Although the combined ultimate impact of recent catastrophe activity, in particular Superstorm Sandy, and the fixed income investment environment remains unclear and is currently more uncertain in light of reinsurance industry performance, broad industry conditions brought about by these events remain supportive of improved pricing in primary insurance markets in the near term. To date however, industry financial conditions have limited the amount of enhanced reinsurance pricing the industry would normally experience during periods of increased catastrophe losses. More recently, January 1 reinsurance renewals for the industry appeared to show limited pricing improvement as a result of Sandy. However, the scope and tenure of any improved pricing environment remains less certain.
For the year ended December 31, 2012, the Company has presently incurred $31.1 million in losses from Sandy, which increased its loss ratio and combined ratio by 1.7% for the year. The sources of these losses are as follows:
The Company's revenues also include fee income generated by the IIS Fee Business as well as income generated from its investment portfolio. The Company's investment portfolio is comprised of fixed maturity investments, held as AFS, and other investments. In accordance with U.S. GAAP, these investments are carried at fair market value and unrealized gains and losses on the Company's investments are generally excluded from earnings. These unrealized gains and losses are included on the Company's Consolidated Balance Sheet in accumulated other comprehensive income as a separate component of shareholders' equity. If unrealized losses are considered to be other-than-temporarily impaired, such losses are included in earnings as a realized loss.
Company employs include, but may not be limited to, the Expected Loss Ratio method, the Reported Loss Development method and the Incurred and (as applicable) Paid Bornhuetter-Ferguson ("B-F") methods. In addition, the Company uses other methodologies to estimate liabilities for specific types of occurrences. For example, external and vendor catastrophe models are typically used in the estimation of loss and loss adjustment expenses at the early stages of catastrophe losses before loss information is reported to the reinsurer.
Our reporting factors and expected loss ratios are based on a blend of our own experience, cedant experience and industry benchmarks. The benchmarks selected were those that we believe are most similar to our underwriting business.
Calculated by dividing net loss and loss adjustment expenses by the sum of net premiums earned and other insurance revenue.
compared to the year ended December 31, 2011. This increase reflects AmTrust's continuing expansion through acquisition and ongoing organic growth, both of which are benefiting from improved rate levels.
The decrease in interest and amortization expense for the year ended December 31, 2011 compared to the same period in 2010 was due to the repurchase on July 15, 2011 of $107.5 million of the TRUPS Offering which have a coupon of 14.0%, the repurchase of which was financed with the issuance of the 2011 Senior Notes, which have a coupon of 8.25%. The weighted average interest rate was 14.8% for the year ended December 31, 2011 compared to 16.95% for the same period in 2010.
Premiums - Net premiums written decreased by $32.7 million, or 4.1%, for the year ended December 31, 2012 compared to the same period in 2011. The table below illustrates net premiums written by line of business in this segment for the years ended December 31, 2012 and 2011:
Premiums - Net premiums written increased by $201.3 million, or 43.0%, for the year ended December 31, 2011 compared to 2010. For the year ended December 31, 2011, net premiums written for the European Hospital Liability Quota Share were $95.3 million. Excluding this new coverage, the net premiums written in the segment increased by $106.0 million or 22.6%, primarily due to continuing increases in each line of business. The table below illustrates net premiums written by AmTrust’s segments for the years ended December 31, 2011 and 2010.
Commission and Other Acquisition Expenses - Commission and other acquisition expenses increased by $15.8 million, or 11.0%, for the year ended December 31, 2011 compared to 2010. The commission and other acquisition expense ratio declined to 28.8% for the year ended December 31, 2011 compared to 32.5% in 2010. The change in both the expenses and ratio reflects the modifications to ceding commission made under the Reinsurance Agreement and the lower ceding commission under the European Hospital Liability Quota Share, both effective April 1, 2011. The impact of the lower ceding commission rate reduced the amount of ceding commission paid to AmTrust by $3.4 million for the year ended December 31, 2011. Expenses have also increased in both periods as a result of ongoing growth in earned premium.