The following summary sets forth the calculation of book value and fully converted book value per common share for the years ended December 31, 2013 and 2012 ($ and amounts in thousands, except per share amounts):
Assumed reinsurance premiums earned are recognized as revenues in the consolidated statements of operations, net of any ceded premiums for retrocessional coverage purchased. Both assumed and ceded premiums written are earned generally on a basis proportionate with the coverage period. On the consolidated balance sheets, unearned premiums represent premiums written not yet recognized as revenue and prepaid reinsurance premiums represent ceded premiums written not yet earned.
In property and marine classes, the loss development patterns are primarily based on our historical reported loss data. For all classes, historical data by effective date and business type is used to determine loss development patterns that reflect each year’s reinsurance contract inception date distribution and the distribution of underlying business written on a losses occurring basis versus on a risk attaching basis. Loss development patterns are analyzed for various reinsurance sub-classes and an overall pattern for each Underwriting Year is determined by the mix of business within that Underwriting Year.
During the years ended December 31, 2013, 2012 and 2011, we experienced net favorable loss development of $183.3 million, $235.5 million, and $113.0 million, respectively. The net favorable loss development was attributable primarily to a level of cumulative losses reported to us by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios and reduce estimated ultimate losses, as discussed further in Item 1, “Business - Unpaid Losses and Loss Adjustment Expenses”, in this Form 10-K.
The following table sets forth the net favorable (unfavorable) development by class of business for the year ended December 31, 2011 ($ in thousands):
2013 versus 2012: The Casualty segment net favorable loss development was $103.2 million and $182.0 million for the years ended December 31, 2013 and 2012, respectively. Net favorable loss development and related premium adjustments decreased the net loss and LAE ratios by 34.6 points and 62.5 points for the years ended December 31, 2013 and 2012, respectively. Net favorable loss development for the years ended December 31, 2013 and 2012 was primarily attributable to a level of cumulative losses reported by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios. In addition, we regularly review and update our initial expected loss ratios and loss development patterns based on our loss experience and these updates resulted in net favorable loss development in several classes of business. For the year ended December 31, 2013, net favorable loss development of $15.7 million was attributable to these changes in loss development patterns and initial expected loss ratios. In the fourth quarter of 2012, we began reflecting favorable variances in reported losses in our selection of ultimate loss ratios at an earlier point in the loss development timeline than we had previously. This earlier recognition accounted for $56.0 million of the net favorable loss development for the year ended December 31, 2012. In addition, net favorable loss development of $24.4 million was attributable to changes in loss development patterns for several classes. The net loss and LAE ratios were also impacted by changes in the mix of business.
2012 versus 2011: Net investment income was $99.9 million and $125.9 million for the years ended December 31, 2012 and 2011, respectively. Net investment income decreased during the year ended December 31, 2012 as compared with 2011 primarily from a decrease in the average book yield for the portfolio of total investments and cash and cash equivalents from 3.1% to 2.6%. Contributing to the decrease in investment income was a reduction of approximately $242.0 million in the average book value of our investments and cash and cash equivalents for the year ended December 31, 2012 as compared with 2011, primarily due to share repurchases, dividend payments and negative operating cash flows.
As part of our investment strategy, we seek to establish a level of cash and liquid short-term and intermediate-term securities which, including expected cash outflows from our operating activities and cash flows from our investments, we believe to be adequate to meet our foreseeable payment obligations. The ultimate amount and timing of claim payments could differ materially from our estimates and create significant variations in cash flows from operations between periods, which may require us to make payments from other sources of liquidity, such as sales of investments, borrowings from our syndicated credit facility or proceeds from capital market transactions. If we need to sell investments to meet liquidity requirements, the sale of such investments may be at a material gain or loss. Our investment portfolio consists primarily of diversified, high quality, predominantly investment grade fixed maturity securities.
We had no borrowings under the Syndicated Credit Facility during the years ended December 31, 2013 and 2012. The following table summarizes the outstanding LOC and the cash and cash equivalents held in trust to collateralize LOC issued as of December 31, 2013 ($ in thousands):
Our reinsurance subsidiaries had a total remaining uncommitted LOC capacity of $263.4 million available as of December 31, 2013. The Company also has the ability to increase the Syndicated Credit Facility and other LOC facilities by up to $175.0 million subject to agreement with the lenders.