During the second quarter of 1999, the Company created an e-commerce entity, OneStop.Com. During the twelve months ended December 31, 1999, OneStop incurred losses included in other corporate expenses of $4.7 million. Additionally, the 1999 included losses of approximately $1.5 million related to Metro Partners, Inc. ("Metro Partners").
During 1999, the Company established a valuation allowance related to its deferred tax asset of $124 million thus offsetting deferred tax benefits, primarily related to loss carry forwards. Because the Company has experienced recurring operating losses management does not currently believe that it is more likely than not that these tax benefits will be realized in the near future. At December 31, 1999 deferred tax assets of $11 million remained relating to net unrealized losses primarily related to the bond portfolio. At the time management believed that a viable investment strategy consistent with the past investment management practice would result in the realization of that asset.
On August 4, 2000, the Company sold to Gulf Insurance Company ("Gulf") the renewal rights to policies related to its environmental, excess and surplus casualty business and certain classes of surety business. Under the agreement, Gulf is obligated to pay the Company 30% of the insurance premiums for the renewal term from policies written by Gulf with respect to the subject business and an additional 5% of the premiums, if any, in excess of $50 million. Gulf made non-refundable advance payments of $12 million during 2000. For additional information regarding the sale of renewal rights, see Note E of the Notes to the Consolidated Financial Statements.
All of the Company's insurance subsidiaries are currently rated C++ ("Marginal") by A.M. Best Company, Inc. ("A.M. Best"). S&P has suspended is financial strength rating of BB+ (Marginal") on all of the Company's insurance subsidiaries, which currently are not rated by S&P.
Effective January 1, 1995, the Company entered into a stop loss reinsurance agreement with Zurich Reinsurance (North America), Inc. ("Zurich N.A."), formerly Centre Reinsurance Company of New York for accident years 1995 through 1997. Under the agreement, Zurich N.A. provided reinsurance protection within certain accident year and contract aggregate dollar limits for losses and LAE in excess of a predetermined ratio of these expenses to net premiums earned for a given accident year for all subject business. The loss and LAE ratio above which the reinsurance provides coverage was 66%, 65%, and 64% for accident years 1995 through 1997, respectively. The maximum amount of recoverable for an accident year is 175% of the reinsurance premium paid for the accident year, or $162.5 million in the aggregate for the three years. As of December 31, 1998, the Company had exceeded the aggregate limits of the contract. (See Note M of the Notes to the Consolidated Financial Statements - Prospective Reinsurance.)
In connection with the retroactive reinsurance agreement discussed above, the Company entered into a novation agreement with Zurich N.A. and National Indemnity whereby National Indemnity replaces Zurich N.A. on the existing stop loss reinsurance agreements between the Company and Zurich covering accident years 1995 through 1998. Under the terms of the novation, National Indemnity is to receive $68.2 million from Zurich and the funds withheld by the Company for the Zurich treaty were redesignated as funds withheld for National Indemnity. For additional disclosure regarding the stop loss and retroactive reinsurance agreements, see Notes M and N of the Notes to the Consolidated Financial Statements, respectively.
Property and casualty insurance premiums are established before the amount of losses and LAE, or the extent to which inflation may affect such expenses, are known. Consequently, the Company attempts, in establishing its premiums, to anticipate the potential impact of inflation. However, for competitive and regulatory reasons, the Company may be limited in raising its premiums commensurate with anticipated inflation, in which event the Company, rather than its insured, would absorb inflation costs. Inflation also affects the rate of investment return on the Company's investment portfolio with a corresponding effect on the Company's investment income.