We are pleased to report some encouraging financial results for the year to date. In my February 2009 e-mail, I outlined the strategy for preserving the Company’s financial strength and planning for measured growth in the wake of the capital market meltdown and the catastrophic losses suffered by the membership. This strategy has yielded tangible results. Most importantly, member and broker support has been truly outstanding! Thank you.
The following are unaudited figures for the year to date as of October 31, 2009: Total surplus has grown this year by almost $70 million to $827 million, due in large part to the strengthening condition of the investment markets. The surplus is now 9% above where it was at year-end 2008. Gross written premium through October is $925 million, about $13 million better than we had planned. Premium increases in the excess liability line, where our loss experience has been poor for several years, as well as the strong performance of our London operations, have contributed to a positive result for the 2009 underwriting year.
Losses for the current accident year are basically what we expected. Our mid-year reserve review with our internal and external actuaries is now complete. All lines performed as expected or better, with the exception of excess liability. In this line, we felt it was necessary to increase our reserves by about $188 million through October, which includes the large losses related to wildfires and propane operations that we have previously discussed. As you know, we have taken action to avoid similar wildfire losses in the future by lowering our limit, implementing an aggregate limit and purchasing additional reinsurance. We have also exited the independent propane business.
Total investment returns are well ahead of plan – the year-to-date return is $224 million or 7.2%. These strong results have more than offset prior year excess liability loss experience and they have helped build our surplus, as indicated above, to a level about where we expected it to be at this time.
We are encouraged by these results and we are grateful for the ongoing understanding and support of our members – which is the essence of our mutual partnership. We hope to report more positive results for the year-end sometime in January and we look forward to restoring continuity credits as conditions allow.
We were pleased to see so many of you at the recent regional member and broker meeting in Chicago. More than 35 members and brokers attended and we had some productive and far-ranging discussions about market conditions, renewable energy, ERM, pandemics, cyber-risk and the Policyholders’ Conference. We were gratified by the very positive feedback we received on our overall quality of service. We also appreciated, however, that a number of you raised some issues with respect to the user-friendliness of the online policy application. This type of dialogue is the foundation of our mutual relationship and your honest feedback will guide our efforts to make the application as user-friendly as possible.
In addition to Chicago, we held regional meetings in Calgary, Seattle and Atlanta this year. As always, these small meetings give you the opportunity to meet directly with AEGIS senior management to tell us what’s on your mind, what you need, and how we are doing. We are currently planning another series of regional meetings for 2010 and will announce those dates and locations shortly.
Many members are focused on the planning and construction of renewable energy facilities and they are turning to AEGIS for the coverage and services they need.
AEGIS has participated on a number of high-profile projects recently, including FPL’s DeSoto Next Generation Solar Energy Center – the nation’s largest solar photovoltaic plant – which just went online in October. We have also provided coverage for TransCanada’s five Cartier Wind Energy facilities (62% owned), three of which are in commercial operation and two of which are to start construction in the second quarter of 2010. And in the area of geothermal generation, we have provided coverage for CalEnergy’s 10 plants in the Salton Sea Known Geothermal Resource Area, which sell power to Southern California Edison and other parties.
In addition to the projects for these three member companies, we participate on renewable projects for 19 other AEGIS members. As a group, these companies account for more than 30% of all solar capacity and more than 50% of all wind capacity in North America.
Our expertise in the renewable energy sector extends to all emerging power sources and technologies, including wind, solar, geothermal and hydroelectric generation. We provide members with a complete range of insurance products and services that are tailored specifically to the construction and operation of renewable energy facilities. Our property team in New Jersey, for example, offers a single policy with up to a $200 million limit that covers each project from construction through the first year of operation, including time element covers. In addition, excess liability coverage for renewable energy projects is available, with a $35 million limit for operational risks and a $25 million limit for construction risks.
This expertise, combined with our collaborative approach to claims management and our specialized property engineering services, sets AEGIS apart from the commercial market.
Based on your continued support of the AEGIS domestic property program, the property underwriting results for the most recent three-year period (ending December 31, 2008) were positive. As a result, we are able to declare an overall property credit of $3.5 million. Although this is lower than it has been in recent years, we are pleased we are able to issue a credit during this period when we are working together to rebuild the Company's surplus. Since the beginning of the program, we have declared more than $41.2 million in credits for eligible property policyholders.
Qualifying policyholders recently received details in the mail regarding their share of this credit and how it can be applied to their property premium upon renewal. To qualify for the property credit, a policyholder must have AEGIS participation of at least 20% of a quoted layer or a minimum $150 million of AEGIS capacity on risk. For more information about the AEGIS property program, please contact Gary Ladman by e-mail or by phone at 201.508.2802.
AEGIS Loss Control recently added fourteen new Review of Major Liability Losses (RMLL) claims summaries to our website. Each summary is based on a loss associated with a claim that closed in calendar year 2008.
These summaries provide valuable information regarding the nature and significance of large losses associated with electric and gas utility operations. Intended to be used in conjunction with a utility's risk management programs, the RMLL claim summaries highlight information or events contributing to the incident described. A "Lessons To Be Learned" section included with each claim description contains suggestions to prevent a recurrence. For more information, please contact Thomas David by e-mail or by phone at 201.508.2732.