aegis 2017 annual review

Transcription

1 We. aegis 2017 annual review

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3 We is simply the advantage of our mutual. We are here for you. And, we are all in this together.

4 Letter to our membership Our mutual was tested in many ways during 2017, most notably by a number of natural catastrophes, including hurricanes Harvey, Irma and Maria, plus the California wildfires and the mudslides that followed. Several AEGIS members sustained significant losses, but we were able to absorb these events and turn in solid financial results. Despite the year s challenges, AEGIS performed exactly as it was designed to do. We were here for our members, and we worked together to manage everything that came our way. The bottom-line measure of our financial strength is policyholder surplus, and by year-end, it grew by $128 million, to $1.56 billion, which is a new high for the mutual. Since the worldwide economic crisis, policyholder surplus has more than doubled, at a steady clip averaging about 8% per year. We believe this is a noteworthy accomplishment, and it s a testament to our work together and the enduring strength of the AEGIS mutual model. Wesley W. von Schack William P. Cullen In 2017, our mutual operations paid $509 million in claims to members and received 1,100 new claims reports. Over the course of the year, at any given time, we re working with members to manage about 3,000 claims matters. Since our founding in 1975, we have managed more than 100,000 claims and paid policyholders more than $16 billion. AEGIS members realize that buying insurance based only on price may offer short-term savings, but the true test of a policy comes when it s time to recover a loss. Our policy wordings are clear, our members are confident they will get what they paid for, and our claims professionals work hard to manage claims fairly and efficiently. We are pleased with the 2017 financial results, which we accomplished by working together. Thanks to our members, brokers, Board of Directors, Risk Management Advisory Committee (RMAC), member task forces, and AEGIS professionals in North America and London, we are in the best financial condition in the history of the mutual, and we are poised to accomplish even more together in Wesley W. von Schack chairman of the board William P. Cullen president & ceo 2

5 We. It s a simple concept but it makes all the difference. AEGIS is vastly different from the commercial insurance market because we are always here for our members, and our members are always here for us. We are in this together. Our mission from the very beginning has been to bring stability to the process of managing risk for the energy industry. Members appreciate the fact that we provide the same broad coverage year after year, with an eye toward achieving the lowest cost of risk over the long term. Our policies are clear and straightforward, so when it comes time to make a claim, members know just what to expect, and our claims professionals work with them as partners, not adversaries, to manage the claim. AEGIS advantage. Members also appreciate our energy industry expertise. Our underwriters, claims professionals and loss control engineers are highly capable, with a deep understanding of energy industry operations, risks, claims and loss control best practices. As a result, our policies are tailored precisely to each member s risk profile, claims are managed intelligently, and loss control measures to improve operations are suggested with confidence. As a mutual, the relationship we have with members is characterized by uncommon loyalty. Unlike the commercial market, which will withdraw its support for the energy industry whenever it becomes unprofitable, we ve provided coverage and claims support to members without interruption for more than 40 years. And we thank members who renew coverage with us through our member credit programs. In return, members support AEGIS in a variety of ways, including serving on our Board of Directors, RMAC and task forces, contributing new ideas at our regional meetings, sharing claims data and loss control practices that help the membership as a whole, and supporting the responsible and sustainable pricing of policies. Together, we succeed in ways that are simply not possible in the commercial insurance market. It s the AEGIS advantage. 3

6 2017 Results We worked together to produce outstanding results in The key measures of our financial strength, sound underwriting practices and claims-paying ability have reached some of the best levels in the history of the mutual. $1.56 billion highest surplus ever Our policyholder surplus grew by $128 million in 2017, to $1.56 billion, the highest level in the history of the mutual. Strong underwriting results in North America and London, combined with solid returns on our consolidated investment portfolio, made this growth possible. $1.35 billion gross premiums written Our gross premiums written totaled $1.35 billion in 2017, which was 9% higher than Consistent member support of the mutual business and growth in some key and diverse classes of business in London contributed to this solid result. 91% overall combined ratio The overall combined ratio for the Group, including our operations in North America and London, was a favorable 91%. 4

