(e) In October 2012 we issued $300.0 million of senior unsecured debt due in 2022 (the “2022 Senior Notes”) and used the majority of the proceeds to fully redeem $228.0 million of outstanding senior unsecured debt due in 2013 (the “2013 Senior Notes”).
There is no single standard methodology or set of assumptions utilized industry-wide in estimating property catastrophe losses. As a result, it may be difficult to accurately compare estimates of risk exposure among different insurance and reinsurance companies, due to, among other things, differences in modeling, modeling assumptions, portfolio composition and concentrations, and selected event scenarios.
Gross premiums written by Montpelier at Lloyd’s during 2013 totaled $235.2 million, a decrease of $10.8 million, or 4%, as compared to 2012. The largest decrease was within the Property Catastrophe - Treaty line of business, resulting from rate decreases and planned reductions in net catastrophe exposures.
(1) Montpelier at Lloyds’ gross IBNR at December 31, 2013 and 2012 includes a recoverable from Montpelier Bermuda pursuant to an inter-segment reinsurance contract of $4.1 million and $8.8 million, respectively, and its gross case reserves at December 31, 2013 and 2012, includes a recoverable from Montpelier Bermuda pursuant to an inter-segment reinsurance contract of $4.3 million $4.5 million, respectively. The effects of these inter-segment reinsurance contracts are eliminated in consolidation.
During 2013 the Collateralized Reinsurance segment ceded $3.0 million of premium to third-party reinsurers. The Collateralized Reinsurance segment purchases reinsurance in the normal course of its business in order to manage its exposures. The amount and type of reinsurance that the Collateralized Reinsurance segment purchases is dependent on a variety of factors, including the cost of a particular reinsurance cover and the nature of its gross premiums written during a particular period. Other factors affect the Collateralized Reinsurance segment’s appetite and capacity to write and retain risk. These include the impact of changes in frequency and severity assumptions used in our models and the corresponding pricing required to meet our return targets, evolving industry-wide capital requirements, increased competition, market conditions and other considerations.
On December 31, 2011, we completed the MUSIC Sale. Since Montpelier Re has either retained, reinsured or otherwise indemnified Selective for all of the business written by MUSIC with an effective date on or prior to December 31, 2011, our former and future operations associated with MUSIC do not constitute a “discontinued operation” in accordance with GAAP. The cash flows that Montpelier Re has retained pursuant to the MUSIC Sale, as well as certain reinsurance balances and other designated assets serving as collateral supporting such cash flows, will continue to be presented within the MUSIC Run-Off segment. See “MUSIC Sale Considerations” contained in Item 1 herein.
The following table summarizes the underwriting expenses of the MUSIC Run-Off segment for the years ended 2013, 2012 and 2011:
Prior to the MUSIC Sale, the MUSIC Run-Off segment’s acquisition cost ratio consisted of commissions, premium taxes, excise taxes and profit commissions and its general and administrative expenses consisted of: (i) salaries, employee benefits, incentive compensation and premises expenses; and (ii) inter-segment allocations of information technology and other centrally-managed expenses.
As of December 31, 2013, we held total cash and cash equivalents of $549.2 million. Of this amount, $517.6 million was held in Bermuda, $28.0 million was held in the U.K., $3.5 million was held in the U.S. and $0.1 million was held in Switzerland.