Many coverage disputes with policyholders are resolved only through aggressive settlement efforts. Settlements involving bankrupt policyholders may include extensive releases, which are favorable to the Company but which could result in settlements earlier and for larger amounts than originally expected. As it has done in the past, the Company will continue to aggressively pursue settlement opportunities.
The decrease in investment income of $71.0 million, or 49.5%, in 2008 as compared to 2007, was primarily driven by substantially lower earnings from investments at equity which include partnership investments, attributable to depressed equity market conditions, and a year-over-year decline in average short-term interest rates. Losses from investments at equity were $(51.3) million in 2008 as compared to earnings of $13.0 million and $87.8 million in 2007 and 2006, respectively. The amount for 2006 includes significant capital gains realized from HWIC.
Insurance premiums are earned ratably over the terms of the related policies after deductions for premiums ceded to reinsurers. Unearned premium reserves are established for the unexpired portion of policy premiums. Premiums are accrued for retrospectively rated policies and on policies subject to audit based on estimates throughout the contract or policy term. The reserve for uncollectible premiums includes both specific allowances for probable uncollectible amounts and a non-specific reserve determined principally on the basis of past collection experience. At December 31, 2008 and 2007, the reserve for uncollectible premiums was $20,191 and $22,535, respectively.
Certain individual available-for-sale securities had gross unrealized losses at December 31, 2008 totaling $137,858, which represented 12.6% of the cost or amortized cost of such securities in the aggregate, of which $22,492 was attributed to fixed income securities and $115,366 was attributed to equity securities.
A summary of these corporate aggregate reinsurance contracts and the amounts of reinsurance recoverable thereunder follows:
The Company provides postretirement health care and life insurance benefits to certain retired employees. Medical benefits are provided to employees who were at least age 50 on January 1, 1994, and upon retirement are at least age 55 and have at least 15 years of service. Employees hired before August 1, 1990 are eligible for retiree life insurance coverage based on defined age, service and salary criteria. During the fourth quarter of 2008, the Company announced that effective January 1, 2009, retiree medical benefits for age 65 and older Medicare eligible participants would be provided by individual “Medicare Advantage Plan” insurance policies and participants under age 65 would be covered by a group insurance policy. This change, from self-insurance was treated as a negative plan amendment and reduced the accumulated postretirement benefit obligation by $3,401.
The Company and its subsidiaries lease office space and equipment under non-cancelable operating leases. These include a 20-year lease for the Company’s home office which expires on December 31, 2022 and has minimum lease payments remaining of $43,251. Minimum annual rentals are summarized as follows: