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Preliminary 2006 Financial Results

We plan to have the final audited financial results approved by our Board of Directors shortly, but wanted to share some preliminary, unaudited results with you now.

We are pleased to report that AEGIS had a successful 2006. Policyholder surplus – the bottom line measure of our financial strength – increased by $75 million and topped $1 billion for the first time at $1.025 billion.

As you continued to support your mutual, total premiums grew to $1.23 billion, an increase of 7.7% over $1.14 billion in 2005. Although incurred losses were $123 million higher than planned because of some necessary strengthening of hurricane loss reserves and a somewhat unexpected increase in excess liability losses, AEGIS benefited from stronger than anticipated investment returns. Our well-diversified portfolio earned 7.1%, which was 280 basis points higher than we had planned for the year. And as you know, our continued strong financial condition enabled us to return more than $51 million to you in member credits during the year.

At year-end, the membership count stood at 450, a net decrease of 24. Departing member companies consisted largely of those involved in acquisitions or consolidations and non-core members that chose alternatives in the commercial market. We were particularly pleased that all core Excess Liability and D&O members renewed their AEGIS programs despite the more competitive marketplace that developed last year.

In short, your mutual is in very good financial shape. AEGIS is well capitalized to support our current products and pursue the new initiatives that you've asked us to undertake. We'll publish our annual report in April to give you all the details together with our final audited financials.