The Company manages its investment portfolio in order to minimize losses, both realized and unrealized. Gross realized gains were $38.9 million for the year ended December 31, 2002, as compared to $31.5 million and $26.4 million in 2001 and 2000, respectively. Gross realized losses were $12.3 million, $14.4 million and $3.1 million for the years ended December 31, 2002, 2001 and 2000, respectively. Included in gross realized losses for the year ended December 31, 2002 were write downs of approximately $4.9 million due to the recognition of other than temporary impairments on certain investment securities (see discussion on page 34.)
The above tables indicate downward trends in the number of open claims and total gross payments over the past three years. Due to the types of coverages within Argonaut Insurance Company's run-off lines of business, a significant amount of judgment and uncertainty exists in establishing the reserves for losses and loss adjustment expenses. Factors that increase these uncertainties are: (1) lack of historical data, (2) inapplicability of standard actuarial projection techniques, (3) uncertainties regarding ultimate claim costs, (4) coverage interpretations, and (5) the judicial, statutory and regulatory environments under which these claims may ultimately be resolved. Significant uncertainty remains as to the ultimate liability to the Company due to the potentially long waiting period between exposure and emergence of any bodily injury or property damage and the resulting potential for involvement of multiple policy periods for individual claims. Additionally, recent industry trends show an increasing number of claims being filed by individuals who claim asbestos exposure, but who have no symptoms of asbestos-related disease. Due to these uncertainties, the current trends cannot be relied on to predict future results.
The Company entered into a retroactive adverse loss development reinsurance agreement on December 31, 2002 to initially cede $125 million of carried reserves for the workers' compensation, commercial multiple peril, general liability and asbestos, environmental and other latent losses lines of business. At December 31, 2002, $118.5 million has been recorded as reinsurance funds withheld and $6.5 as ceded reinsurance payable, which was paid during the first quarter of 2003.
The agreement provides up to $119 million of future adverse development, if any, on workers' compensation, commercial multiple peril, general liability and asbestos, environmental and other latent losses. The cessions for adverse development are calculated on a tiered structure and subject to certain limitations. The Company has the option to commute the reinsurance agreement at any time if the funds withheld balance is positive. The reinsurance agreement is effective for reserves as of December 31, 2002, with the exception of reserves for asbestos, environmental, and other latent losses which are effective as of September 30, 2002.
The quarterly dividend paid to shareholders for 2002 was $0.15 per common share, for a total of $0.60 per share, as compared to $1.38 and $1.64 per common share for 2001 and 2000, respectively. The Company reduced the dividend in order to preserve the capital base and to fund future profitable growth opportunities. During the first quarter of 2003, the board of directors suspended the payment of shareholder dividends to support the capital needs of the Company.