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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.