Net income was $2.2 billion in 2009 compared with $1.8 billion in 2008 and $2.8 billion in 2007. The increase in net income in 2009 compared with 2008 was due to higher operating income in 2009 and modest net realized investment gains in 2009 compared with substantial net realized investment losses in 2008. We define operating income as net income excluding realized investment gains and losses after tax. The decrease in net income in 2008 compared with 2007 was due to both a significant decline in operating income and substantial realized investment losses in 2008 compared with substantial realized investments gains in 2007.
The extent of losses from a natural catastrophe is a function of both the total amount of insured exposure in an area affected by the event and the severity of the event. We regularly assess our concentration of risk exposures in natural catastrophe exposed areas globally and have strategies and underwriting standards to manage this exposure through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance. We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas in the United States, such as California and the gulf and east coasts, as well as in natural catastrophe exposed areas in other countries. The information provided by the catastrophe modeling and the risk concentration management tool has resulted in our non-renewing some accounts and has restricted us from writing others. Actual results may differ materially from those suggested by the model. We also continue to actively explore and analyze credible scientific evidence, including the potential impact of global climate change, that may affect our ability to manage exposure under the insurance policies we issue as well as the impact that laws and regulations intended to combat climate change may have on us.
Loss reserves, net of reinsurance recoverable, increased by $631 million or 3% in 2009. Loss reserves related to our insurance business increased by $815 million, including approximately $370 million related to currency fluctuation due to the weaker U.S. dollar at December 31, 2009 compared with December 31, 2008. Loss reserves related to our reinsurance assumed business, which is in run-off, decreased by $184 million.
During 2009, the analysis of our toxic waste exposures indicated higher than expected development driven by a relatively small number of exposures. Based on these developments, as well as the increased cost to remediate certain sites, we increased our net toxic waste loss reserves by $90 million in 2009.
For equity securities, we consider our intent and ability to hold a security for a period of time sufficient to allow us to recover our cost. If a decline in the fair value of an equity security is deemed to be other than temporary, the security is written down to fair value and the amount of the writedown is included in net income as a realized investment loss.
Fair values for fixed maturities are determined by management, utilizing prices obtained from an independent, nationally recognized pricing service or, in the case of securities for which prices are not provided by a pricing service, from independent brokers. For fixed maturities that have quoted prices in active markets, market quotations are provided. For fixed maturities that do not trade on a daily basis, the pricing service and brokers provide fair value estimates using a variety of inputs including, but not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, reference data, prepayment spreads and measures of volatility. Management reviews on an ongoing basis the reasonableness of the methodologies used by the relevant pricing service and brokers. In addition, management, using the prices received for the securities from the pricing service and brokers,