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October 19, 2010

Third quarter 2010 financial results

We are pleased to report that things have continued to go well for AEGIS since we were together in Denver for the Policyholders' Conference. I wanted to share some unaudited interim results with you. As of September 30, Total Surplus has grown to $968 million, an increase of $106 million or 12% since year-end 2009. This is a very good step on our way to restoring the surplus lost in 2008. (In fact, we have now recovered two thirds of the roughly $325 million lost that year.) Our year-to-date all lines combined loss and expense ratio is ahead of Plan at 91%. This is a substantial improvement from last year's 108% at this time, and is in part a result of our mid-year actuarial review showing that our overall prior year loss reserves are running off favorably. Our total investment return is at 4.0% through September which is ahead of our expectations by about 130 basis points or $47 million.

Even though the insurance market remains highly competitive and price cutting is rampant, the commitment of our core members and brokers to the continued success of your mutual has been superb — making AEGIS a stronger company better able to serve you over the long term. Thank you for all of your support!


Board of Directors transitions

Three of our Directors, John Ellis, David Hay and Don Jordan did not stand for reelection at our 2010 Annual meeting. All three of these gentlemen provided great guidance and support to AEGIS and we are deeply appreciative of their service. We are also pleased to announce that two new Directors were elected at our October meeting: Bill Timmerman who is currently Chairman, President and CEO of SCANA and Charles Schrock who is Chairman, President and CEO of Integrys. We look forward to working with them.


New Side A D&O liability coverage

We are pleased to announce our new Side A facility through Endurance Risk Solutions-US which will offer Side A DIC coverage on a stand-alone basis. Endurance will independently underwrite, price and administer the claims, and is able to offer significant capacity, up to $30 million.

In the short time since Endurance has replaced our previous partner for Side A D&O coverage, four member companies have purchased coverage and five others are actively considering it. We are encouraged by this level of active collaboration with Endurance and we believe it reflects their financial strength and overall reputation in the industry.

Coverage details are posted on our website. For more information about Endurance Side A coverage, please contact Ray O'Byrne, Senior Vice President-Management Liability by e-mail or at 212.209.6533. If you have other D&O questions, please contact Karen Larson by e-mail or at 201.508.2804.


2010 Policyholders' Conference

Our thanks to all of you who attended our annual Policyholders' Conference in Denver. More than 980 attended the event this year, which was particularly gratifying given the ongoing restrictions on travel budgets at a number of member and broker companies.

Many of the general session and breakout presentations are posted on our website — including Bob Hartwig's presentation on economic and insurance market conditions as well as the popular presentations on transitioning to renewable infrastructure, risks emerging from the smart grid and the D&O update from Dan Bailey.

Your response to the new online application that we introduced at the conference was very positive. The application is now live and it can be used for Excess Liability and Workers' Compensation coverage with a renewal date of January 1, 2011 or later. We are grateful for the feedback from members and brokers regarding the old application as well as the considerable contribution of time and energy from members and brokers during the development of the new application. This type of collaboration is the essence of our mutual partnership.

We also introduced a library of on-demand Loss Control videos at the conference. These videos cover a wide variety of safety and training issues related to electric and natural gas utilities. They are tailored to the needs of utility company employees, emergency first responders, aircraft pilots and the general public. The videos are available online to AEGIS members and brokers with an AEGIS user name and password. To apply for a password, please call 1.866.MY.AEGIS (1.866.692.3447) or submit a contact form.

Your comments on the PHC evaluation forms were very positive regarding the program content, networking opportunities and activities. We are also grateful for your constructive suggestions for improvement and will consider them carefully as we plan next year's conference, which will be held July 25 to July 28, 2011 at the Sheraton Chicago Hotel and Towers in Chicago, IL.


Regional member and broker meetings - November 11 and December 8 - register now

Our next two regional member and broker meetings will be held on Thursday, November 11 in San Antonio at the Hilton San Antonio Airport Hotel and on Wednesday, December 8 in Los Angeles at The Omni Los Angeles Hotel at California Plaza.

As those of you who've attended one of our regional meetings already know, the main purpose is to give you an opportunity to tell us what you need and how we're doing. Most attendees also find these forums to be a great opportunity for comparing notes on risk management issues with other risk managers and brokers. We'll also spend some time telling you about our latest initiatives and answer any questions you may have. Please come prepared to discuss risk management issues, the current insurance market, enterprise risk management and other topics.

The meeting is a one-day event so most of you will be able to drive or fly between home and the meeting on the same day. However, if you'd like to stay overnight, AEGIS will reimburse one person from each member company for one night's stay in the meeting hotel.

If you have questions about the meeting, please contact Molly Lenz by e-mail or at 201.508.2805. For questions about the hotel or other logistics, please contact Carrie White by e-mail or at 201.508.2840.

Please register now online. We look forward to seeing you!


Jack Denman appointed AEGIS Executive Vice President

Jack Denman, who has served most recently as Senior Vice President and Chief Financial Officer, has been promoted to Executive Vice President. In his new position, Jack will help lead strategic planning and will oversee the actuarial and investment functions. Michael Johnson, who recently joined us after 22 years at PricewaterhouseCoopers where he worked with a number of property & casualty clients, will assume the role of Senior Vice President-Finance. Please join us in congratulating Jack and Michael on their new responsibilities.


Chris Fisher - AEGIS Property Underwriter

It is with great sadness that we announce the death of our friend and co-worker, Chris Fisher, who passed away after a long illness on October 7 at age 43. Chris joined AEGIS as an engineer in our Loss Control division in 2004 and became a property underwriter in 2007. Prior to AEGIS, he worked for FM Global. Chris was a respected colleague and friend. He will be deeply missed by all who worked with him.


AEGIS London office to relocate in November

As we announced at the Policyholders' Conference, our London office will relocate in late November from 110 Fenchurch Street to nearby Gracechurch Street. Until we finalize an exact move date, however, please continue to direct all correspondence to the current address. The main phone number, 44 207 265 2100, will remain unchanged.