Our GAAP combined ratio for the year ended December 31, 2011 decreased to 95.8% from 99.9% for the year ended December 31, 2010. The loss and LAE ratio decreased by 3.9 points to 57.2% while the expense ratio decreased by 0.2 points to 38.6%. The decrease in the loss and LAE ratio was primarily due to a decrease in current accident year non-catastrophe losses. We experienced a number of large losses in our property and inland marine business within Specialty Insurance Operations and in our non-specialty commercial lines business within Other Insurance Operations during the year ended December 31, 2010. The decrease in current accident year losses was partially offset by a decrease in favorable loss reserve development. The year ended December 31, 2011 included $2.9 million or 0.3 points of favorable loss reserve development, as compared to $57.1 million or 4.1 points of favorable loss reserve development in the year ended December 31, 2010. During the year ended December 31, 2011, we completed a detailed review of run-off expenses and, as a result, increased our run-off loss and LAE reserves. For the year ended December 31, 2011, we recognized $26.7 million of adverse loss reserve development, which includes the impact of the expense reserve strengthening, in Other Insurance Operations. During the year ended December 31, 2011, the favorable loss reserve development in Specialty Insurance Operations was primarily related to lower than expected severity on non-catastrophe losses related to professional liability lines, multiple peril liability lines and other general liability lines. Current accident year catastrophe losses were 0.3 points lower than the prior year. The year ended December 31, 2011 included $36.9 million or 3.6 points of current accident year catastrophe losses, as compared to $55.3 million or 3.9 points of current accident year catastrophe losses in the year ended December 31, 2010. The slight decrease in the expense ratio reflects lower
The Specialty Products combined ratio for the year ended December 31, 2011 increased to 95.1% from 93.1% for the year ended December 31, 2010. The loss and LAE ratio increased by 1.6 points to 60.8% while the expense ratio increased by 0.4 points to 34.3%. The increase in the loss and LAE ratio was primarily due to lower favorable loss reserve development as well as higher current accident year catastrophe losses. The year ended December 31, 2011 included 2.7 points of favorable loss reserve development related to professional liability, compared to 7.5 points of favorable loss reserve development related to professional liability in the prior year period. The year ended December 31, 2011 included 4.2 points of current accident year catastrophe losses, primarily related to tornados in the southeastern and Midwestern United States, storms and freezing weather in the northeastern and southwestern United States and hurricane Irene impacting PIM and to a lesser extent within the financial services business of OBPI, compared to 3.3 points of current accident year catastrophe losses, primarily related to severe wind and rainstorms in the northeastern United States experienced in the first quarter of 2010 and elsewhere in the United States in the second quarter of 2010. The increases were partially offset by a 4.1 point decrease in current accident year non-catastrophe losses, compared with the year ended December 31, 2010. The year ended December 31, 2010 included the impact of a number of large losses experienced at PIM. The increase in the expense ratio was primarily due to an increase in policy acquisition expenses mainly due to OBPI, partially offset by a decrease in other underwriting expenses primarily related to PIM.
On August 22, 2007, our Board authorized us to repurchase up to $200.0 million of OneBeacon's Class A common shares from time to time, subject to market conditions. Shares may be repurchased on the open market or through privately negotiated transactions. This authorization does not have a stated expiration date. Since the inception of this authorization, the Company has repurchased and retired 5.6 million of its Class A common shares. During the year ended December 31, 2011, no shares were repurchased. During the year ended December 31, 2010, 0.7 million Class A common shares under this authorization were repurchased for $10.5 million and retired. During the year ended December 31, 2009, no shares were repurchased.
With respect to the favorable loss reserve development in Specialty Insurance Operations, at December 31, 2010, management had revised its expectations downward for future loss emergence in the professional liability business, which had initially been based on market analysis when this business was initiated in 2002 and 2003. However, during the year ended December 31, 2011, losses continued to be lower than these revised expectations. As a result, management lowered its selected reserves on the earliest years which affected more recent years as total loss expectations for those years are based in part on prior years' results. The impact of this revised estimate was a decrease to professional liability reserves of $11.5 million which affected Specialty Insurance Operations.
The percentages shown in the following table represent the linear interpolation of where our recorded loss and LAE reserves, net of reinsurance recoverables on unpaid losses, are within the range
of reserves estimates by segment at December 31, 2011 and 2010, where the low end of the range equals zero, the middle of the range equals 50% and the high end of the range equals 100%.
them together in an attempt to estimate volatility for our reserves in total. It is important to note that the variations discussed are not meant to be a worst-case scenario, and therefore, it is possible that future variations may be more than amounts discussed below.
In connection with the OneBeacon Acquisition, Aviva caused us to purchase reinsurance contracts with two reinsurance companies rated "A++" ("Superior", the highest of fifteen financial strength ratings) by A.M. Best and "AA+" ("Very Strong", the second highest of twenty-one financial strength ratings) by Standard & Poor's. One is a reinsurance cover with NICO which entitles us to recover up to $2.5 billion in ultimate loss and LAE incurred related to asbestos claims arising from business written prior to 1992, environmental claims arising from business written prior to 1987 and certain other latent exposures. As of December 31, 2011, we have ceded estimated incurred losses of approximately $2.3 billion to NICO under the NICO Cover. The other contract is a reinsurance cover with GRC for up to $570 million of additional losses on all claims arising from accident years 2000 and prior. As of December 31, 2011, we have ceded estimated incurred losses of $562.0 million to GRC under the GRC Cover. The NICO Cover and GRC Cover, which were contingent on and occurred contemporaneously with the OneBeacon Acquisition, were put in place in lieu of a seller guarantee of loss and LAE reserves and are therefore accounted for as a seller guarantee under GAAP. NICO and GRC are wholly-owned subsidiaries of Berkshire Hathaway Inc.