Net income for the year ended December 31, 2013 was $63.5 million or $4.42 per diluted share compared to $63.8 million or $4.45 per diluted share for the year ended December 31, 2012. Operating earnings for the year ended December 31, 2013 were $61.7 million or $4.30 per diluted share compared to $37.6 million or $2.63 per diluted share for the comparable period in 2012. In comparison to net income, our operating earnings for the year ended December 31, 2013 excluded after-tax net realized gains of $14.9 million, after-tax OTTI losses of $1.5 million and an after-tax charge of $11.6 million for the call premium in connection with the redemption of our 7.0% Notes due May 1, 2016. For the year ended December 31, 2012, operating earnings excluded after-tax net realized gains of $26.7 million and after-tax OTTI losses of $0.6 million. The increase in our operating earnings was largely attributable to stronger underwriting results.
Net written premiums increased 6.5% for the year ended December 31, 2013 compared to the same period in 2012. The increase is due to the mix of our Insurance Companies Property Casualty business and is specifically driven by the continued growth of our Excess Casualty and Primary Casualty businesses and more RRPs recorded in 2012 in connection with several losses from our Marine businesses. The aforementioned increases are partially offset by a decrease in our Marine business in connection with the re-underwriting of our Inland Marine division.
The 2.4% and 3.0% annualized pre-tax yields for the years ended December 31, 2012 and 2011, include investment expenses of $4.5 million and $4.7 million, respectively, for a total of $9.2 million, of interest expense related to the settlement of a dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. In the dispute Equitas alleged that we failed to make timely payments to them under certain reinsurance agreements in connection with subrogation recoveries received by us with respect to several catastrophe losses that occurred in the late 1980’s and early 1990’s. In addition, investment expenses for the year ended December 31, 2012 includes a $2.8 million investment performance fee. Excluding the impact of the aforementioned interest expense and investment performance fee, the annualized pre-tax yield for the years ended December 31, 2012 and 2011 would have been 2.7% and 3.2%, reflective of the general decline in market yield.
Net realized gains and losses are generated as part of the normal ongoing management of our investment portfolio. Net realized gains of $22.9 million for the year ended December 31, 2013 are primarily due to the sale of equities. Net realized gains of $41.1 million for the year ended December 31, 2012 are primarily due to the sale of municipal bonds and equity securities in anticipation of continued market uncertainty, the proceeds of which were reinvested in U.S. Government Treasury bonds and equities. Net realized gains of $12.0 million for the year ended December 31, 2011 primarily included the sale of corporate bonds and equity mutual funds.
Total other expense for the year ended December 31, 2013 was $1.2 million compared to total other income of $1.5 million and $1.2 million for the years ended December 31, 2012 and 2011, respectively. Other income consists of foreign exchange gains and losses from our Lloyd’s Operations, commission income and inspection fees related to our specialty insurance business.
The aforementioned strengthening from our Insurance Companies Property Casualty and Professional Liability were partially offset by $15.2 million of net reserve releases from our Insurance Companies Marine business in connection with favorable emergence from our Marine liability lines for UYs 2012 and prior.
We recorded income tax expense of $28.8 million, $28.0 million and $7.1 million for the years ended December 31, 2013, 2012 and 2011 respectively. The effective tax rates were 31.2%, 30.5% and 21.8% for the years ended December 31, 2013, 2012 and 2011, respectively. The increase in the effective tax rate from 2012 to 2013 is due to a smaller percentage of tax-exempt interest earned during 2013. The increase in effective tax rate from 2011 to 2012 resulted primarily from a higher percentage of pre-tax income being subject to the maximum federal income tax rate in 2012, due in part to net realized gains on the sales of investments. The effective tax rate on net investment income was 27.8%, 26.8% and 27.6% for the years ended December 31, 2013, 2012 and 2011 respectively.
The following table sets forth the results of operations for the Insurance Companies for the years ended December 31, 2013, 2012 and 2011:
During the year ended December 31, 2013 we recognized OTTI losses of $2.4 million related to three equity securities and one municipal bond. During the year ended December 31, 2012 we recognized OTTI losses of $0.9 million related to one non-agency mortgage-backed security and three equity securities. During the year ended December 31, 2011 we recognized OTTI losses of $2.0 million related to non-agency mortgage-backed securities, two equity securities and one corporate bond. The significant inputs used to measure the amount of credit loss recognized in earnings were actual delinquency rates, default probability assumptions, severity assumptions and prepayment assumptions. Projected losses are a function of both loss severity and probability of default. Default probability and severity assumptions differ based on property type, vintage and the stress of the collateral. We do not intend to sell any of these securities and it is more likely than not that we will not be required to sell these securities before the recovery of the amortized cost basis.