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Preliminary 2009 financial results

Thanks to the consistent strong support of our members and brokers, AEGIS has had a good restorative year. Our preliminary unaudited financial results for 2009 produced surplus growth to $860 million. The following is based on unaudited figures as of December 31, 2009:

Gross written premiums for the year of $1.11 billion were slightly better than anticipated as a result of strong support by our core membership. We are grateful to the members who understood the need to adjust rates and terms for the excess liability policy to better reflect the risk profile for the industry. AEGIS members also continued to support the mutual’s D&O and property programs during 2009 despite the availability of lower-priced alternatives in an oversupplied commercial market. Our London operations made a very strong, positive contribution to the 2009 underwriting results, as well.

Investment results were well ahead of plan and our total return for the year was $230 million or 7.3% – which was about 3.5% above our plan for 2009 and 14.9% above year-end results for 2008.

Current accident year losses were about what we expected and we were pleased that the year ended without any major hurricane or wildfire activity. The recent reserve review by our internal and external actuaries has confirmed that – with the exception of excess liability – all lines have been performing as expected or better. In the excess liability line, we increased our prior year reserves by about $130 million, which includes the large losses related to wildfires and stand-alone propane operations. During 2009, as you know, we took action to avoid similar wildfire losses in the future by lowering our limit, implementing an aggregate limit for wildfires and purchasing additional reinsurance. We also exited the independent propane business.

As a result of the foregoing, the Company’s total surplus grew by $102 million to $860 million at year end – an increase of 13% over 2008 – overall a very positive result given the excess liability challenges of recent years.

We also would like to report that Fitch Rating Agency announced today that it has updated its review and maintained AEGIS’ rating status of A-, although it is also continuing its negative rating watch “to allow additional time for the anticipated benefits of recent rate increases, more restrictive policy terms for selected exposures, and a reduction in membership continuity credits to flow through operating results.” Fitch favorably notes the progress AEGIS has made in 2009 and that continued improvement during the first half of 2010 would likely result in the removal of the negative watch.

Our complete, audited financial results will be published in our 2009 annual report in early April. AEGIS has emerged from the 2008 financial turmoil, is well on its way to restoring surplus and, in addition, now has an improved risk profile. We are in a very good position to continue to serve the membership in 2010 and we look forward to it.