Includes results of Chaucer Holdings Limited since the July 1, 2011 acquisition date.
Other operating losses were $8.0 million for the year ended December 31, 2013, compared to $6.9 million for the year ended December 31, 2012. The $1.1 million increased loss was primarily due to higher employee retirement costs.
Given the inherent complexity of our loss reserve estimation process and the potential variability of the assumptions used, the actual emergence of losses will vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly in those instances where settlements or other claim resolutions do not occur until well into the future. Our net loss reserves at December 31, 2014 were $4.5 billion. Therefore, a relatively small percentage change in the estimate of net loss reserves would have a material effect on our results of operations.
within casualty and other lines, specialist liability lines, primarily in the 2010 and 2013 accident years,
Higher than expected large losses within our commercial automobile coverages, which includes our AIX program business, primarily related to liability coverage in accident years 2009 through 2012.
Net investment income before taxes was $270.3 million, $269.0 million and $276.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. The increase in net investment income in 2014 compared to 2013 was primarily due to additional income resulting from the investment of higher operational cash flows, partially offset by the impact of lower new money yields. The decrease in net investment income in 2013 compared to 2012 was primarily due to the impact of lower new money yields. This decrease was partially offset by additional income resulting from our investments in higher yielding investment grade mortgage-backed securities and the investment of operational cash flows, lower investment expenses and the investment of cash balances into fixed maturities. Average pre-tax earned yields on fixed maturities were 3.71%, 3.95% and 4.26% for the years ended December 31, 2014, 2013 and 2012, respectively. We expect average investment yields to continue to decline as new money rates remain lower than embedded book yields.
Monetary policies in the developed economies, particularly in the United States, Europe and Japan, are supportive of moderate economic growth, while fiscal policies are more divergent and subject to change. During 2014 in the United States, the Federal Reserve (the “Fed”) ceased its $85 billion of monthly bond purchases, known as quantitative easing. The Fed is expected to continue to provide forward guidance to keep rates relatively stable even as the economy strengthens. Geopolitical risks and equity market volatility can also impact the movement of U.S. Treasury interest rates.
Dividends to common shareholders are subject to quarterly board approval and declaration. During 2014, as declared by the Board, we paid three quarterly dividends of $0.37 per share and one quarterly dividend of $0.41 per share to our shareholders totaling $67.0 million. We believe that our holding company assets are sufficient to provide for future shareholder dividends should the Board of Directors declare them.
Amended Facility Agreement. The Guaranty Agreement contains certain customary financial covenants related to our primary U.S. domiciled property and casualty companies and certain negative covenants that limit our ability, among other things, to incur or assume certain debt, grant liens on our property, merge or consolidate, dispose of assets, materially change the nature or conduct of our business and make restricted payments (except, in each case, as provided by certain exceptions). The Guaranty Agreement also contains certain customary representations and warranties.
Discontinued operations for the years ended December 31, 2014 and 2013 resulted in losses of $0.3 million and gains of $5.3 million, respectively, net of tax. The 2013 benefit associated with the Company’s former life insurance businesses was primarily due to an insurance settlement related to a class action lawsuit.
Equity securities and other balances at December 31, 2014, 2013 and 2012 include after-tax net appreciation on other invested assets of $2.6 million, $2.9 million and $2.1 million, respectively.
Mortgage participations and other mortgage loans included the following property type and geographic locations. These investments are reflected in other investments in the Consolidated Balance Sheets.
Level 1 consists of publicly traded securities, including exchange traded funds, valued at quoted market prices. Level 2 includes securities that are valued using pricing for similar securities and pricing models that incorporate observable inputs. Level 3 consists of common or preferred stock of private companies for which observable inputs are not available. Non-binding broker quotes are also included in Level 3.
Under the 2014 Stock Plan, options may be granted to eligible employees, directors or consultants at an exercise price equal to the market price of the Company’s common stock on the date of grant. Option shares may be exercised subject to the terms prescribed by the Compensation Committee of the Board of Directors (the “Committee”) at the time of grant. Options granted in 2014 and 2013 generally vest over 3 years with 33 1/3% vesting in each year, whereas options granted in 2012 generally vest over 4 years with a 50% vesting rate in the third year and a 50% vesting rate in the fourth year. Options must be exercised not later than ten years from the date of grant.
(2)In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.