By now you should have all received our 2013 annual report containing the audited financial results. As we stated therein, our continued success in working together produced another fine year for the company. Our bottom-line measure of financial success is policyholder surplus growth, and we grew surplus by $56 million, to $1.156 billion, a new high for AEGIS. Since the 2008 financial crisis, we have grown surplus by close to $400 million, thanks to strong support from our members and brokers at renewals and a contribution of $210 million from the efforts of our AEGIS London operations.
Our unaudited first quarter 2014 results continued the favorable trends with surplus growing by an additional $22 million. Written premiums displayed strong growth at $218 million, $18 million ahead of the same period in 2013, particularly in our excess liability and London businesses. This is an outstanding performance in what is universally accepted as being a challenging soft market, particularly in the London and property lines. Our overall losses for the first quarter were slightly better than expected by $5 million, which is another positive trend. Lastly, the 1.1% total investment return before expenses was 50 basis points ahead of plan, thanks in part to strong equity markets in the first quarter.
As you know, we use our continuity credit programs to help maintain a balance between the lowest long-term cost of risk for members and the financial strength of the mutual. We work closely with our members and brokers to collect enough premium to fund the losses of the membership and promote measured surplus growth to pave the way for positive treatment by our rating agency – Best’s. With a long-term history of excellent results, we've been able to maintain this balance and return more than $1.094 billion to our eligible members in credits of one kind or another.
Even though the 2013 bottom-line financial results were positive, and our overall loss experience was directionally positive, the five-year combined ratio for our flagship excess liability business is 147%. Taking this high ratio into consideration, combined with the relatively poor loss experience for our property business in the past three years, and the low rate of return on our conservative investment portfolio, the Board of Directors has decided to maintain the continuity credit programs at their current levels:
• The continuity credit for excess liability will remain suspended for the time being. After years of stubbornly high combined ratios, though, the combined ratio for this business finally dropped to 113% in 2013, versus 169% in 2012. Hopefully this trend will continue.
• Our D&O loss experience has been good in recent years, and the contribution to surplus has been positive, so we will maintain the current D&O continuity credit level at 2.0%.
• The property credit will remain at $2 million based on the ongoing effects of Superstorm Sandy losses, as well as two of the largest losses in the history of the mutual that occurred in 2013.
• The AEGIS London credit will remain unchanged at $1.0 million based on the Syndicate’s directionally positive results for the member business they write.
We are pleased to provide an ongoing level of credits and we know you recognize and appreciate the need to manage the credits in the context of the mutual’s overall financial results. The specific details that describe the individual credit amounts and how they can be applied to future renewals for your D&O and AEGIS London renewals will be mailed within the next few weeks. Those eligible for the member property credits will receive their notices later this summer.
Tony Calega recently announced that he is retiring from his role as Senior Vice President of the AEGIS Loss Control Division. Tony joined AEGIS in 1995 as one of our Senior Loss Control Engineers, and he has served as the Loss Control Division Head since 2009. During his tenure, the number of Loss Control services, educational events and publications grew significantly, and now more than 220 AEGIS member companies work with AEGIS Loss Control to help reduce the cost of risk for their own companies and the membership as a whole, while maintaining safe and reliable operating systems. We thank Tony for his many years of dedicated service to AEGIS and our members, and we wish him and his wife, Cheryl, all the best in retirement.
Registration will open in mid-May for PHC 2014, which will be held Monday, July 28 to Thursday, July 31, at the Manchester Grand Hyatt in San Diego, California.
We're hard at work on the conference agenda, which will include the annual management report, as well as sessions covering cyber risk management, analysis and insurance, wildfires, terrorism and TRIA, trends in member company losses, and evolving risks such as electromagnetic pulses and solar storms, distributed energy and global climate change. Bob Hartwig, President of The Insurance Information Institute, will join us again to present his popular overview of current economic and insurance market conditions, which always provides a useful context for other conference presentations and discussions.
Our keynote speaker will be General Keith Alexander, USA (Ret), who served over the past decade as commander of the U.S. Cyber Command (USCYBERCOM), chief of the Central Security Service (CSS) and the longest-serving director of the National Security Agency (NSA). A four-star Army general, Alexander became head of the NSA and CSS in 2005, a pivotal time period for American security that coincided with the conflicts in Afghanistan and Iraq and the increased threat of cyber-attacks. General Alexander is considered by many to be one of the most strategic thinkers in the intelligence arena and he is widely recognized as an influential force in the domain of cyberspace. He will share his insights into the Edward Snowden leaks, discuss cybersecurity in the energy and utility industry, and offer solutions about what we can do to stay ahead of the curve to protect America’s most vulnerable targets.
Those of you who attended the PHC in 2004 will remember that the Manchester Grand Hyatt overlooks San Diego Bay and Seaport Village, and the hotel’s easy access to the city’s many attractions, including the Gaslamp Quarter, San Diego Zoo, SeaWorld and Balboa Park. In addition, the hotel’s guest rooms have just been refurbished, and the floor-to-ceiling windows open to let in the fresh sea breezes. Our reception on Wednesday night this year will be on the beach at the iconic and historic Hotel del Coronado overlooking the Pacific Ocean.
We look forward to seeing you, your families and guests in San Diego at PHC 2014!
Please register now for the next AEGIS Claims Roundtable seminar – The Essentials of Claims Investigation – which will be held on Thursday, June 5 in East Rutherford, NJ and on Thursday, June 19 in New Orleans, LA. If you are unable to join us in either location, we are also offering the seminar as a concurrent, real-time webinar on June 5.
The faculty, who will include experienced in-house counsel as well as nationally known forensic engineers, will discuss the important elements of the investigation and defense of ﬁre or explosion claims, starting with the incident scene itself. Discussion topics will include access to the scene, the proper documentation of a scene, preservation and spoliation of evidence, sampling and testing both on-site and off-site, identiﬁcation of interested parties, identiﬁcation of key evidence and the presentation of expert testimony. The utility’s public response during the investigation of a signiﬁcant incident will also be discussed.
As always, Continuing Legal Education (CLE) credits are offered.
Please register now for Thursday, June 5 in East Rutherford or for the webinar, or Thursday, June 19 in New Orleans. If you register for the webinar, you will receive instructions for participating one week prior. If you have any questions about the webinar in the meantime, please contact Sharon Sarch by e-mail or by phone at 201.508.2654. For more information about the AEGIS Claims Roundtable program, please contact Jeff Schupack by e-mail or by phone at 201.508.2658.
Please save the date for the 2014 AEGIS Claims Seminar which will be held October 20 to 22 at the Fontainebleau Miami Beach in Miami Beach, FL. The AEGIS Claims Seminar in 2012 drew an audience of more than 150 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.
Please do not contact the hotel to make room reservations. We are holding a block of rooms for all seminar attendees and they can be reserved as part of the seminar registration process that will begin in early August.
For more information, please contact Mark Bluestein by e-mail or by phone at 201.508.2635.