7 $789 million in claims paid to policyholders Our operations in North America and London paid $789 million in claims to policyholders in Since AEGIS was founded in 1975, we have paid more than $16.4 billion in claims, while building a reputation for collaborative claims management that s consistently better than other insurers. Our claims service in London was recently awarded the prestigious Outstanding Service Quality Marque by Gracechurch Consulting, a leading independent expert on claims in the London market. $1.27 billion member credits since 1979 Our member credit programs help member companies achieve the lowest overall long-term cost of risk. Each year, the AEGIS Board of Directors evaluates the company s financial results and determines the amount of surplus to return to eligible members in the form of member credits. Members who purchase excess liability, D&O, property and London coverage can apply the credits to their premiums upon renewal. $141 million net investment return Our consolidated investment portfolio returned more than $141 million in This translated to a +3.5% net return, which was significantly above the plan of +2.3%. All investment categories performed well in A Stable rating from A.M. Best The rating agencies agree on our financial strength and stability. In 2017, A.M. Best rated us A Stable, S&P awarded an A- rating, and Fitch gave us an A rating. 5

8 1Stability We know energy. Our underwriters in North America focus solely on energy risks across all types of traditional and renewable operations. Our claims professionals manage only energy claims, including major losses involving natural gas and electric facilities, pipeline spills, explosions, wildfires, D&O matters and cyber incidents. And our loss control professionals, many of whom are hired from the member companies we serve, are in member facilities on a continuous basis to offer suggestions that help ensure safe and reliable operations. Stability takes many forms at AEGIS. By taking the long-term view, and acting in the best interests of our members, we can provide policy pricing, coverage and claims management that s more stable than the commercial market. This underwriting and claims stability is backed up by overall financial and operational stability. Our company-wide Enterprise Risk Management program, well-grounded investment strategy and syndicate at Lloyd s of London bring balance, diversity and profitability to our mutual operations. 2Capability 6

9 3Loyalty AEGIS is fundamentally different from the commercial market. In short, we stay and we pay. Loyalty that s mutual. We serve only policyholdermembers, and we answer only to them. Unlike the commercial market, there are no outside shareholders or quarterly earnings targets, so our culture is different. Our entire organization is focused exclusively on providing continuous coverage, claims management and loss control support to members. Members recognize the difference, and they stick with us. On average, members have been with AEGIS 26.5 years and counting, and we reward this loyalty with our member credit programs. 7

10 All day, every day. AEGIS underwriting, claims and loss control profes- sionals are in and out of energy industry facilities all day, every day. We are not working with a chemical plant on Monday, a power generation plant on Tuesday, and a widget factory on Wednesday. Our singular focus on the energy industry has earned us a reputation for being energy risk management experts. AEGIS Loss Control engineers made more than 800 field visits to member company power generating facilities and service territories in 2017, which was the highest number on record. The risk assessment data they gather helps inform the underwriting process at AEGIS and helps members improve their operations. In the course of those visits, we worked 8

11 with members to address potentially hazardous conditions, which helped them avoid numerous multimillion-dollar losses and significantly reduce the cost of risk. These efforts, combined with member company operating and maintenance practices, have contributed to a reduction in the number of reported claims to AEGIS. Over the past 10 years, on average, members with electric operations reported six fewer claims per year, and members with natural gas operations reported three fewer claims per year. These reductions benefit individual member companies, but they also benefit the membership as a whole by contributing to the overall lowest longterm cost of risk and preserving policyholder surplus. Based on the growing interest in AEGIS Loss Control services in 2017, we ve added five loss control engineers to our staff and, to acknowledge our appreciation for members who place 100% of their property programs with AEGIS, property loss control services are now included as part of the policy. 9

12 Playing a key role. Members have always played a key role in the mutual, and we constantly engage them in the process through one-on-one meetings, regional member meetings and our annual Policyholders Conference. More than 60 member company representatives, across 44 member companies, serve on our Board of Directors, Risk Management Advisory Committee (RMAC ) and task forces, providing invaluable guidance and expertise. 10

