We are pleased to report that AEGIS had another successful year in 2014. Our audited financial results are not yet finalized, but preliminarily, surplus grew in 2014 by $66 million to $1,222 million, a new high for AEGIS. We’ve now grown surplus by $464 million since 2008.
Our overall combined ratio of 90% is one of the best we’ve had in the past 20 years. This was comprised of a U.S. operation combined ratio of 92% and a London combined ratio of 88%. Most noteworthy, we exceeded our plan with an 11% premium rate increase across our excess liability book, which is a strong indication of the continuing membership support of AEGIS and our need for premium increases over the past several years. This resulted in a much improved excess liability combined ratio of 94%. Gross written premiums for the year were $1,348 million, which is $68 million over the prior year and also a record high for AEGIS. Thanks to all our members and brokers for that great support to help get us where we need to be!
Improving our combined ratio was certainly essential this year as our total gross investment return for the year was 2.8%. Fortunately, we had equity returns of 8.9% to supplement our fixed income return of 2.3%.
We’re still in the process of finalizing our year-end audit and we look forward to sharing our final audited financial statements with you when we publish our annual report in April.
We are pleased to announce that Christopher Crane has been elected to the AEGIS Board of Directors. Chris is president and chief executive officer of Chicago-based Exelon Corporation, where he oversees one of the country’s leading energy providers. Prior to joining Exelon in 1998 (then ComEd), he served as Browns Ferry Site vice president for Tennessee Valley Authority and worked with nuclear plants in Texas and Arizona. Chris is also active in the leadership of the electric and nuclear industries, serving as vice chairman of the Edison Electric Institute and vice chairman of the Institute of Nuclear Power Operations. We welcome Chris to the Board and look forward to his contributions.
With high-profile cyber-attacks on the rise, such as those on Sony, Home Depot and Target, more and more AEGIS member companies are purchasing our cyber coverage. In a departure from earlier days when there was a lot of interest, but not many purchases, more than 40 members have approached us recently for quotes on cyber coverage, 23 policies have been bound, and 14 are pending. As the exposures and number of known claims increase, we expect this trend to continue, and we will continue to enhance our cyber coverage and related services to keep pace. Indeed, cyber risk dominated the discussion at some of our recent regional meetings.
The AEGIS cyber policy is written through our London syndicate with a $50 million limit and it was recently enhanced with Difference in Conditions (DIC) coverage. The DIC wraps around existing AEGIS property and excess liability programs to help provide back-to-back cyber protection of information technology and operational technology against cyber-attacks, cyber terrorism and security breaches. The policy is tailored to the specific needs of each member company and it also provides access to our in-house energy cybersecurity consultants on matters of risk management, loss control and incident response. Given the increasing risk profile of cybersecurity, we are in the process of adding additional cyber insurance talent in our New Jersey office. For more information, please contact George Keefe by e-mail or by phone at 201.508.2797.
We recently launched a new property consortium in cooperation with NEIL (Nuclear Electric Insurance Limited) and Berkshire Hathaway Specialty Insurance which increases our total property capacity to $300 million for certain risks. Each of our consortium partners can add $50 million to our existing $200 million capacity, bringing the total to $300 million. Many AEGIS members have expressed interest in reliable, sustainable, long-term property programs with higher limits and we expect our new consortium will help meet this need. To date, we have bound property consortium policies for six member companies and we expect that number to increase as existing property programs expire and member companies undertake new projects. For more information, please contact Gary Ladman by e-mail or by phone at 201.508.2802.
We were pleased to welcome 44 members and brokers to our recent regional meeting in Dallas and 30 members and brokers to our recent regional meeting in Seattle. Our discussions covered cyber risk and coverage, insurance market conditions, enterprise risk management (ERM), construction, and evolving risks, including the use of drones in the energy industry.
Our next regional member and broker meeting will be held at the AEGIS office in East Rutherford, NJ on Tuesday, March 24, and we invite you to register now online.
Our regional meetings give you an opportunity to tell us about the issues on your mind, what you need from AEGIS, and how we’re doing. They are also an ideal way to further involve your risk management and finance colleagues with your company’s insurance program, discuss current energy and insurance issues, and learn more about your mutual. At these meetings, small groups of members and brokers meet with AEGIS senior management to discuss these topics as well as any new initiatives at AEGIS. We’ll also answer any questions you may have. Most attendees find that these small meetings are conducive to comparing notes and networking with other risk managers and brokers. Please come prepared to discuss risk management issues, general insurance market conditions, cyber risk, ERM and other current topics.
