Our executive and administrative office is located at 6 International Drive in Rye Brook, NY. Our lease for this space expires in February 2014. Our underwriting operations are in various locations with non-cancelable operating leases including Charlotte, NC, Chicago, IL, Coral Gables, FL, Danbury, CT, Ellicott City, MD, Exton, PA, Houston, TX, Irvine, CA, Los Angeles, CA, New York City, NY, Parsippany, NJ, Philadelphia, PA, Pittsburgh, PA, San Francisco, CA, Schaumburg, IL, Seattle, WA, London, England, Manchester, England, Antwerp, Belgium, Stockholm, Sweden and Copenhagen, Denmark.
We are an international insurance company focusing on specialty products within the overall property and casualty insurance market. Our largest product line and most long-standing area of specialization is ocean marine insurance. We have also developed specialty niches in professional liability insurance and in specialty liability insurance primarily consisting of contractors’ liability and commercial primary and excess casualty coverages.
While management takes into consideration a wide range of factors in planning our business strategy and evaluating results of operations, there are certain factors that management believes are fundamental to understanding how we are managed. First, underwriting profit is consistently emphasized as a primary goal, above premium growth. Management’s assessment of our trends and potential growth in underwriting profit is the dominant factor in its decisions with respect to whether or not to expand a business line, enter into a new niche, product or territory or, conversely, to contract capacity in any business line. In addition, management focuses on controlling the costs of our operations. Management believes that careful monitoring of the costs of existing operations and assessment of costs of potential growth opportunities are important to our profitability. Access to capital also has a significant impact on management’s outlook for our operations. The Insurance Companies’ operations and ability to grow their business and take advantage of market opportunities are constrained by regulatory capital requirements and rating agency assessments of capital adequacy. Similarly, the ability to grow our operations at Lloyd’s is subject to capital and operating requirements of Lloyd’s and the U.K. regulatory authorities.
Management’s decisions are also greatly influenced by access to specialized underwriting and claims expertise in our lines of business. We have chosen to operate in specialty niches with certain common characteristics which we believe provide us with the opportunity to use our technical underwriting expertise in order to realize underwriting profit. As a result, we have focused on underserved markets for businesses characterized by higher severity and lower frequency of loss where we believe our intellectual capital and financial strength bring meaningful value. In contrast, we have avoided niches that we believe have a high frequency of loss activity and/or are subject to a high level of regulatory requirements, such as workers compensation and personal automobile insurance, because we do not believe our technical underwriting expertise is of as much value in these types of businesses. Examples of niches that have the characteristics we look for include bluewater hull which provides coverage for physical damage to, for example, highly valued cruise ships, and Directors and Officers (“D&O”) insurance which covers litigation exposure of a corporation’s directors and officers. These types of exposures require substantial technical expertise. We attempt to mitigate the financial impact of severe claims on our results by conservative and detailed underwriting, prudent use of reinsurance and a balanced portfolio of risks.
For the Insurance Companies, Navigators Insurance Company and Navigators Specialty Insurance Company utilize the financial strength ratings from A.M. Best Company (“A.M. Best”) and Standard and Poor’s Rating Services (“S&P”) for underwriting purposes. Navigators Insurance Company and Navigators Specialty Insurance Company are both rated “A” (Excellent - stable outlook) by A.M. Best and “A” (Strong-negative outlook) by S&P. Syndicate 1221 utilizes the ratings from A.M. Best and S&P for underwriting purposes which apply to all Lloyd’s syndicates. Lloyd’s is rated “A” (Excellent - stable outlook) by A.M. Best and A+ (Strong - stable outlook) by S&P.
Reserves for losses and LAE represent an estimate of the expected cost of the ultimate settlement and administration of losses, based on facts and circumstances then known. Actuarial methodologies are employed to assist in establishing such estimates and include judgments relative to estimates of future claims severity and frequency, length of time to develop to ultimate, judicial theories of liability and other third party factors which are often beyond our control. No assurance can be given that actual claims made and related payments will not be in excess of the amounts reserved. During the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate liability may exceed or be less than the revised estimates.
Our actuaries calculate indicated IBNR loss reserves for each line of business by underwriting year for major products principally using two standard actuarial methodologies which are projection or extrapolation techniques: the loss ratio method and the Bornheutter-Ferguson method. In general the loss ratio method is used to calculate the IBNR for more recent underwriting years while the Bornheutter-Ferguson method is used to calculate the IBNR for more mature underwriting years. When appropriate such methodologies are supplemented by the loss development method and the frequency/severity method, which are used to analyze and better comprehend loss development patterns and trends in the data when making selections and judgments. Each of these methodologies, which are described below, are generally applicable to both long tail and short tail lines of business depending on a variety of circumstances. In utilizing these methodologies to develop our IBNR loss reserves, a key objective of management in making their final selections is to deliberate with our actuaries to identify aberrations and systemic changes occurring within historical experience and accurately adjust for them. This process requires the substantial use of informed judgment and is inherently uncertain as it can be influenced by numerous factors including:
Marine: Generally, two key assumptions are used by our actuaries in setting IBNR loss reserves for major products in this line of business. The first assumption is that our historical experience regarding paid and reported losses for each product where we have sufficient history can be relied on to predict future loss activity. The second assumption is that our underwriters’ assessments as to potential loss exposures are reliable indicators of the level of our expected loss activity. The specific loss reserves for marine are then analyzed separately by product based on such assumptions, except where noted below, with the major products including marine liability, cargo, P&I, transport and bluewater hull.
