The following overview of our 2013, 2012 and 2011 operating results and financial condition is intended to identify important themes and should be read in conjunction with the more detailed discussion further below.
Net income. For 2013, we reported income after taxes of $329.3 million, compared to income after taxes of $280.4 million in 2012, and a loss after taxes of $110.1 million in 2011. The increase in net income in 2013 over 2012 was due to the $39.3
Book value per ordinary share is based on total shareholders’ equity, less preference shares (liquidation preference less issue expenses), divided by the number of ordinary shares in issue at the end of the period.
Overall. The overall pricing environment in which we operate continues to be varied and highly dynamic.
IBNR reserves. The need for IBNR reserves arises from time lags between when a loss occurs and when it is actually reported and settled. By definition, we do not have specific information on IBNR claims so they need to be estimated by actuarial methodologies. IBNR reserves are therefore generally calculated at an aggregate level and cannot generally be identified as reserves for a particular loss or contract. We calculate IBNR reserves by line of business. Where appropriate, analyses may be conducted on sub-sets of a line of business. IBNR reserves are calculated by projecting our ultimate losses on each line of business and subtracting paid losses and case reserves. IBNR reserves also cover any potential development of reported claims.
and the mean value of $4,319.4 million), although the impact of such a change is unlikely to be recognized in one calendar year due to the unwinding of experience against expectations taking many years.
Investment gains. Realized and unrealized investment gains for the twelve months ended December 31, 2013 were $36.4 million (2012 - $26.8 million; 2011 - $30.3 million) comprising the amounts set out in the table below:
The loss ratio for 2012 was 63.4% compared to 60.6% for 2011. The deterioration in the loss ratio included $24.8 million of losses in respect of claims arising from the sinking of the Costa Concordia cruise liner in January 2012, $49.8 million of losses from claims arising from Superstorm Sandy and $1.4 million from severe weather in the U.S. in 2012. The increase in losses was partly offset by a $15.2 million increase in prior year reserve releases to $35.2 million compared to a $20.0 million reserve release in 2011. Prior year reserve releases are further discussed under “Reserves for Losses and Loss Adjustment Expenses.”
Other-than-temporary Impairment of Investments. We review all our available for sale fixed income and equity investments on an individual security basis for potential OTTI each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions. For further discussion, see Note 2(c) of our consolidated financial statements, “Basis of Preparation and Significant Accounting Policies - Accounting for Investments, Cash and Cash Equivalents.”
Access to capital. Our business operations are in part dependent on our financial strength and the market’s perception thereof, as measured by total shareholders’ equity, which was $3,299.6 million at December 31, 2013 (December 31, 2012 - $3,488.4 million). We believe our financial strength provides us with the flexibility and capacity to obtain funds through debt or equity financing. Our continuing ability to access the capital markets is dependent on, among other things, our operating results, market conditions and our perceived financial strength. We regularly monitor our capital and financial position, as well as investment and securities market conditions, both in general and with respect to Aspen Holdings’ securities. Our ordinary shares and all our preference shares are listed on the NYSE.
Where we incur losses in currencies which are not normally held we will convert funds into the appropriate currencies to mitigate our currency risk and also make funds available to settle claims in local currencies as and when they become due. Recent examples of this have been where we have converted funds to Thai Bhat and New Zealand Dollars to cover flood and earthquake losses in these countries. For local regulatory reasons we hold assets in trust which does limit our liquidity to some degree, however, the process of matching assets with liabilities in currency means that at any one time we will hold cash and short-term assets in all major currencies which are available to settle claims.