For equity securities, we consider our intent to hold securities as part of the process of evaluating whether a decline in fair value represents an other-than-temporary decline in value. For fixed maturity securities, we consider our intent to sell a security and whether it is more likely than not that we will be required to sell a security before the anticipated recovery as part of the process of evaluating whether a security’s unrealized loss represents an other-than-temporary decline. Our ability to hold such securities is supported by sufficient cash flow from its operations and from maturities within its investment portfolio in order to meet its claims payments and other disbursement obligations arising from its underwriting operations without selling such investments. With respect to securities where the decline in value is determined to be temporary and the security’s value is not written down, a subsequent decision may be made to sell that security and realize a loss. Subsequent decisions on security sales are made within the context of overall risk monitoring, changing information and market conditions.
The 2007 results of operations reflect improved financial performance compared to 2006 due to a combination of improved underwriting results and growth in investment income. The underwriting results benefited from increased net premium revenues despite continuing softening market conditions, and the recording of a net redundancy of prior years’ loss reserves of $47.0 million, or $1.80 per share, which reduced the 2007 combined ratio of 87.5% by 7.8 loss ratio points.
The Insurance Companies recorded $5.3 million of net prior year savings for marine business, primarily comprised of $4.7 million of savings in the marine liability business, $2.8 million of savings in the protection and indemnity business, $1.4 million of savings in the transport business and $1.4 million of savings due to a review of reinsurance recoverable in the second quarter of 2008, partially offset by $2.7 million of strengthening in the cargo business, $1.4 million of strengthening in the craft and hull businesses, and $0.7 million recorded for a commutation with a reinsurer. The favorable development for marine liability, protection and indemnity, and transport was primarily due to reduced claims activity for underwriting years 2003 through 2006 as well as IBNR loss reserve reductions that resulted from the reduced claims activity. The adverse development for cargo, craft and hull was primarily due to several large claims in underwriting years 2005 and 2006.
The Lloyd’s Operations recorded $8.8 million of net prior year savings, primarily in the marine liability, energy, specie and reinsurance business for underwriting years 2005 and prior. The favorable development is the result of more extensive analysis of the potential future development which led us to shorten the development patterns.
As illustrated in the following table, our overall reinsurance recoverable amounts for paid and unpaid losses have decreased during 2009 as we utilized less reinsurance in 2009 compared to 2008:
At December 31, 2009, the IBNR loss reserve was $684.1 million or 61.5% of our total loss reserves compared to $633.6 million or 63.4% in 2008.
The following table sets forth the underwriting results for the Insurance Companies for the periods indicated:
Details of the collateral of our asset-backed securities portfolio as of December 31, 2009 are presented below:
Investments and cash increased to $2.06 billion at December 31, 2009 from $1.92 billion at December 31, 2008. The increase was primarily due to the positive cash flow from operations. Net investment income was $75.5 million for 2009, $76.6 million for 2008 and $70.7 million for 2007.