The London Market division is comprised of our Lloyd’s of London business, in which we participate through our 100% ownership of Newline, our London branch office and our recently formed London-based casualty insurer Newline Insurance Company Limited. The London Market division writes insurance and reinsurance business worldwide, principally through brokers.
Americas. Gross premiums written in the Americas division for the year ended December 31, 2006 were $924.2 million, a decrease of $206.3 million, or 18.2%, as compared to $1,130.5 million for the year ended December 31, 2005. These amounts represent 39.6% of our gross premiums written for the year ended December 31, 2006 and 43.1% in 2005. These amounts include reinstatement premiums of $4.0 million and $32.0 million for the years ended December 31, 2006 and 2005, respectively, which principally relate to Hurricanes Katrina, Rita and Wilma in 2005. Excluding reinstatement premiums in each period, gross premiums written would be $920.2 million and $1,098.5 million for the years ended December 31, 2006 and 2005, respectively, representing a decrease of $178.3 million, or 16.2% over the period. Gross premiums written across each geographic region of the Americas are as follows:
EuroAsia Division - Losses and LAE increased $26.2 million, or 8.7%, to $326.0 million for the year ended December 31, 2005, from $299.8 million for the year ended December 31, 2004. This resulted in a loss and LAE ratio of 63.2% for the year ended December 31, 2005, compared to 62.2% for the year ended December 31, 2004. The increase in losses and LAE was related to the 7.0% increase in net premiums earned and $56.7 million of catastrophe losses, principally Windstorm Erwin and floods in India and Europe. Losses and LAE in the 2005 period include favorable loss development of $8.7 million attributable to 2004 and prior years, principally related to favorable emergence on liability and bond exposures in the period, and include $7.4 million of adverse development on prior period catastrophe losses predominantly attributable to Typhoon Songda and the Indonesian earthquake and resulting tsunami due to unexpected claims emergence. For the year ended December 31, 2004, losses and LAE include $24.8 million for property catastrophe events, including Typhoon Songda and the Indonesian earthquake and resulting tsunami. Losses and LAE in the 2004 period include net adverse loss development of $6.6 million attributable to 2003 and prior years, principally related to unexpected loss emergence on bond exposures in the period, and include $2.2 million of net adverse development on prior period catastrophe losses due to loss emergence greater than expectations.
an increase of $857.6 million or 18.3% in average invested assets for the year ended December 31, 2005 over 2004, and higher short term rates over the period
In connection with the short sales described above, we purchased a SPDR call option as protection at a cost of $0.4 million. The call option is recorded at fair value in other invested assets in the consolidated balance sheet and changes in the fair value are recorded as a realized gain or loss in the consolidated statements of operations in the period in which they occur. For the years ended December 31, 2006 and 2005, the net change in the fair market value of the call option resulted in a net realized loss of $0.1 million and $1.2 million, respectively, and a net realized gain of $0.4 million for 2004.
German securities denominated in the Euro, which represented 7.0% and 5.5%, respectively, and from securities denominated in the Canadian dollar, which represented 4.7% and 4.9% of our total investments and cash as of December 31, 2005 and December 31, 2004, respectively. As of December 31, 2006, the potential impact of a 10% decline in each of the foreign exchange rates on the valuation of investment assets denominated in those respective foreign currencies would result in a $161.3 million decline in the fair value of our total investments and cash, before taxes.
As indicated by the table above, for the years ended December 31, 2006, 2005 and 2004, the Company ceded $8.3 million, $18.7 million and $5.6 million, respectively, of losses and LAE, primarily to the 2001 aggregate excess of loss treaty. The increases in losses ceded to the Company’s Whole Account and Facultative Excess of Loss Agreements, for the years ended December 31, 2006, 2005 and 2004 were primarily attributable to adverse loss development on casualty business written in 2001. Losses ceded to the Company’s Whole Account and Facultative Excess of Loss Agreements represented 1.1% of the Company’s pre-tax income in 2006, 10.3% of the Company’s pre-tax loss in 2005 and 1.8% of pre-tax income in 2004.
$2.1 million were paid on January 22, 2007 to Series A and Series B preferred shareholders of record on December 31, 2006.
The amounts above are reduced by an aggregate minimum rental recovery of $1.5 million resulting from the sublease of space to other companies.
The following tables set forth the Plan’s funded status, which uses a measurement date of October 1, and amounts recognized in the Company’s consolidated financial statements as of December 31, 2006 and 2005 (in thousands):
(2) The registrant’s investment in Odyssey America is accounted for under the equity method of accounting.