The following section builds upon earlier discussion and provides more information about our company and our financial performance.
Effectively managing our capital - During 2005, we repurchased 4.5 million shares, or 3.6%, of our outstanding common stock at a total cost of $239.2 under stock buyback programs. We also repurchased $25.9 in principal amount of our debt for $29.8, including transaction costs. In 2004, we used the majority of the $1,499.0 proceeds from the sale of L&I to return our debt-to-capital ratios to pre-sale levels and return excess capital to our shareholders. Specifically, we used $735.2, including transaction costs, to repurchase $618.4 of debt, and we used $625.0 to execute an accelerated stock buyback program of 13.2 million shares. We retained the balance of the sale proceeds for future flexibility and to pay transaction-related expenses.
Investment activities are an important part of our business and represent a significant part of our total revenues. We don’t include our investment portfolio results when measuring the profitability of our individual segments because we manage them separately. We invest the insurance premiums we receive in a diversified portfolio until they’re needed to pay claims. Our first priority is to protect our policyholders, so we invest in a diversified portfolio of primarily high-grade fixed maturities. This strategy provides protection for our policyholders and a steady income for our shareholders.
Catastrophe and non-catastrophe weather loss reserves are established by event by the claims department when the event occurs. These estimates are revised as the actual loss experience develops and claims are reported and settled over time.
How long and by how much the fair value of the security has been below its amortized cost
Net written premiums increased $114.4, or 4.2%, in 2005 compared with 2004 and $370.1, or 15.8%, in 2004 compared with 2003. The increases in net written premiums were primarily driven by:
Net earned premiums decreased $7.3, or 0.8%, in 2005 compared with 2004 and were flat in 2004 compared with 2003. This reflected:
Our underwriting profit decreased $5.0, and our combined ratio increased 6.2 points in 2005 compared with 2004. Our underwriting profit decreased $15.3, and our combined ratio increased 19.6 points in 2004 compared with 2003. Our underwriting results and combined ratio were primarily driven by:
Our SBI Regular segment provides insurance for small- to mid-sized businesses (those with annual premiums of $200,000 or less). This is our core commercial lines business featuring these main products:
Our underwriting profit increased $6.3, and our combined ratio decreased 1.7 points in 2005 compared with 2004. Our underwriting profit increased $2.8, and our combined ratio increased 0.2 points in 2004 compared with 2003. Our underwriting results in 2005 included favorable prior-year reserve development of $35.7 primarily related to general liability coverages. The difference in prior-year reserve development decreased the combined ratio by 8.4 points in 2005 compared with 2004.
For events other than earthquake, the entire amount above $500.0 would be ours.
In 2005, we repurchased $25.9 in principal amount of 7.25% senior notes for $29.8. Including transaction costs, we reported a pretax loss on debt repurchase of $4.0 ($2.6 after tax) in the Consolidated Statements of Income.
In 2004, we repurchased $473.4 in principal amount of 8.072% debentures for $562.7, and we repurchased $145.0 in principal amount of 7.25% senior notes for $170.9. Including transaction costs, we reported a pretax loss on debt repurchases of $121.0 ($78.7 after tax) in the Consolidated Statements of Income.
The higher level of impairments in 2003 primarily resulted from credit problems affecting some of the companies in which we had invested and credit deterioration in the airline and air transportation sectors.
As of December 31, 2005, our marketable equity securities, carried at $1,123.5, included: