to a lesser extent, increased coverage provided. In 2003 and 2002, as compared to the immediately prior years, premium increases were primarily from treaty business. On a worldwide basis, casualty lines business represented 73.5% of net premiums written in 2003 versus 73.9% and 79.2% in 2002 and 2001, respectively. The balance represented property lines. Treaty business represented 96.4% of net premiums written in 2003 versus 95.4% in 2002 and 95.7% in 2001. The balance represented facultative accounts.
Net premiums written by international offices increased in 2003 by $362.7 million, or 31.9%, over the prior year, to $1,500.3 million. All of the international offices recorded increases in net premiums written, led by London, TRZ and Paris. International net premiums written increased significantly in property, specialty casualty (principally directors' and officers' liability, other professional liability and medical malpractice) and auto liability lines. Note that increases in international net premiums written resulted, in part, from the impact of the weakened U.S. dollar in 2003 compared to the currencies in which TRH does business. International business represented 44.9% of 2003 net premiums written compared to 45.5% in 2002.
Of the total increase in net premiums written in 2002 compared to 2001, domestic net premiums written increased by $349.6 million, or 34.5%, to $1,362.6 million, with significant increases recorded in specialty casualty (principally directors' and officers' liability, other professional liability and medical malpractice), property, general casualty and ocean marine and aviation lines.
In 2001, the unusual effective tax rate results from the fact that the tax benefit exceeds the amount of pre-tax loss due to the ability of TRH to reflect the current benefit of carrying its current year tax net operating loss back to prior years ($17.7 million current tax benefit) and record a deferred tax benefit for a minimum tax credit carryforward which, by law at that time, could be carried forward indefinitely. However, a change in the U.S. federal tax law in 2002 extended the net operating loss carryback period to five years for net operating losses occurring in 2001 and 2002 enabling TRH to utilize its tax net operating loss for 2001 in 2002. (See Note 4 of Notes to Consolidated Financial Statements.)
2002 compared to 2001 -- Domestic revenues increased over the prior year due primarily to increases in net premiums earned for reasons discussed earlier in the Operational Review. Income before income taxes for 2002 far exceeded the prior year amount due to improved underwriting profit (loss) in 2002 resulting principally from reduced loss activity and, to a lesser extent, a reduction of the relationship of underwriting expenses to net premiums written, each as compared to 2001. (Also see combined ratio table earlier in Operational Review for relationships of elements of underwriting profit (loss) with net premiums written and earned.) Loss activity in 2002 includes a $55 million fourth quarter pre-tax charge to net losses and loss adjustment expenses related to an increase in loss reserves as discussed earlier in the Operational Review. 2001 loss activity includes $115 million of net pre-tax catastrophe losses (including $100 million related to September 11) and a net pre-tax loss of $60 million from estimated reinsurance exposure related to Enron Corporation.
At December 31, 2003, total investments and cash were $6,867.2 million compared to $5,587.5 million at December 31, 2002. The increase was caused, in large part, by $921.1 million of cash provided by operating activities and, to a lesser extent, the impact of a weakening U.S. dollar on investments held, principally in European currencies, and net unrealized appreciation of fixed maturities and equities available for sale during the year.
In general, a security is considered a candidate for such a write-down if it meets any of the following criteria:
Loss reserves include amounts for risks related to environmental impairment and asbestos-related illnesses totaling $75 million and $71 million at December 31, 2003 and 2002, respectively. The majority of TRH's environmental and asbestos-related liabilities arise from contracts entered into after 1984. These obligations generally arose from contracts underwritten specifically as environmental or asbestos-related coverages rather than from standard general liability coverages where the environmental or asbestos-related liabilities were neither clearly defined nor specifically excluded. The reserves carried for such claims, including IBNR, are based upon known facts and current law. However, significant uncertainty exists as, among other things, there are inconsistent court resolutions and judicial interpretations with respect to underlying policy intent and coverage and uncertainties as to the allocation of responsibility for resultant damages.
For 2002, TRH's operating cash flows of $598.0 million significantly exceeded the comparable 2001 amount of $242.1 million. The increase was caused principally by a significant increase in net premiums written, net of commissions, offset, in part, by an increase in paid losses and loss adjustment expenses, each in 2002 as compared to 2001.
In accordance with the transition provisions of SFAS No. 133, as amended, TRH transferred during the first quarter of 2001 all of its fixed maturities in the held-to-maturity classification at that time (with an amortized cost of $932.3 million and market value of $982.1 million at the date of transfer) to the fixed maturities available-for-sale classification (on the balance sheet) to enhance TRH's flexibility with respect to future portfolio management. The resulting increase in net unrealized appreciation of investments, net of income taxes (a component of accumulated other comprehensive income), of $32.4 million (net of a tax effect of $17.4 million) was recorded as the cumulative effect of an accounting change in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Stockholders' Equity in 2001. Under the provisions of SFAS No. 133, such a transfer does not affect TRH's intent nor its ability to hold fixed maturities acquired in the future to their maturity.
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
These consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated.
On January 1, 2003, TRH adopted the recognition provisions of SFAS No. 123, using the prospective method of transition. That method requires application of such recognition provisions under
(b) The components of the net deferred income tax asset at December 31, 2003 and 2002 were as follows:
year-end 2003, those options granted in 1994 were exercisable, as none have been exercised or forfeited. The impact of these options on the financial statements is not material.
15. SEGMENT INFORMATION (CONTINUED) The following table is a summary of financial data by segment:
Rent expense approximated $8,804,000, $8,249,000 and $7,844,000 in 2003, 2002 and 2001, respectively.