The headquarters of Quanta U.S. Holdings and our other U.S. subsidiaries is located in New York, New York and contains approximately 58,000 square feet. The initial term of the lease for these premises expires in October 2013 with an option to extend the lease term by an additional 15 years. The annual lease payment for this office is approximately $2,300,720.
Our other offices in the U.S. are located in Reston, Virginia; Chicago, Illinois; Pittsburgh, Pennsylvania; Denver, Colorado; San Jose, California; San Francisco, California; Hartford, Connecticut; Dallas, Texas; Minneapolis, Minnesota; Alpharetta, Georgia, Cazenovia, New York; Boxborough, Massachusetts; Somerset, New Jersey, Apex, North Carolina, Orchard Park, New York and Irvine, California. These offices are leased for a total of approximately $1.6 million per year for all these offices.
Quanta Holdings was incorporated on May 23, 2003 as a Bermuda holding company formed to provide specialty lines insurance, reinsurance, risk assessment and risk technical services on a global basis through its affiliated companies. We commenced substantive operations on September 3, 2003 when we obtained our initial capital and purchased ESC, our predecessor for accounting purposes. During the remainder of 2003, we wrote a small number of insurance and reinsurance contracts. During the years ended December 31, 2005 and 2004, we continued to grow our specialty lines of business significantly increasing the number of insurance and reinsurance contracts underwritten.
We acquired Environmental Strategies Corporation, known as ESC, on September 3, 2003. ESC is our predecessor company for accounting and financial reporting purposes. ESC provides diversified environmental risk management services to assist customers in environmental remediation, regulatory analyses, technical support for environmental claims, merger and acquisition due diligence, environmental audits and risk assessments, and engineering and information management services. ESC also provides risk assessment and technical services support to our environmental underwriters. We expect ESC's operations will be adversely affected to the extent our environmental insurance product line and our other insurance and reinsurance product lines that have used ESC's consulting services are no longer able to continue to write coverage or lose business opportunities due to the recent A.M. Best downgrade of our financial strength ratings. In addition to these consulting services, we provide liability assumption programs through Quanta Technical Services and its subsidiaries under which these subsidiaries assume specified liabilities associated with environmental conditions, which may be insured or guaranteed by us or an insurance subsidiary. Under these programs, our technical services team provides consulting and performs the required remediation services through subcontractors. Our liability assumption programs during the year ended December 31, 2005 included our Buffalo, New York and Axis, Alabama programs. The estimated remaining liabilities for these programs are approximately $5.9 million, as of December 31, 2005. We are currently evaluating whether, or to what extent, we will continue to offer this liability assumption program following our March 2006 ratings downgrade.
Presently, we anticipate that it will be difficult to continue to provide these programs under an A.M. Best rating of "B++."
We generated approximately $390.0 million, $419.5 million and $20.1 million of net premiums written after premiums ceded on purchased reinsurance protection, which include the ceded premiums of $57.3 million related to the Property Transaction referred to above, and $364.1 million, $237.1 million and $1.9 million of net premiums earned during the years ended December 31, 2005, 2004 and 2003. During the year ended December 31, 2005, we also purchased additional retrocessional protection in our specialty reinsurance segment which is intended to help limit our net loss exposures to catastrophe windstorm events. This purchase resulted in approximately $15.3 million of premium ceded during the year ended December 31, 2005. However, based on our current estimate of losses related to Hurricane Katrina, we have exhausted our reinsurance and retrocessional protection with respect to that hurricane. If our Hurricane Katrina losses prove to be greater than currently anticipated, we will have no further reinsurance and retrocessional coverage available for that windstorm.
General and administrative expenses consist primarily of personnel related expenses, information technology, other operating overheads and professional fees. From time to time we engage administrative service providers and legal, accounting, tax and financial advisors. General and administrative expenses are a function of the development of our business and infrastructure, including the growth in personnel and the volume of insurance and reinsurance contracts written. These general and administrative expenses may be incurred directly by a segment or indirectly at the corporate level.
net realized gains on sale of investments of $0.1 million. Technical services revenues were derived from the operations of ESC, which were included in our consolidated results of operations from the date of acquisition, September 3, 2003.
The table below shows gross and net premiums written by product line for the years ended December 31, 2005 and 2004 whether written on a traditional insurance, programs or structured basis.
Our casualty reinsurance gross premiums written during the year ended December 31, 2005 are summarized in the table below by risk class.
segment are being earned over the periods of reinsured or underlying insured risks which are typically one year.
During the period from May 23, 2003 (date of incorporation) to December 31, 2003, we did not allocate general and administrative expenses to our underwriting segments.
The following table summarizes and compares our technical services segment results for the years ended December 31, 2005 and 2004.
Our investment guidelines require compliance with applicable local regulations and laws. Without board approval, we will not purchase financial futures, forwards, options, swaps and other derivatives, except for instruments that are purchased as part of our business, for purposes of hedging capital market risks (including those within our structured products transactions), or as replication
On December 14, 2005, the Company issued 13,136,841 common shares at $4.75 per share and 3,000,000 shares of our series A preferred shares at $25.00 per share with a liquidation preference of $25.00 per share. The gross proceeds to the Company were $137.4 million, of which $62.4 million was from the sale of common shares and $75.0 million was from the sale of preferred shares. In addition, on December 29, 2005, the underwriters exercised their over-allotment option to acquire an additional 130,525 series A preferred shares at the offering price of $25.00 per share. This resulted in gross proceeds of $3.3 million which were received and recorded on January 11, 2006. The proceeds from
both the common shares offering and series A preferred shares offering will be used for general corporate purposes.
Reserve for losses and loss expenses $533,983 $267,477 $124,957 $ 71,335 $ 70,214 Interest on long-term debt obligations(1) 142,651 4,703 9,406 9,406 119,136 Long-term debt obligations 61,857 -- -- -- 61,857 Operating lease obligations 42,631 5,588 8,622 6,525 21,896 Dividend on preferred shares(2) 39,780 8,022 16,044 15,714 (2) Total $820,902 $285,790 $159,029 $102,980 $273,103
Substantially all of our capital has been distributed among our rated operating subsidiaries based on our assessment of the levels of capital that we believe are prudent to support our expected levels of business, the applicable regulatory requirements, and the recommendations of the insurance regulatory authorities and rating agencies.
As of December 31, 2005, our reinsurance recoverables recorded in the consolidated balance sheet were $190.4 million, of which approximately 22% and 17% were due from two reinsurers rated A+ and A by A.M. Best.
We adopted an Annual Variable Cash Compensation Plan ("Annual Incentive Plan") which is generally available to our employees. Awards paid under this plan are dependent on performance measured at an individual and line of business level. In general, our Annual Incentive Plan provides for an annual bonus award to employees that is based on a sharing of profit in excess of a minimum return on capital to our shareholders for each calendar year. Profit for each calendar year is measured by estimating the ultimate net present value of after-tax profit generated from business during that calendar year and is re-estimated on an annual basis through the vesting period. Annual Incentive Plan awards vest and are paid out over four annual installments. However, with respect to 2005, as part of the company's retention plan, awards vest in two annual installments, the first of