We are pleased to report continuing positive financial results for the first quarter of 2010. The following are unaudited figures for the quarter ending March 31, 2010: Total surplus grew $26 million to $888 million, 17% above where it was at year-end 2008. Gross written premiums totaled $185 million, which was slightly below our plan due to continuing competitive pricing pressures. Our investment return for the quarter was $35 million and was ahead of plan as a number of our mandates performed well. Losses were about what we expected. We appreciate the ongoing support of our members and brokers and we look forward to reviewing our first half results with you in detail at our Policyholders' Conference in July.
We are also pleased that AM Best has just reaffirmed our "A- (Excellent)" rating with a "stable" outlook. In our discussions regarding their assessment, they noted our "strong operating performance in 2009" as well as our "more robust and enhanced risk management process" and our "proven track record of developing long-lasting partnerships with members and brokers".
They also noted, however, the substantial amount of energy industry excess liability and D+O losses we incurred going back to the early 2000s, as well as the effect of the recent financial market meltdown on our surplus. And although they remain concerned about the need to continue to grow surplus to support our inherent risk volatility, especially during a time of tentative economic recovery, they also noted that we continue to demonstrate a strong market profile as evidenced by our high member retention ratio, the adaptability and responsiveness of our management team, and our continued expansion of programs to meet our mission.
We believe AM Best understands and appreciates the wisdom of the steps we've taken during the past 18 months to improve capital adequacy, and their reaffirmation of our rating acknowledges our progress. We have clearly been able to maintain our business and market leadership during the past year and we are confident that our business plan – along with strong member support – will continue to strengthen our capital base.
Our continuity and premium credit programs, even at reduced levels, play an important role in helping us provide you with a secure and stable market while ensuring the lowest overall long-term cost of risk. Since 1987, we've returned $915 million in continuity credits to our members – and $182 million has been returned in just the last five years. At the end of April, we reviewed all of our credit programs with the Board of Directors, who approved a number of credit declarations.
In 2009, as you have read in our e-mails and the annual report we published recently, the Company had a good, restorative year following the financial crisis and the catastrophic losses suffered across the membership. Thanks to your support, we have made significant progress in terms of rebuilding surplus and strengthening our collective risk profile. However, we are still managing the substantial excess liability losses suffered in recent years and, as you may know, we had to increase our prior year excess liability loss estimates by over $100 million due largely to the wildfire, E&P and propane losses that are working their way through the claims process. In light of this situation, and after careful consideration, the Board agreed that it would not be prudent to resume paying a continuity credit for excess liability for the 2010-2011 year.
The underwriting results for our other major lines – D+O, property and London – performed at or better than expectations last year so the Board believes it is appropriate to maintain credits at current levels. The Board approved a continuity credit at 2.5% for D+O members, whose loss experience continued to be favorable over the most recent five years. These D+O credits total $15.7 million. The details regarding this year's D+O credits will be sent in the coming weeks to eligible members along with materials that describe how they can be applied to future premiums.
The Board has also approved $3.5 million in premium credits for members who renew coverages placed through our domestic property program. Now in its eighth year, the property premium credit program allows eligible policyholders to share in positive underwriting results.
Additionally, the Board has approved $1.0 million in premium credits for members who renew coverages placed through AEGIS London, reflecting the Syndicate's strong 2009 results. Now in its sixth year, the AEGIS London premium credit program allows eligible members utilizing our syndicate to share in the positive underwriting results of the operation.
As we continue to rebuild surplus, we appreciate your understanding the need to manage the level of credits to our mutual advantage. We know these credit programs are important to you and we would like to restore and/or improve them as soon as we can reasonably do so.
The AEGIS excess liability policy has formed the foundation of the excess liability program at member companies for more than 30 years. Our consistent $35 million limit and collaborative claims services are unmatched in the commercial insurance market. In recent years, however, changes in certain legal jurisdictions and the absence of an annual policy aggregate have allowed members to make multiple, full-limit excess liability claims within a single policy year. The resulting losses to the Company, combined with the lingering effects of the capital market meltdown in late 2008, have had a negative effect on policyholder surplus.