The meeting is a one-day event and you should be able to drive or fly between home and the meeting on the same day. However, if you need to stay overnight, AEGIS will reimburse one person from each member company for one night’s stay in the meeting hotel. We look forward to seeing you!
You may recall that we recently formed a task force of enterprise risk management (ERM) professionals from ten member companies to help us gain a deeper understanding of the ERM issues utilities face. The goals of the ERM Task Force are to advise AEGIS on ERM-related matters, identify ERM trends that affect the energy industry, promote the development and sharing of ERM information to benefit the membership, and work to help educate AEGIS members on ERM issues.
The ERM Task Force suggested that a survey of member companies would be a valuable first step because it would help us benchmark member company ERM programs, identify member needs and identify ways AEGIS could help meet those needs. We have partnered with the St. John’s University of School of Risk Management, Insurance and Actuarial Science to develop the questions, conduct the survey and analyze the results. Within the next three to four weeks, St. John’s will send the survey to risk managers at AEGIS member companies. All responses are strictly confidential, and results will be aggregated to ensure privacy. We hope to report the findings and identify next steps at the 2015 Policyholders’ Conference in Nashville in July.
In the meantime, please contact George Keefe by e-mail or by phone at 201.508.2797, with any questions or comments.
More than 70 attendees representing 27 AEGIS member companies attended our recent seminar/webinar – The Art of Recovery and the Transfer of Risk.
A topic of interest to risk managers and claims professionals alike, the seminar covered the benefits, importance and practical applications of the transfer of risk and the recovery of funds in claims and litigation management. Our panel of experts addressed the effective utilization of contractual hold harmless and indemnification language, the pursuit of subrogation against third parties, and contribution actions. The strategy surrounding when and/or whether these theories should be employed was covered as well.
More than 170 attendees representing 68 AEGIS member companies attended the most recent monthly AEGIS Loss Control webinar – Safety Issues – Rooftop Solar Panels.
The increasing use of rooftop solar panels poses new risks to firefighters. Access to the roof to allow venting of the fire may be limited, the panels may still produce live current after shut-offs which can shock firefighters, and the added weight of the panels may cause roofs to collapse more quickly than anticipated. Delays created by working around solar panels may ultimately mean greater damage to structures and greater danger to firefighters. This webinar helps utilities understand potential hazards encountered by firefighters battling fires at structures with photovoltaic systems, and helps inform safer firefighting decisions.
The webinar is presented by Robert Green, Risk Manager at Public Service Electric and Gas of New Jersey, and past Chief of the Colonia, NJ Fire Department. This presentation is used extensively throughout New Jersey to assist firefighters in understanding the potential hazards that may be encountered with photovoltaic systems.
The Safety Issues with Rooftop Solar Panels webinar has just been posted our website and we encourage you and your colleagues to view it. Many AEGIS member companies have asked to share the webinar with their local fire departments so we posted the webinar in the public section of our website to facilitate access for firefighting professionals and others who may not have access to our password-protected content.
For more information about the AEGIS Loss Control series of monthly webinars, please visit our website. You can also register now for the next AEGIS Loss Control webinar, Gas Control Center Security, which is scheduled for April 1. If you have any questions about the monthly webinars, please contact Scot Macomber, Vice President – Loss Control Utility Operations, by e-mail or by phone at 201.508.2739.
At a recent regional member and broker meeting, a member asked about the security of our website, which houses online policy and claims data, so I thought I would share the following from our Chief Information Officer, Gene Blauvelt:
“Our number-one priority is the protection of member information. Once a year, AEGIS employs the services of external security experts to review the website and to conduct penetration testing. Any recommendations provided by the experts are then vetted and applied. Industry-standard best practices are used when securing access and providing information through the AEGIS website. All content, both public and private, is transmitted through HTTPS and uses an extended validation certificate with a green status bar to let our users know they are communicating with AEGIS securely. We also require the use of strong passwords for all users when logging in to the secure section of our website. Access to our system is controlled through an internal approval process that validates each user’s relationship and appropriate roles are assigned and confirmed before access is granted. We continually monitor our systems for new vulnerabilities and apply appropriate changes and monitoring tools to keep our systems secure from potential threats. As an additional level of security, we ask that you please notify us immediately when a person leaves your organization so we can disable their access to our systems. Please send an email to email@example.com or contact your AEGIS underwriter. No security scheme is foolproof, and we will continue to enhance our system as the risk and defenses evolve.”
I hope this helps. If you have any questions or would like our Information Technology Division to go into more detail, please contact Gene Blauvelt by e-mail or by phone at 201.508.2713.