- ------------ (1) After-tax operating income (loss), before after-tax net realized capital gains or losses, was $169.0 million (or $3.48 per basic share and $3.47 per diluted share), $165.7 million (or $3.29 per basic and $3.27 per diluted share), $144.6 million (or $2.86 per basic and $2.85 per diluted share), $108.3 million (or $2.14 per basic and diluted share) and ($21.2) million (or ($0.42) per basic and diluted share) for the years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively. Supplemental after-tax operating income before net realized gains and excluding IPO-related charges was $78.4 million (or $1.56 per basic and diluted share) for the year ended December 31, 1995. (2) Catastrophe losses are net of reinsurance. A catastrophe is defined, for purposes of the Selected Consolidated Financial Data, as an event that causes a pre-tax loss before reinsurance of at least $5.0 million and has an event date of January 1, 1988 or later. (3) Some amounts may not reconcile due to rounding. (4) Based on weighted average basic shares outstanding of 48.5 million, 50.4 million, 50.5 million, 50.6 million and 50.2 million for 1999, 1998, 1997, 1996 and 1995, respectively. (5) Based on weighted average diluted shares outstanding of 48.7 million, 50.7 million, 50.8 million, 50.7 million and 50.2 million for 1999, 1998, 1997, 1996 and 1995, respectively. (6) GAAP losses and LAE incurred as a percentage of GAAP net premiums earned. (7) Statutory results are on a Everest Re legal entity basis; consequently, investments in subsidiary operations are accounted for on an equity basis. Effective January 1, 1997, the reinsurance operations of Everest Re Ltd. were transferred to Everest Re on a portfolio basis. Excluding the impact of the portfolio transaction, the 1997 ratio of net written premiums to surplus, the 1997 loss and LAE ratio, the 1997 underwriting expense ratio and the 1997 combined ratio were 1.1 x, 70.5%, 32.2% and 102.7%, respectively. (8) Statutory net premiums written as a percentage of period-end surplus. (9) Statutory losses and LAE incurred as a percentage of SAP net premiums earned. (10) Statutory underwriting expenses as a percentage of SAP net premiums written. (11) Excluding net unrealized appreciation (depreciation) of investments, stockholder's equity was $1,337.2 million, $1,281.6 million, $1,147.1 million, $1,008.3 million and $899.9 million as of December 31, 1999, 1998, 1997, 1996 and 1995, respectively. (12) Based on 46.5 million shares outstanding for December 31, 1999, 50.0 million shares outstanding for December 31, 1998, 50.5 million shares outstanding for December 31, 1997 and 1996 and 50.8 million shares outstanding for December 31, 1995.
PREMIUM REVENUES. Net premiums earned increased by 1.7% to $1,068.0 million in 1998 from $1,049.8 million in 1997, with the increase attributable to normal earnings patterns coupled with the decrease in premiums written. Contributing to this increase was a 21.4% ($65.4 million) increase in the U.S. Broker Treaty operation and an 11.4% ($17.7 million) increase in the U.S. Direct Treaty Reinsurance and Insurance operation. These increases were partially offset by a 30.4% ($48.4 million) decrease in the Marine, Aviation and Surety operation, an 8.4% ($6.7 million) decrease in the U.S. Facultative operation and a 2.8% ($9.9 million) decrease in the International operation. All of these changes reflect period to period changes in net written premiums together with normal variability in earnings patterns.
Underwriting expenses decreased by 0.7% to $324.1 million in 1998 from $326.5 million in 1997. Commission, brokerage, taxes and fees decreased by $0.2 million attributable to decreases in written premium and changes in the Company's business mix. Other underwriting expenses decreased by $2.1 million, as the Company's cost reduction initiatives continued to provide benefits over the course of 1998 and 1997. The benefits more than offset the impact of salary and other expense increases that were generally in line with inflation. Contributing to these underwriting expense decreases were a 28.5% ($14.8 million) decrease in the Marine, Aviation and Surety operation and a 10.1% ($2.4 million) decrease in the U.S. Facultative operation. These underwriting expense decreases were partially offset by a 12.8% ($11.9 million) increase in the U.S. Broker Treaty operation, a 6.3% ($3.3 million) increase in the U.S. Direct Treaty Reinsurance and Insurance operation and a 0.1% ($1.0 million) increase in the International operation. The Company's expense ratio decreased by 0.8 percentage points to 30.3% in 1998 from 31.1% in 1997 as a result of the increase in premiums earned and the decrease in underwriting expenses.
During the first quarter of 1999, Gibraltar disputed $63.0 million ceded under the Stop Loss Agreement in the fourth quarter of 1998. Gibraltar also disputed the Company's level of reserves previously ceded to and paid by Gibraltar under the Stop Loss Agreement and claimed a refund of $91.7 million. These disputes were based on Gibraltar's belief that there were redundancies in that portion of Everest Re's IBNR reserves which were subject to the Stop Loss Agreement. Pursuant to the terms of the Stop Loss Agreement, Everest Re and Gibraltar appointed an independent examiner to review Everest Re's reserves underlying the disputed amounts to determine the appropriate amount of cessions to Gibraltar, and Everest Re placed the $91.7 million in a trust.
The tables below display the potential impact of market value fluctuations and after-tax unrealized appreciation on the fixed maturity portfolio as of December 31, 1999 and 1998 based on parallel 200 basis point shifts in interest rates up and down in 100 basis point increments. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates on mortgage-backed securities, changes in prepayment expectations under different interest rate environments are taken into account. For legal entities with a non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios. During the year, there was no material change in the fixed maturity portfolio with respect to interest rate risk. All amounts are in millions of U.S.$.