We use our member 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, promote measured surplus growth and maintain our financial strength ratings. With a long-term history of solid financial results, we've been able to maintain this balance and return more than $1 billion to our eligible members in credits of one kind or another.
Our overall financial results were positive in 2015 and our overall combined ratio for U.S. and London operations was a very satisfactory 81%. Most importantly, after years of persistently high ratios, the current policy year combined ratio for our flagship excess liability business was 90% in 2015, and 93% for the most recent three-policy-year period. Based on these favorable underwriting results, and taking into account the disappointing recent returns (and low forecasts) for our investment portfolio, the Board of Directors believes it will be prudent to manage the member credit programs for the 2016 − 2017 year as follows:
The excess liability business has trended favorably in recent years to the point where the member credit for excess liability will be reinstated at a declared rate of 3%.
The D&O underwriting results and contribution to surplus continue to be positive. Based on these trends, the D&O credit will remain at its current declared rate of 3%.
The property credit will remain at $2 million. While the loss experience was favorable in 2015, the losses associated with Superstorm Sandy that emerged in 2013 and two particularly large property claims in 2014 still have a negative effect on the longer-term results.
The AEGIS London credit will remain unchanged at $1.0 million.
The specific details that describe the individual credit amounts and how they can be applied to future renewals for your Excess Liability, D&O and AEGIS London renewals will be mailed within the next few weeks. Those eligible for the property credits will receive notices later this summer. If you have any questions about the credit programs, please contact George Keefe, Senior Vice President – Member Relations, by e-mail or at 201.508.2797.