The consolidated financial statements include amounts based on informed estimates and judgments of management for those transactions that are not yet complete or for which the ultimate effects are uncertain. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the adequacy of loss reserves and the recoverability of related reinsurance recoverables, the fair value of credit derivative obligations, the recoverability of the carrying value of real estate properties and the realization of deferred income tax benefits. These estimates and judgments are discussed within the following analysis of our results of operations. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements.
Our property and casualty business produced income before taxes of $278 million in 2002 compared with a loss of $53 million in 2001 and income of $803 million in 2000.
Net premiums from commercial insurance, which represent 37% of our total writings, increased by 37% in 2002 compared with a 6% increase in 2001. The substantial premium growth in 2002, which occurred in all segments of this business, was due in large part to significantly higher rates and also to an increase in our in-force count. Retention levels have improved significantly, beginning in the second half of 2001. On the business that was renewed, rates have increased steadily. New business has accelerated, beginning toward the end of 2001. During 2002, we wrote more than two dollars of new business for every dollar of business we lost; during 2001, this ratio was about one to one. The substantial growth in new business was produced with the same underwriting discipline that existed over the past three years when we were shrinking the book of business. We expect that rates will continue to rise but that the level of rate increases will begin to decline.
A reunderwriting of our European executive protection business is underway using many of the strategies already implemented in the United States, including substantial rate increases, reductions in policy limits and higher deductibles.
The litigation environment has become increasingly adverse. More than half of the lawsuits filed in recent years have been filed in five plaintiff oriented states, where significant verdicts historically have been rendered against commercial defendants.
The unrealized appreciation of investments carried at market value, which includes fixed maturities classified as available-for-sale and equity securities, was $901 million, $389 million and $339 million at December 31, 2002, 2001 and 2000, respectively. Such unrealized appreciation is reflected in a separate component of other comprehensive income, net of applicable deferred income tax.
The following table provides information about our fixed maturity investments, which are sensitive to changes in interest rates. The table presents cash flows of principal amounts and related weighted average interest rates by expected maturity dates at December 31, 2002 and 2001. The cash flows are based on the earlier of the call date or the maturity date or, for mortgage-backed securities, expected payment patterns. Actual cash flows could differ from the expected amounts.
Valuation models are used to estimate the fair value of our obligation in each credit default swap. Within these models, credit spreads are a critical input used to estimate the probability of the occurrence of credit events. The fair value of a portfolio credit default swap is also a function of the financial ratings of referenced asset-backed securities, actual credit events reducing subordination, credit correlation within a portfolio, anticipated recovery rates related to potential defaults and changes in interest rates.