The remaining 15 field offices are leased from various unaffiliated parties. In addition to these field offices, we lease certain other facilities from unaffiliated parties. Net lease payments to external parties amounted to $2.7 million in 2008. Lease commitments for these properties expire periodically through 2013.
The cyclical nature of the insurance industry has a direct impact on our income from management operations, as our management fee revenues are based on the direct written premiums of the Property and Casualty Group and the
Renewal premiums written on personal lines increased 1.6% on total personal lines policies during 2008 compared to a decrease of 0.3% in 2007. The impact of rate reductions was offset by improving policy retention ratio trends. The personal lines renewal business year-over-year average premium per policy declined 1.3% in 2008, while the year-over-year policy retention ratio for personal lines improved to 91.4% in 2008 from 90.8% in 2007 and 90.1% in 2006. The year-over-year policy retention ratio for private passenger auto was 91.8% in 2008, 91.5% in 2007 and 90.8% in 2006. Homeowners policyholder retention increased to 91.1% in 2008, compared to 90.3% in 2007 and 89.4% in 2006, driving the 2.2% increase in homeowners renewal premiums written to $667.6 million in 2008 from $653.2 million in 2007 despite rate reductions effective in 2008.
The incentives under the annual incentive plan are based on the achievement of certain predetermined performance targets. These targets are established by the Executive Compensation and Development Committee of the Board and can include various financial measures. Incentives for the 2008 plan were based on measures specific to each member of executive and senior management, primarily on statutory reported combined ratio and policies in force of the Property and Casualty Group, as defined in the plan. Incentives for the 2007 plan were based on measures specific to each member of executive and senior management, primarily on adjusted operating ratio and growth in submitted applications of the Property and Casualty Group, as defined in the plan. Incentives for the 2006 plan were based primarily on adjusted operating ratio and growth in direct written premiums of the Property and Casualty Group, as defined in the plan.
Pre-2004 LTIP - Prior to 2004, awards were determined based on the achievement of predetermined financial performance goals for actual growth in our retained earnings. The 2003-2005 performance period was the final open award period under the pre-2004 LTIP.
There is no provision in the subscribers agreement for termination of our appointment as attorney-in-fact by the subscribers of the Exchange and the appointment is not affected by a policyholder’s disability or incapacity.
We lease office space on a year-to-year basis from the Exchange including 3 field office facilities. Rent expenses under these leases totaled $5.6 million, $5.8 million and $5.7 million in 2008, 2007 and 2006, respectively. We have a lease commitment until 2018 with EFL for a branch office. Annual rentals paid to EFL under this lease totaled $0.3 million in 2008, 2007 and 2006.
Premiums due from policyholders of our wholly-owned property/casualty insurance subsidiaries equaled $244.8 million and $243.6 million at December 31, 2008 and 2007 respectively. A significant amount of these receivables are ceded to the Exchange as part of the intercompany pooling agreement. See also Note 18.