During 2011, 2010 and 2009, the Company identified available for sale securities that were considered to be other-than-temporarily impaired. Net impairment losses recognized in earnings for the years ended December 31, 2011, 2010 and 2009 as a result of other-than-temporarily impaired securities were as follows:
Other Investments are accounted for under the equity method of accounting. Adjustments to the carrying value of these investments are made based upon the net valuation criteria established by the managers of the Other Investments, which in turn are established based upon the valuation criteria in the governing documents of the Other Investments. Such valuations may differ significantly from the values that would have been used had liquid markets existed for the shares or partnership interests of the Other Investments. Due to a delay in the valuations reported by certain of the fund managers, valuations of certain alternative funds and
The following table shows the fair value of the Company’s investments exposed to all countries whose currency is the Euro or whose sovereign debt rating is below AAA (except the U.S.) by any of the recognized rating agencies at December 31, 2011. The amortized cost basis of these investments was not significantly different from their fair value at December 31, 2011. The Company determined the underlying exposure of the investment by reference to the risk country or parent risk country as published by a third party pricing service. The Company does not have any direct exposure to sovereign debt issued by Ireland, Greece or Portugal.
On January 13, 2012, S&P downgraded the sovereign ratings of nine Eurozone countries, including France (from “AAA” to “AA+”), Austria (from “AAA” to “AA+”), and Spain (from “AA-” to “A”). If these downgrades were in effect at December 31, 2011, the total fair value of securities having a “AAA” rating in the foregoing table would have declined by $29.3 million, while securities having a “AA” rating would have increased by the same amount.
Cash and Invested Assets. The Company’s aggregate invested assets, including fixed maturity investments, short-term investments, equity securities, Other Investments, cash and cash equivalents and pending securities transactions, as of December 31, 2011 totaled $6.3 billion compared to aggregate invested assets of $6.2 billion as of December 31, 2010. The increase in invested assets since December 31, 2010 resulted from collections of premiums on insurance policies and reinsurance contracts, investment income, the change in market value of invested assets and the issuance of preferred shares offset in part by losses and loss expenses paid, acquisition expenses paid, reinsurance premiums paid, general and administrative expenses paid, interest and dividends paid, and the repurchase of the Company’s ordinary shares.
For the year ended December 31, 2011, for the vast majority of our business, the Company did not materially alter the two key inputs it utilizes to establish its reserve for losses and loss expenses, initial expected loss ratios or loss reporting patterns, for business related to prior years for the insurance and reinsurance reserve categories as the variances in reported losses in 2011 for those reserve categories were within the range of possible results anticipated by the Company.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Endurance Specialty Holdings Ltd.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2012 expressed an unqualified opinion thereon.
Two separate, but consecutive, statements of net income and other comprehensive income
(2) Represents total OTTI recognized in accumulated other comprehensive income. It does not include the change in fair value subsequent to the impairment measurement date. At December 31, 2011, the gross unrealized loss related to fixed income investments for which a non-credit OTTI was recognized in accumulated other comprehensive income was $1.5 million.
None of the Company’s derivatives are designated as hedges under current accounting guidance, with the exception of the interest rate lock. The Company’s objectives for holding these derivatives are as follows:
The Company may assume or economically hedge credit risk through credit default swaps to replicate or hedge investment positions. The original term of these credit default swaps is generally five years or less.
Major production sources. The following table shows the percentage of net premiums written generated through the Company’s largest brokers for the years ended December 31, 2011, 2010 and 2009:
The following table sets forth dividends declared in the years ended December 31, 2011, 2010 and 2009, respectively:
On February 28, 2011, the Company entered into an agreement with Robert A. Spass, a Director of the Company, to purchase from Mr. Spass warrants exercisable for 90,000 ordinary shares of the Company having an exercise price on the date of the agreement of $12.87 per ordinary share (the “Warrant Purchase Agreement”). The Warrant Purchase Agreement provided that the Company would purchase the warrants from Mr. Spass at a purchase price of $36.72 per warrant, which represented the closing price for the Company’s ordinary shares on the New York Stock Exchange on February 28, 2011, less the exercise price of the warrants. The transactions contemplated by the Warrant Purchase Agreement closed on March 1, 2011.
A summary of the restricted share and restricted share unit activity during the year ended December 31, 2011, is presented below:
Net income tax refunds received in 2011 totaled $15.7 million. The Company paid net income taxes and received net refunds totaling $24.3 million and $6.8 million for the years ended December 31, 2010 and 2009, respectively. Net operating loss carryforwards in the amount of $45.5 million, $59.1 million, $41.6 million and $26.7 million are available for application against future taxable income in the United States, United Kingdom, Singapore and Switzerland, respectively. These net operating loss carry forwards have no expiration date in the United Kingdom and Singapore. In Switzerland and the United States the net operating loss carry forwards expire through 2018 and 2031, respectively. There were no income taxes payable in the United Kingdom as of December 31, 2011 or 2010.