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March 18, 2011

Preliminary 2010 financial results

Our annual report preparation is underway but we wanted to share our preliminary results with you at this time. We are delighted to report that thanks to the strong ongoing support of our members and brokers, and your commitment to maintain the advantages of the mutual model, AEGIS had a remarkably good 2010. Our unaudited financial results for 2010 show that total surplus grew by $139 million – or 16% – to $1.001 billion. We have now recovered three-fourths of the surplus lost two years ago as a result of the financial crisis and an unusually tough underwriting year. The following highlights are based on our unaudited results for the year ended December 31, 2010.

Gross written premiums for the year were $1.02 billion. Although lower than last year, given the soft market conditions, we believe this to be a better result than growing our top line with inadequately priced business.

We are grateful to the members who understood the need to adjust rates and terms for their excess liability policies to help ensure the long-term sustainability of this key coverage and to the members who renewed their D&O and property programs rather than pursue some of the shorter-term, lower-priced options that are currently available in the commercial market. AEGIS London made a very strong contribution to the 2010 surplus results as well.

Investment results were ahead of plan for 2010. Our total return for the year was $134 million or 4.8% – which was about 120 basis points higher than our plan and well above the 4.0% overall return predicted by a number of the financial advisors of institutional investors.

Our overall combined ratio was the best in recent memory at 95% and we were pleased that another year ended without any major hurricane or wildfire activity. This strong result was aided by favorable prior year reserve development for virtually every line of business, as well as a one-time benefit from the commutation of a structured reinsurance transaction. The 2010 ratio was 7% better than planned and 17% better than last year’s results. Overall, our results for the current underwriting year were essentially on or better than plan for all but the excess liability line of business, although it is obviously very early in this year’s development.

We hope you are pleased with these strong results and we look forward to sharing them with you in detail in our upcoming annual report.

 

Earthquake and tsunami in Japan

The scope and magnitude of the earthquake and tsunami in Japan have been widely reported in the media during recent days. Several members and brokers have inquired about the impact on AEGIS and our member companies.

Our property facility in New Jersey does not have any exposure to the widespread damage in Japan and we understand that our member companies with operations in Hawaii, California and other areas of the West Coast did not sustain any damage from the waves that radiated across the Pacific from Japan.

AEGIS London, however, does have some exposure through their varied subscription writings. Although it is still too early to estimate any losses and their affect with reliable accuracy, overall, we believe the Syndicate will sustain some significant but manageable earthquake and tsunami-related losses. Our current early estimate based on the preliminary information available is that our net loss will be on the order of $25 million. Losses of this magnitude fall within the possibilities we regularly have envisioned for significant natural disasters. We will continue to analyze the potential exposure and will provide you with the appropriate updates.

 

Transitions on the RMAC, Claims Task Force and Loss Control Task Force

We are pleased to announce a number of new additions to the Risk Management Advisory Committee (RMAC), the Claims Task Force and the Loss Control Task Force.

Some of you may know that Mike Main, Manager, Risk Management at Puget Sound Energy, has announced his retirement from Puget Sound Energy and from the RMAC effective April 1. Mike has contributed in countless ways to the Committee and to its task forces over the years and we are very grateful for his service to AEGIS.

With Mike's retirement, and that of Keith Kennedy last year, we felt it would be a good time to restore the overall number of RMAC members to the level it had been in prior years. The depth and breadth of the Committee benefits all AEGIS members and we are therefore pleased to welcome five new members to the RMAC:

  • Justin Lee Brown – Assistant General Counsel at Southwest Gas
  • Maury DeBont – Director, Risk Management at Sempra Energy
  • Thomas McDonnell – Manager, Corporate Insurance Risk at FirstEnergy
  • Erica McNabb – Director, Risk Management at NextEra Energy
  • Michael Mee – Manager of Insurance at Exelon Corporation

 

We are also taking this opportunity to add members to our Claims Task Force and Loss Control Task Force, replacing those who have moved on in the recent past while enhancing the expertise to guide our efforts in the future. We are pleased to announce that Keith Bone, Director of Insurance and Claims at Duke Energy and Derek Boyd, Director of Risk Management at Atmos Energy, have just joined the Claims Task Force. We are also pleased to announce that Dave Nalepka, Director of Insurance Services at Integrys, has joined the Loss Control Task Force.

We welcome all of our new RMAC, Claims Task Force and Loss Control Task Force members and we look forward to their contributions.

 

Evolving Utility Risk Survey results are available

Thank you to the many members who participated in the Evolving Utility Risk Survey we conducted in January. The survey results clearly validated the earlier conclusions of the RMAC's Evolving Utility Risk Task Force regarding emerging risks in each of the four categories: climate and environment, digital connectivity, operations and infrastructure, and financial. A summary of the survey results is posted on our website.

As part of our ongoing collaboration on evolving risks with EIM, we discussed the aggregated survey results in detail with EIM during a joint task force meeting at their recent annual conference in Orlando. Based on the survey findings, both AEGIS and EIM are reviewing how information about these emerging risks is gathered and evaluated so that the risks can be underwritten as fairly and thoroughly as possible.

Again, thank you for participating in the survey. Your input provides valuable guidance to AEGIS, your fellow member companies, and the industry at large as we all consider ways to manage these risks and incorporate them into our ERM planning. Finally, thank you and congratulations to Susan Karkheck of New Hampshire Electric Cooperative, who won the random drawing of completed surveys. Susan will receive an American Express gift card as a token of our appreciation.

 

AEGIS at RIMS – May 1 to May 5 – Vancouver, B.C.

