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.

As you know, we use our continuity credit programs to maintain a balance between members' financial benefits and AEGIS' financial strength. We strive to collect enough premium to match the losses of our industry and provide modest additions to surplus to allow for growth and rating improvements. With a long-term history of excellent results, we've been able to maintain this balance and return more than $1.07 billion to our eligible members in credits of one kind or another.

Even though the 2012 bottom line financial results were positive, our excess liability product line is significantly out of balance. Last year's combined ratio was 116% (excluding the effects of the old pollution claims) and the five-year average is 109%, despite the rate increases we've introduced over the past few years. Not that many years ago, a 109% combined ratio could be offset with investment returns but that simply is not possible in today's financial environment.

After careful consideration, the Board of Directors agreed to suspend the continuity credit for excess liability for the time being. Even though our D&O experience has been unusually good recently, the Board also agreed it would be prudent to reduce the D&O credit from its current level of 4.0% to 2.0% to conserve the Company's surplus until AEGIS' overall underwriting result improves. The Board also reduced the member property credit from $3.5 million to $2.0 million to reflect our loss experience in this book, including the significant losses associated with Superstorm Sandy. Finally, the Board elected to leave the $1.0 million AEGIS London credit program unchanged.

These actions will help pave the way for better financial balance. We look forward to reviewing the credit programs again next year with the hope that we will be able to make positive adjustments at that time. 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.

We are pleased to introduce new cyber coverage and services through AEGIS London for all types of AEGIS member companies, including electric and natural gas utilities, renewable energy facilities, oil and gas E&P companies, water utilities, and transmission and distribution companies. The policy provides a $15 million limit in combination with a range of loss control services that will assist members with data loss, privacy breach and reputation management. For more information, please contact George Keefe by e-mail or phone at 201.508.2797, or Rick Welsh, Head of Cyber at AEGIS London, by e-mail or phone at 011.44.207.265.2100.

Registration will open in mid-May for PHC 2013, which will be held Monday, July 29 to Thursday, August 1, at the Baltimore Marriott Waterfront in Baltimore, Maryland.

We're hard at work on the conference agenda, which will include the annual management report, as well as sessions covering cyber risk, enterprise risk management, premium adequacy, and trends in member company losses. 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.

The Baltimore Marriott Waterfront is situated directly on Baltimore's Inner Harbor, a beautiful and vibrant waterfront district, which has been dramatically revitalized over the past 20 years. Most of the city's best attractions are a quick walk or water taxi ride away, including Fort McHenry, where a battle during the War of 1812 inspired "The Star-Spangled Banner," Camden Yards, home to the Baltimore Orioles, and the National Aquarium, one of the most sophisticated and technologically advanced aquariums in the world. We'll post details of our tours when registration opens in mid-May, but Baltimore offers many activities in the summer months, including historic tours, sporting events, Inner Harbor sightseeing cruises and the family favorite, paddleboats. The summer months are also the height of the season for world-famous Chesapeake Bay blue crabs, so bring your appetites.

We look forward to seeing you, your families and guests in Baltimore at PHC 2013!

Many of you will recall the policy limits survey we conducted four years ago in cooperation with The Edison Electric Institute (EEI). In addition to polling AEGIS member companies with electric operations, we conducted the survey across the entire membership to include members with natural gas, water and other types of operations. The response to the survey was strong and many members found the results useful in terms of setting appropriate limits and benchmarking their programs versus peer companies. The aggregated survey results for all electric and gas company respondents are still posted in the password-protected area of our website. The aggregated results for other company operation types are available upon request.

The new survey is designed to tell us how insurance buying practices have changed since the time of the last survey, and we've added some questions to determine the state of ERM at AEGIS member companies. Please watch your e-mail for further details and a link to the online survey. We plan to discuss the aggregated results in detail at the 2013 AEGIS Policyholders' Conference in July.

Please register now for the next AEGIS Claims Roundtable seminar – Litigation Involving Catastrophic Injuries – which will be held on Thursday, June 6 in East Rutherford and Thursday, June 13 in Chicago.

Utility companies are frequently faced with litigation arising from catastrophic injuries suffered by members of the public and company employees. These injuries can result from events such as electrical contacts, gas explosions and exposure to toxic substances. Resultant injuries, including severe burns, brain damage, paraplegia, quadriplegia and loss of limbs, can serve as a difficult backdrop for the defense. In catastrophic injury cases, there is often an overwhelming empathy factor. Yet such injury cases are defensible, and can be mitigated, if properly prepared, investigated, negotiated and presented to a jury. This panel will address the issues surrounding the successful defense of such cases. Attendees will gain a better understanding of major injury claim management and defense tactics.

As always, you're welcome to attend AEGIS Claims Roundtables in person or by videoconference, and Continuing Legal Education (CLE) credits are offered. 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 2013 AEGIS Emergency Preparedness and Response Seminar, which will be held October 15 to 17 at the Westin Indianapolis.

Sponsored by AEGIS Loss Control, the seminar includes presentations by industry experts, consultants, and AEGIS member companies on a variety of topics that affect electric and natural gas systems during and following events such as wildfires, tornadoes, ice storms, earthquakes, floods and hurricanes. Issues regarding storm preparation, mutual aid, communications with emergency responders, the public and customers, nationwide utility disasters, and the lessons learned to improve emergency preparedness, along with new technology to assess storm damage, will be covered.

AEGIS member company personnel from risk management, operations, maintenance, engineering and claims, as well as AEGIS brokers, are encouraged to attend.

Registration and hotel reservations will open in August. The seminar registration fee is $495 per person, which covers all sessions and meals. In the meantime, please do not contact the hotel directly. We have reserved a block of rooms for the seminar and they will be available when reservations open.

If you have any questions about the program, please contact Scot Macomber, Manager – Loss Control Utility Operations, by e-mail or by phone at 201.508.2739. For questions regarding the hotel or other logistics, please contact Leah Convery by e-mail or by phone at 201.508.2872.