s Risk Management Services, and Jackie French, Senior Director Insurance, Litigation & Claims with Ameren Services, joined the Loss Control Task Force.
We thank the departing members of the RMAC, Claims and Loss Control Task Forces for their many valuable contributions and welcome the incoming members to their new roles.
Our mutual efforts are guided by these experienced executives and professionals drawn from the member companies we serve. They generously contribute their time and expertise, and they are essential to our success.
The Annual General Meeting of Members of the Company will be held on October 21, 2021. Notice of the Meeting and the form of proxy shall be issued to each voting Member not less than ten days before the meeting convenes, stating the date, place, time and nature of the business to be considered.
The 2021 AEGIS Policyholders’ Conference will be held virtually. Details will be e-mailed and posted on our website.
AEGIS will also host a series of regional member meetings, Claims Roundtable seminars and Loss Control webinars throughout 2021. Please visit aegislink.com for details.
Associated Electric & Gas Insurance Services Limited (“AEGIS”) was incorporated in Bermuda in 1971 and commenced underwriting activities in 1975. AEGIS is a Class 3 Insurer in Bermuda.
AEGIS is an eligible surplus lines insurer in all jurisdictions of the United States. It is subject to United States federal income taxes, files the required tax returns, and maintains a United States trust fund in excess of $250,000,000. AEGIS is also a licensed foreign insurance company in all provinces and territories of Canada and is listed on the general register of foreign reinsurers in Mexico.
AEGIS’ operations are conducted through a wholly-owned subsidiary, AEGIS Insurance Services, Inc. (“AEGIS Services”), which provides AEGIS and its affiliates with professional staff and services.
AEGIS London (the AEGIS Syndicate at Lloyd’s of London, number 1225) commenced operations in 1999. AEGIS London’s operations are supported by AEGIS Managing Agency Limited (“AMAL”), which provides professional staff and services for AEGIS London. AEGIS Electric & Gas International Services Limited (“AEGIS International”) is a corporate member of Lloyd’s and the principal capital provider of AEGIS London. Both AMAL and AEGIS International are indirect subsidiaries of AEGIS.
In the U.S., AEGIS, AEGIS & Design, the AEGIS Logo (any reference to “Logo” or “Design” are references to the AEGIS Diamonds Design), AEGISLINK, HOW SAFE, PEOPLE DON’T KNOW WHAT THEY DON’T KNOW, LESSONS LEARNED, AEGIS LONDON and AEGIS LONDON & Design are registered trademarks of AEGIS.
In the U.K., AEGIS, AEGIS LONDON, and AEGIS LONDON & Design are registered trademarks of AEGIS.
In the E.U., AEGIS, AEGIS & Design, the AEGIS Logo, AEGISLINK, AEGIS LONDON, and AEGIS LONDON & Design are registered Community trademarks of AEGIS.
In Bermuda, AEGIS and the AEGIS Logo are registered trademarks of AEGIS.
In New Zealand, AEGIS is a registered trademark of AEGIS.
In Canada, AEGIS, AEGIS & Design, AEGIS CANADA, the AEGIS Logo, AEGIS LONDON, and AEGIS LONDON & Design are registered trademarks of AEGIS.
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