Underwriting results were profitable in 2011 and highly profitable in both 2010 and 2009. The combined loss and expense ratio for our overall property and casualty business was as follows:
Our personal insurance business produced modestly profitable underwriting results in 2011. Results were highly profitable in 2010 and 2009, but less so in 2010. Results were less profitable in each successive year due in large part to a higher impact of catastrophe losses on our homeowners business. The impact of catastrophes accounted for 13.1 percentage points of the combined loss and expense ratio for our personal business in 2011, compared with 10.2 percentage points in 2010 and 0.9 percentage points in 2009. A significant portion of the catastrophe losses in 2011 related to storms in the United States, including Hurricane Irene. A significant portion of the catastrophe losses in 2010 related to numerous storms in the United States. The less profitable results in 2011 compared to 2010 were also attributable to a higher expense ratio, a higher current accident year loss ratio excluding catastrophes and a lower amount of favorable prior year loss development. The combined loss and expense ratios for the classes of business within the personal insurance segment were as follows:
Net premiums written from our reinsurance assumed business during the past three years have not been significant as this business is in runoff.
Despite our efforts to manage our catastrophe exposure, the occurrence of one or more severe natural catastrophic events in heavily populated areas could have a material effect on the Corporation’s results of operations, financial condition or liquidity.
The Terrorism Risk Insurance Act of 2002 and more recently, the Terrorism Risk Insurance Program Reauthorization Act of 2007 (collectively TRIA), are limited duration programs under which the U.S. federal government has agreed to share the risk of loss arising from certain acts of terrorism with the insurance industry. The current program, which will terminate on December 31, 2014, is applicable to many lines of commercial business but excludes, among others, commercial automobile, surety and
An accident year is the calendar year in which a loss is incurred or, in the case of claims-made policies, the calendar year in which a loss is reported. Liability claims are also more susceptible to litigation and can be significantly affected by changing contract interpretations and the legal and economic environment. Consequently, the estimation of loss reserves for these classes is more complex and typically subject to a higher degree of variability than for short tail classes. As a result, the role of judgment is much greater for these reserve estimates.
During 2011, we experienced overall favorable prior year development of $767 million, which represented 3.7% of the net loss reserves as of December 31, 2010. This compares with favorable prior year development of $746 million during 2010, which represented 3.6% of the net loss reserves at December 31, 2009, and favorable prior year development of $762 million during 2009, which represented 3.8% of the net loss reserves at December 31, 2008. Such favorable development was reflected in operating results in these respective years.
On an after-tax basis, property and casualty investment income was flat in 2011 compared to 2010 and increased by 1% in 2010 compared to 2009. The after-tax annualized yield on the investment portfolio that supports our property and casualty insurance business was 3.25% in 2011 compared with 3.29% in 2010 and 3.39% in 2009.
CFS’s aggregate exposure, or retained risk, from its remaining derivative contracts is referred to as notional amount. Notional amounts are used to calculate the exchange of contractual cash flows and are not necessarily representative of the potential for gain or loss. Notional amounts are not recorded on the balance sheet.
During each of the last three years, the fair value of some of our investments declined to a level below our cost. Some of these investments were deemed to be other than temporarily impaired. The issuers of the equity securities deemed to be other than temporarily impaired in each of the last three years were not concentrated within any individual industry or sector.
Fair values of equity securities are based on quoted market prices.