13 This active participation ensures that our coverages, claims management services, and loss control products and services are continuously refreshed and remain closely tied to member needs. We are grateful for these contributions, as well as the loyalty of our members who consistently renew their coverage with us. Since 1979, after paying claims and expenses, we have returned a portion of excess capital to members who renew their AEGIS policies in the form of member credits that reduce future premiums, which is one of the ways we help members achieve the lowest long-term cost of risk. Over the years, the member credit program has been expanded to include excess liability, D&O, property and AEGIS London coverage, and we have declared a total of $1.27 billion in such credits, averaging 3% of total surplus annually. 11

14 Leadership Our mutual efforts are guided by these experienced executives and professionals. They generously contribute their time and expertise, and they are essential to our success. Board of Directors Wesley W. von Schack Chairman Associated Electric & Gas Insurance Services Limited William P. Cullen President & CEO AEGIS Insurance Services, Inc. Gregory E. Abel Vice Chairman Non-Insurance Business Operations Berkshire Hathaway Inc. Chairman Berkshire Hathaway Energy Company Robert W. Best Director & Former Chairman Atmos Energy Corporation Thomas G.S. Busher Former Chief Operating Officer, Director and Deputy Chairman Montpelier Re Christopher M. Crane President & CEO Exelon Corporation Thomas F. Farrell, II Chairman, President & CEO Dominion Energy, Inc. Walter M. Higgins Chairman South Jersey Industries Christopher P. Johns Vice Chairman & President, Retired Pacific Gas & Electric Company James J. Jura CEO & General Manager, Retired Associated Electric Cooperative, Inc. Constance H. Lau President & CEO Hawaiian Electric Industries, Inc. Ronald L. Litzinger President, Retired Edison Energy Group Charles A. Schrock Chairman & CEO, Retired Integrys Energy Group, Inc. William B. Timmerman Chairman & CEO, Retired SCANA Corporation Directors Emeriti Vice Chairmen Emeriti Donald J. Greene Chairman Emeritus Dewey & LeBoeuf LLP William H. Grigg Chairman Emeritus Duke Energy Corporation Directors Emeriti Philip C. Ackerman Chairman, Retired National Fuel Gas Company Keith E. Bailey Chairman, President & CEO, Retired The Williams Companies, Inc. Thomas E. Capps Chairman, Retired Dominion Energy, Inc. R. Don Cash Chairman Emeritus & Director Questar Corporation W.R.P. Dalton Executive Director, Retired HSBC Holdings plc John W. Ellis Chairman, Retired Puget Sound Energy, Inc. Stephen E. Frank Chairman, President & CEO, Retired Southern California Edison Don D. Jordan Chairman & CEO, Retired Reliant Energy George L. Mazanec Vice Chairman, Retired PanEnergy (now Enbridge) Eugene R. McGrath Chairman & CEO, Retired Consolidated Edison, Inc. Corbin A. McNeill, Jr. Chairman & Co-CEO, Retired Exelon Corporation Richard G. Reiten Chairman & CEO, Retired NW Natural 12

15 Officers Wesley W. von Schack Chairman of the Board William P. Cullen President & CEO Gregory E. Abel Vice Chairman William Hillman Assistant Vice President & Chief Underwriting Officer Michael S. Johnson Controller Simon J. Day Actuary Rip Reeves Treasurer Patricia L. McKenna Assistant Treasurer Mark A. Walsh Secretary Stephen P. Byrne Assistant Secretary Elda B. Feldman Assistant Secretary Committees Executive Committee Wesley W. von Schack * Gregory E. Abel Christopher M. Crane William P. Cullen Thomas F. Farrell, II Charles A. Schrock Audit & Finance Committee Christopher P. Johns * Thomas F. Farrell, II James J. Jura Claims & Loss Control Committee Christopher M. Crane * James J. Jura Ronald L. Litzinger Compensation & Benefits Committee Thomas F. Farrell, II * Gregory E. Abel Christopher M. Crane Wesley W. von Schack Investment Committee William B. Timmerman * Walter M. Higgins Charles A. Schrock Nominating Committee Gregory E. Abel * Constance H. Lau Wesley W. von Schack Charles A. Schrock Risk & Capital Committee Constance H. Lau * Robert W. Best Thomas G.S. Busher Risk Management Advisory Committee Wesley W. von Schack * Associated Electric & Gas Insurance Services Limited Johan G. Bramer TransCanada Corporation Denise M. Cosentino Eversource Energy John Frank Basin Electric Power Cooperative Deborah S. Gaffney Southern Company David A. Layne Algonquin Power & Utilities Corp. Janaize Markland Pacific Gas & Electric Company Joseph T. Meaney, Jr. The AES Corporation Michael A. Mee Exelon Corporation Robert L. Miller Xcel Energy, Inc. Peter M. Nadel FirstEnergy Corp. H. Wayne Soza El Paso Electric Company James M. Vacek CenterPoint Energy, Inc. * Denotes Chairman 13