The RIMS 2011 Conference will be held at the Vancouver Convention & Exhibition Centre in Vancouver, B.C. from Sunday, May 1 to Thursday, May 5. AEGIS staff, including some of our excess liability, D&O and property underwriters, will be available to meet with you at the AEGIS booth (#732) during exhibit hall hours, or you may schedule a meeting in advance of the conference at the AEGIS meeting room at the Hyatt Regency Vancouver. We also invite you to join us and your industry colleagues for drinks and hors d'oeuvres on Monday and Tuesday, May 2 and May 3, from 5:30 pm to 7:00 pm at our hospitality suite at the Hyatt Regency Vancouver.

AEGIS Policyholders’ Conference – July 25 to July 28 – Chicago

Please mark your calendars now for the 2011 AEGIS Policyholders' Conference which will be held Monday, July 25 to Thursday, July 28 at the Sheraton Chicago Hotel and Towers in Chicago, IL. Our annual conference is an important opportunity to share your thoughts with us, network with your peers, and learn about new developments in the industry and at AEGIS. More information will be posted on our website as it becomes available and registration will open in May.

Claims Roundtables – Professionalism and Ethical Consideration in Case Management – May 12 and May 26

Please register now for the next AEGIS Claims Roundtable seminar – Professionalism and Ethical Consideration in Case Management – which will be held Thursday, May 12 in East Rutherford and Thursday, May 26 in Chicago.

Utility companies are faced with claims and lawsuits arising from catastrophic injuries suffered by members of the public. These injuries can result from events such as electrical contacts and gas explosions. Such cases can be defended and damages mitigated if they are professionally and ethically investigated, prepared, negotiated and presented to a jury.

A distinguished panel of experienced industry in-house and outside counsel will discuss ethics and professional conduct during all stages of case development such as investigation, e-discovery, settlement negotiations, the decision to try the case and trial tactics. As always, you're welcome to attend AEGIS Claims Roundtables in person or by videoconference, and Continuing Legal Education (CLE) credits are offered. For more information about the AEGIS Claims Roundtable program, please contact Jeff Schupack by e-mail or by phone at 201.508.2658.

Also, please mark your calendars for the remaining 2011 AEGIS Claims Roundtable seminar on Directing the Discovery Process to Accurately Evaluate the Case, to be held on Thursday, October 13 in East Rutherford and Thursday, October 27 in Las Vegas.

 

Loss Control Incident Investigation Workshops 2011

AEGIS Loss Control conducts workshops throughout the country that help member company personnel investigate incidents involving either electric or natural gas utilities. Workshop attendees learn about investigation objectives, interviews, evidence collection and other critical parts of the process.

Member company staff from operations, compliance, claims, engineering and safety find the workshop content very useful and the programs are particularly beneficial for those who are responsible for field incident investigations.

Currently electrical workshops are scheduled for April 12 and 13 at Xcel Energy in Denver, CO and June 28 and 29 at Xcel Energy in Minneapolis, MN.

Natural gas workshops are currently scheduled for April 14 at Xcel Energy in Denver, CO and June 30 at Xcel Energy in Minneapolis, MN. Three additional natural gas workshops will be scheduled later in the year: September 13 at TECO, Tampa, FL; October 12 at NiSource, Columbus, OH; and November 30 at PGW, Philadelphia, PA. Information on these last three workshops will be posted on our website shortly.

If you or your colleagues are not affiliated with any of the member companies above, you are still welcome to attend these workshops or, if you would like to schedule an Investigating Electrical Incidents Workshop or Investigating Natural Gas Incidents Workshop at your own company, please contact Scot Macomber, Manager–Utility Operations by e-mail or by phone at 201.508.2739.

Save the date – Loss Control Boiler Machinery Seminar – September 13 to 14 – Pittsburgh

Please save the date for the 2011 Loss Control Boiler Machinery Seminar – Electric Generation: Issues, Trends, and Practical Solutions — which will focus on the current issues and trends affecting the electric utility industry. Sponsored by AEGIS Loss Control, the two-day seminar includes presentations by industry experts, consultants, and AEGIS members on a variety of topics that affect power plant equipment. Issues regarding critical machinery apparatus, such as transformers, steam turbines, generators, high energy piping systems, and related components will be addressed.

AEGIS member company personnel from risk management, operations, maintenance, engineering, and claims as well as AEGIS brokers are welcome to attend. The seminar is complimentary; however, attendees will be responsible for their own travel and hotel accommodations.

The seminar will take place at the Sheraton Station Square in Pittsburgh on Tuesday and Wednesday, September 13 and 14. More information will be posted on our website as it becomes available and registration will open in June. In the meantime, please do not contact the hotel directly regarding room reservations. We have reserved a block of rooms that will be available to seminar attendees when registration opens in June.

 

New Review of Major Liability Losses summaries posted

AEGIS Loss Control recently added twenty-two new Review of Major Liability Losses (RMLL) claims summaries to our website. These summaries provide valuable information regarding the nature and significance of large losses associated with electric and gas utility operations. They are intended to help member companies raise the level of safety awareness among their operating personnel by highlighting the information or events that contributed to major incidents. A "Lessons To Be Learned" section in each claim summary contains suggestions to prevent a recurrence.

Each summary is based on a loss associated with a claim that closed in or prior to calendar year 2009. They are organized on the website by operation type — Major Electric Claims Summaries (1983 to 2009) and Major Electric Gas Summaries (1983 to 2009). For more information, please contact Scot Macomber by e-mail or at 201.508.2739.