Net income was $144,823,000 and $6,438,000 for the year ended December 31, 2003 and the 2002 Period, respectively. The increase is primarily because 2003 was the Company's first complete year of operations and the 2002 Period represents a two-month period, during which the Company had minimal underwriting activity. Additional factors affecting the comparison include the growth in the business underwritten in 2003 over 2002, favorable development in 2003 of unpaid losses and LAE as of December 31, 2002 of approximately $50,866,000, as well as improved profitability relating to net premiums earned in 2003, and increased investment income resulting from growth in invested assets in 2003. The United States insurance industry incurred some significant catastrophe losses in 2003. However, catastrophe losses in the Company's portfolio were relatively low as most catastrophe claims remained at the primary or ceding company level. Operating expenses for the year ended December 31, 2003 include a charge of $9,289,000 for expenses related to the separation and consulting agreement with the Company's former chief executive officer. Income tax expenses of $48,875,000 resulted in an effective tax rate of 25.2% for the year.
Acquisition expenses for the year ended December 31, 2003 and the 2002 Period were $52,154,000 and $7,798,000, respectively. The increase is due to the increase in net premiums earned in 2003 over the 2002 Period. The ratios of acquisition expenses to net premiums earned for 2003 and the 2002 Period, respectively were 14.7% and 18.1%, respectively. The ratios fluctuate as a result of the changes in mix of business and the differences in terms and conditions of various contracts.
Losses and LAE were $266,836,000 and $29,498,000 for the year ended December 31, 2003 and the 2002 Period, respectively. The increase in losses and LAE is related to the increase in net premiums earned in 2003 over the 2002 Period. The loss ratios incurred for the Casualty segment in 2003 and the 2002 Period were 68.2% and 75.0%, respectively. The loss ratio on business underwritten in 2003 is lower than the loss ratio for business underwritten in 2002 due to rate increases achieved during 2003. The losses and LAE in 2003 includes amounts from business underwritten in 2003 and business underwritten in 2002 while the 2002 Period includes amounts only from business underwritten in 2002. Losses and LAE in 2003 included a reduction is the estimated liability as of December 31, 2002 of $14,500,000 of which $13,100,000 relates to the reduction in 2003 of premiums originally estimated and accrued in the 2002 Period. The remaining $1,400,000 relates to favorable development. The decline in the loss ratio is further influenced by a shift in the mix of business toward contracts that have lower loss ratios and higher expense ratios.
None of Platinum Holdings, Platinum US, Platinum UK or Platinum Bermuda have any material commitments for capital expenditures.
A retrocessionaire's insolvency or its inability or unwillingness to make payments under the terms of its reinsurance treaty with us could have a material adverse effect on us. Therefore, our retrocessions subject us to credit risk because the ceding of risk to retrocessionaires does not relieve a reinsurer of its liability to the ceding companies.
In accordance with industry practice, we expect to frequently pay amounts owing in respect of claims under our policies to reinsurance brokers, for payment over to the ceding companies. In the event that a broker fails to make such a payment, depending on the jurisdiction, we may remain liable to the ceding company for the deficiency. Conversely, in certain jurisdictions, when premiums for such policies are paid to reinsurance brokers for payment over to us, such premiums will be deemed to have been paid and the ceding company will no longer be liable to us for those amounts whether or not actually received by us. Consequently, we will assume a degree of credit risk associated with our brokers during the payment process.
to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable premium levels. We can expect to experience the effects of such cyclicality.
Platinum Holdings is a holding company that conducts no reinsurance operations of its own. All operations are conducted by its wholly owned operating subsidiaries, Platinum US, Platinum UK and Platinum Bermuda. As a holding company, Platinum Holdings' cash flow consists primarily of dividends, interest and other permissible payments from its subsidiaries. Platinum Holdings depends on such payments for general corporate purposes and to meet its obligations, including the payment of any dividends to its shareholders. Additionally, under the Bermuda Companies Act 1981, Platinum Holdings may declare or pay a dividend only if, among other things, it has reasonable grounds for believing that it is, or would after the payment be, able to pay its liabilities as they become due. For a discussion of the legal limitations on our subsidiaries' ability to pay dividends to Platinum Holdings, see "Business -- Regulation."