16 AEGIS London Board of Directors W.R.P. Dalton Chairman David Croom-Johnson Managing Director Thomas G.S. Busher John Chambers Christopher Forbes Jonathan Gray Michael Onslow Alex Powell Wesley W. von Schack Hermien Smeets-Flier Graeme Tennyson Matthew C. Yeldham Evolving Utility Industry Risk Task Force J.P. Agnesse Portland General Electric Company Lisa R. Groff American Electric Power Company, Inc. Kirk A. Kelley Tennessee Valley Authority George W. Marget III, Esq. Dominion Energy, Inc. Ronald D. Rispoli Entergy Services, Inc. Richard Sayette Exelon Corporation Frank Stanbrough Southwest Gas Corporation Enterprise Risk Management (ERM) Task Force Christopher Eaton Enbridge Inc. Steve Haynes American Electric Power Company, Inc. H. Wayne Soza El Paso Electric Company Claims Task Force David P. Abernathy, Esq. Spire, Inc. Keith Bone Duke Energy Corporation Derek Boyd Atmos Energy Corporation Kirk A. Cresto NiSource, Inc. C. Larry Davis, Esq. San Diego Gas & Electric Company Bryony Hodges, Esq. SCANA Corporation Judy Y. Liu, Esq. CenterPoint Energy Service Company, LLC George W. Marget III, Esq. Dominion Energy, Inc. Doug McKay Consolidated Edison Company of New York Timothy J. Saviano, Esq. We Energies Mark J. Sweeney, Esq. Pacific Gas & Electric Company Loss Control Task Force Mark Boone Dominion Energy, Inc. Robert Brandkamp Avista Corporation Mariya Fedorchenko Berkshire Hathaway Energy Company Robert A. Green PSEG Services Corporation Lisa Hough Omaha Public Power District John Mellette SCANA Corporation Sandy Meyers City Utilities of Springfield John C. Norman AVANGRID Ronald D. Rispoli Entergy Services, Inc. Scott Wibbenmeyer Ameren Services Company 14

17 Five-Year Financial Highlights Associated Electric & Gas Insurance Services Limited For the years ended December 31, (Expressed in thousands of U.S. dollars) Revenue: Gross premiums written $ 1,280,125 $ 1,348,493 $ 1,250,510 $ 1,236,475 $ 1,344,705 Net premiums written 878, , , , ,647 Net premiums earned 805, , , , ,131 Net investment (loss) income 111,064 83,037 (16,791) 117, ,935 Change in fair value of insurance and reinsurance contracts 38,420 (42,587) 28,642 (22,333) (31,284) Total revenue 954, , , , ,782 Expenses: Losses and loss expenses incurred 572, , , , ,787 Commission expenses 97, ,272 97,077 82,589 98,172 Other underwriting expenses 114, ,150 95,087 87, ,209 Total expenses 784, , , , ,168 Income before continuity and other premium credits and income taxes 170, , , , ,614 Continuity and other premium credits 35,544 20,796 19,964 29,275 37,837 Income before income taxes 134, , , , ,777 Income tax provision (benefit) 44,981 42,581 70,162 53,467 27,050 Net income $ 89,632 $ 66,868 $ 87,154 $ 112,115 $ 132,727 Other comprehensive income (loss), net of income tax (benefit) expense (33,639) (1,504) (18,596) 26,478 (4,160) Total surplus, beginning of year $ 1,100,190 $ 1,156,183 $ 1,221,547 $ 1,290,105 $ 1,428,698 Total surplus, end of year $ 1,156,183 $ 1,221,547 $ 1,290,105 $ 1,428,698 $ 1,557,265 Total assets $ 5,757,767 $ 6,037,151 $ 5,718,282 $ 6,087,210 $ 6,512,136 Reserve for losses and loss expenses $ 3,104,771 $ 3,165,788 $ 2,879,855 $ 3,068,261 $ 3,306,617 For details on our 2017 financial results, please visit aegislink.com. 15

18 Offices 2018 AEGIS Meetings AEGIS Associated Electric & Gas Insurance Services Limited The Maxwell Roberts Building Fourth Floor One Church Street Hamilton, Bermuda HM11 Telephone: AEGIS Insurance Services, Inc. 1 Meadowlands Plaza East Rutherford, NJ Telephone: Fax: Claims fax: Website: aegislink.com inquiry@aegislimited.com AEGIS London AEGIS Managing Agency Limited 33 Gracechurch Street London EC3V 0BT England Telephone: Fax: Website: aegislondon.co.uk enquiries@aegislondon.co.uk Annual Meeting The Annual General Meeting of Members of the Company will be held on Thursday, October 25, Notice of the Meeting and the form of proxy shall be issued to each voting Member not less than 10 days before the meeting convenes, stating the date, place, time and nature of the business to be considered. Policyholders Conference The annual AEGIS Policyholders Conference will be held July 16 to 19, 2018, in Chicago, IL. Registration information will be ed and posted on our website. Other Meetings and Seminars AEGIS will also host a series of regional member meetings, Claims Roundtable seminars, and a number of underwriting, claims and loss control seminars and webinars throughout Please visit aegislink.com for details. Associated Electric & Gas Insurance Services Limited ( AEGIS ) was incorporated in Bermuda in 1971 and commenced underwriting activities in AEGIS is registered as a Class 3 non-assessable mutual insurance company in Bermuda. AEGIS is an eligible surplus lines insurer in all jurisdictions of the United States. It is subject to United States federal income taxes, files the required tax returns, and maintains a United States trust fund in excess of $150,000,000. AEGIS is also a licensed foreign insurance company in all provinces and territories of Canada and is listed on the general register of foreign reinsurers in Mexico. AEGIS operations are conducted through a wholly-owned subsidiary, AEGIS Insurance Services, Inc. ( AEGIS Services ), which provides AEGIS and its affiliates with professional staff and services. The AEGIS Syndicate at Lloyd s of London, number 1225 ( AEGIS London ), commenced operations in AEGIS London s operations are supported by AEGIS Managing Agency Limited ( AMAL ), which provides professional staff and services for AEGIS London. AEGIS Electric & Gas International Services Limited ( AEGIS International ) is a corporate member of Lloyd s and the principal capital provider of AEGIS London. Both AMAL and AEGIS International are indirect subsidiaries of AEGIS. In the U.S., AEGIS; AEGIS & Design; the AEGIS Logo (any reference to Logo or Design are references to the AEGIS Diamonds Design); AEGISLINK; HOW SAFE; PEOPLE DON T KNOW WHAT THEY DON T KNOW; LESSONS LEARNED; AEGIS LONDON; and AEGIS LONDON & Design are registered trademarks of AEGIS. In the U.K., AEGIS; AEGIS LONDON; and AEGIS LONDON & Design are registered trademarks of AEGIS. In the E.U., AEGIS; AEGIS & Design; the AEGIS Logo; AEGISLINK; AEGIS LONDON; and AEGIS LONDON & Design are registered Community trademarks of AEGIS. In Bermuda, AEGIS and the AEGIS Logo are registered trademarks of AEGIS. In New Zealand, AEGIS is a registered trademark of AEGIS. In Canada, AEGIS; AEGIS & Design; AEGIS CANADA; the AEGIS Logo; and AEGIS LONDON & Design are registered trademarks of AEGIS Associated Electric & Gas Insurance Services Limited and AEGIS Insurance Services, Inc. All rights reserved. 16

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