Net income was $2.2 billion in both 2010 and 2009 and $1.8 billion in 2008. Net income was similar in 2010 and 2009 as lower operating income in 2010 was offset by higher net realized investment gains. We define operating income as net income excluding realized investment gains and losses after tax. The increase in net income in 2009 compared with 2008 was due to both higher operating income in 2009 compared with 2008 and modest net realized investment gains in 2009 compared with substantial net realized investment losses in 2008.
Net premiums written amounted to $11.2 billion in 2010, $11.1 billion in 2009 and $11.8 billion in 2008.
Premium growth was adversely impacted in both 2010 and 2009 by the general downturn in the economy which began in 2008 and continued through 2010. The amounts of coverage purchased or the insured exposures, both of which are bases upon which we calculate the premiums we charge, were down slightly or were flat for many classes of business in 2010 compared to 2009. In 2009, the amounts of
Retention levels of our existing customers remained strong over the last three years. New business volume was up modestly in 2010 compared with 2009. New business volume was down in 2009 compared with 2008. Although we obtained some new business in 2009 as a result of the dislocation in the insurance markets caused by the impact of the financial market crisis on some of our competitors, new business declined overall in 2009 due to continued competitive conditions and the general reduction in insurance demand due to the effects of the economic downturn.
Overall renewal rates in our professional liability business in the U.S. decreased slightly in 2010 after increasing slightly in 2009. Rates were down in most lines of our professional liability business in 2010, with the most significant reduction in rates in our directors and officers liability business. Rates for directors and officers liability and errors and omissions liability insurance for financial institutions had increased in 2009, particularly for those companies implicated in the crisis in the financial markets, but rates for those companies stabilized in 2010.
Our most significant individual asbestos exposures involve products liability on the part of “traditional” defendants who were engaged in the manufacture, distribution or installation of asbestos products. We wrote excess liability and/or general liability coverages for these insureds. While these insureds are relatively few in number, their exposure has become substantial due to the increased volume of claims, the erosion of the underlying limits and the bankruptcies of target defendants.
the volume of claims by unimpaired plaintiffs and the extent to which they can be precluded from making claims;
We experienced overall favorable development of about $315 million in the professional liability classes other than fidelity, including about $190 million outside the U.S. The most significant amount of favorable development occurred in the directors and officers liability class, particularly outside the U.S., with additional favorable development in the fiduciary liability and employment practices liability classes, partially offset by adverse development in the errors and omissions liability class. The aggregate reported loss activity related to accident years 2007 and prior was less than expected, reflecting a favorable business climate, lower policy limits and better terms and conditions. As these years have become increasingly mature, and as the reported loss experience has emerged better than we expected, we have gradually decreased the expected loss ratios for these accident years. This favorable development was recognized as one among many factors in the determination of loss reserves for more current accident years. Among other important factors were the uncertainty surrounding the recent crisis in the financial markets and its aftermath and the general downward trend in prices in recent years.
We experienced favorable development of about $40 million in the personal automobile business due primarily to lower than expected frequency of prior year claims. This factor was reflected in our determination of carried personal automobile loss reserves at December 31, 2010.
The determination of whether a decline in value of any investment is temporary or other than temporary requires the judgment of management. The assessment of other-than-temporary impairment of fixed maturities and equity securities is based on both quantitative criteria and qualitative information and also considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, general
It is possible that one or more of the rating agencies may raise or lower our existing ratings in the future. If our credit ratings were downgraded, we might incur higher borrowing costs and might have