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Annual report and first quarter results

By now you should have all received our annual report with the audited financial results for 2012. With your strong support, our surplus rose by $50 million to a new high of $1.1 billion after earned continuity credits of $34 million. We've now recovered all of the surplus we lost in the financial crisis of 2008. Gross written premiums also reached a new high of $1.245 billion due largely to growth in our property writings and AEGIS London. Our overall combined ratio was 108% but that included some surprise developments of $120 million on pre-1986 pollution claims. Without that change, our combined ratio would have been 93%. That reflects good performance across all our business lines except excess liability, which continues to be our loss leader. We must continue to improve our underwriting results there, particularly given the low return investment environment.

Our first quarter (unaudited) 2013 results were favorable with surplus growing by another $20 million. Our premium revenues were about $45 million less than we had hoped but this is due mostly to a rebalancing of the portfolio of risks written by AEGIS London as we redeploy their capacity to more profitable classes of business. We expect to recover this shortfall as the year progresses. Our overall losses for the first quarter were slightly better than expected by $5 million. Finally, we are pleased with the 1.4% total return we earned in the first quarter which was 50 basis points ahead of plan and drove our surplus growth.