AEGIS Management and the RMAC have recognized the potential danger of providing this type of unlimited coverage in the future and, as many of you know, we formed an Excess Liability Aggregate Limits Task Force in 2009 to study and develop options that would allow members to maintain the broad, consistent coverage provided by the excess liability policy while allowing AEGIS to remain financially sound. We are grateful for the considerable amount of time and expertise the task force devoted to this important matter.
As the result of the task force efforts, the RMAC and Management agreed AEGIS should place a $35 million per occurrence/$70 million annual aggregate limit (or twice the per occurrence limit, if lower) on the excess liability policy. This will put a finite limit on the policy no matter how many “occurrences” are reported.
In order to allow proper planning and arrangement of coverages in excess of AEGIS programs, the aggregate will take effect with excess liability policies renewing on and after January 1, 2011. We will provide additional details in the months ahead, including a detailed presentation on the subject at the Policyholders' Conference in July.
Our preliminary agenda includes a management report which will focus on the progress the Company has made as a result of strong member support and our restorative initiatives in the investment and underwriting areas. We have also invited Bob Hartwig, President of The Insurance Information Institute, to present his perennially popular overview of current economic and insurance market conditions. Bob spoke at our recent European Energy Conference in Prague and his "after the recession" overview was very well received.
Our preliminary PHC 2010 agenda also includes a report from the RMAC's Evolving Utility Risk Task Force and their collaborative efforts with the AGA, EEI and EIM. In addition, we are exploring a number of other PHC topics including: the risks associated with the smart grid and smart houses, renewables and the related AEGIS capabilities in Property and Loss Control, and contractual risk transfer, plus a primer session on the most common sources of losses, how to present them to AEGIS and how to help prevent them.
Conference registration is complimentary and attendees are invited to bring guests. Brokers must be connected with a current AEGIS member policy written through AEGIS in New Jersey to attend. AEGIS will reimburse one representative from each member company with a current AEGIS policy written through AEGIS in East Rutherford for the cost of three nights' lodging at the Hyatt Regency Denver. If you have any questions about your eligibility, please contact Gil Gould by e-mail or by phone at 201.508.2790.
Additional details about the PHC will be posted on the website as they become available and registration will open before the end of May. For more information, please contact Carrie White by e-mail or by phone at 201.508.2840.
We also hope you'll join us for the 2010 AEGIS Claims Seminar which will be held October 25 to October 27 at the Loews Miami Beach Hotel.
The 2008 Seminar drew a record audience of 200 claims and litigation professionals from around the country who gathered to learn and share their experiences. Once again, we will focus on the important issues facing AEGIS members in the defense of their claims, including electric and gas case studies as well as other topics of interest to claims professionals and litigators for the utility industry. The seminar will be eligible for Continuing Legal Education (CLE) Credits.
Additional details about the Claims Seminar will be posted on the website as they become available and registration will open in August. For more information, please contact Brian Ekdahl by e-mail or by phone at 201.508.2643.
There are also three more Claims Roundtables scheduled for May and June.
The next topic in the series is "Automobile/Truck Fleet Accidents" which will focus on issues associated with policyholder automobile/truck fleet accidents, including initial response to accidents, accident reconstruction, biomechanics, and the medical causation of both low- and high-impact collisions. This roundtable will be held in New Orleans on May 20.
The final topic in the 2010 series is "Employment Practices Liability". This seminar addresses the challenges employers will face in complying with new employment laws as well as a recent U.S. Supreme Court decision expanding the scope of Title VII's anti-retaliation protection. Panelists will discuss how effective loss control measures, such as anti-discrimination training programs and whistleblower and in-house complaint procedures, can greatly reduce the number of employment law claims and provide a strong defense when lawsuits are filed. The economic downturn is requiring many companies to make smaller budgets go further. This includes restructurings and downsizings as well as creative means to cope with budget deficits, such as work furloughs. Speakers will discuss how to implement these measures without running afoul of state and federal laws. This roundtable will be held in Columbus on June 10 and East Rutherford on June 24.
The 2009 AEGIS annual report has been mailed to members and brokers and is now posted on our website. We encourage you to read about the solid, restorative year your Company had in 2009. You may order additional printed copies from email@example.com.
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