Set forth below is a sensitivity analysis that estimates the effect on our net loss reserve position of using alternative expected loss ratios for the underwriting years 2003 to 2011 and alternative loss development factors for underwriting years beginning in the late 1990’s to 2011 rather than those loss ratios and factors actually used in determining our best estimates as of December 31, 2011. The analysis addresses each major line of business and underwriting year for which a material deviation to our overall reserve position is believed reasonably possible, and uses what we believe is a reasonably likely range of potential deviation for each line of business. There can be no assurance, however, that actual reserve development will be materially consistent with either the original or the adjusted expected loss ratios or loss development factor assumptions, or with other assumptions made in the reserving process.
Such sensitivity analysis was performed in the aggregate for all products within each line of business. The use of aggregate data was considered more stable and reliable compared to a product-by-product analysis. We cannot assure, however, that such use of aggregate data will provide a more accurate range of the actual variations in loss development. The loss ratio sensitivity analysis uses loss ratios for the 2003 to 2011 underwriting years, which are believed to be more representative compared to years prior to 2003 given our evolving mix of business, product changes and other factors. There can be no assurances, however, that the use of such recent history is more predictive of actual development as compared to employing longer periods of history. In addition, while the net loss reserves include the net loss reserves for asbestos exposures, such amounts were excluded from the sensitivity analysis given the nature of how such reserves are established by the Company. While we believe such net reserves are adequate, we cannot assure that material loss development may not arise in the future from asbestos losses given the complex nature of such exposures.
A portion of our premium is estimated for unreported premium, mostly for the Marine business written by our U.K. Branch and Lloyd’s Operations as well as the Accident and Health reinsurance business written by our recently established reinsurance division Nav Re. We generally do not experience any significant backlog in processing premiums. Such premium estimates are generally based on submission data received from brokers and agents and recorded when the insurance policy or reinsurance contract is written or bound. The estimates are regularly reviewed and updated taking into account the premium received to date versus the estimate and the age of the estimate. To the extent that the actual premium varies from the estimates, the difference, along with the related loss reserves and underwriting expenses, is recorded in current operations.
For equity securities, in general, we focus our attention on those securities whose fair value was less than 80% of their cost for six or more consecutive months. If warranted as the result of conditions relating to a particular security, we will focus on a significant decline in fair value regardless of the time period involved. Factors considered in evaluating potential impairment include, but are not limited to, the current fair value as compared to cost of the security, the length of time the investment has been below cost and the impact of the amount. If an equity security is deemed to be other-than-temporarily impaired, the cost is written down to fair value with the loss recognized in earnings.
For equity securities, we also consider our intent to hold securities as part of the process of evaluating whether a decline in fair value represents an other-than-temporary decline in value. For fixed maturity securities, we consider our intent to sell a security and whether it is more likely than not that we will be required to sell a security before the anticipated recovery as part of the process of evaluating whether a security’s unrealized loss represents an other-than-temporary decline. Our ability to hold such securities is evaluated by the Company and is based on whether there is sufficient cash flow from operations and from maturities within our investment portfolio in order to meet claims payment and other disbursement obligations arising from our underwriting operations without selling such investments. With respect to securities where the decline in value is determined to be temporary and the security’s value is not written down, a subsequent decision may be made to sell that security and realize a loss. Subsequent decisions on security sales are made within the context of overall risk monitoring, changing information and market conditions.
Net income for the year ended December 31, 2010 was $69.6 million or $4.24 per diluted share compared to net income of $63.2 million or $3.65 per diluted share for the year ended December 31, 2009. Operating earnings for the year ended December 31, 2010 were $43.4 million or $2.65 per diluted share compared to $65.2 million or $3.76 per diluted share for the comparable period in 2009. In comparison to net income, operating earnings excludes after-tax net realized gains of $26.9 million and $5.8 million and after-tax other-than-temporary impairment losses recognized in earnings of $0.7 million and $7.8 million for the years ended December 31, 2010 and 2009, respectively. The decrease in our operating earnings was largely attributable to unfavorable underwriting results related to large loss activity from our energy business in connection with the Deepwater Horizon and West Atlas events.
The following table presents our consolidated underwriting results and provides a reconciliation of our underwriting profit or loss to GAAP net income for the years ended December 31, 2011, 2010 and 2009:
(2) - Reported within “Other income (expense)” on the Consolidated Statements of Income
Large current accident year energy losses with a net adverse impact of $25.6 million, inclusive of $8.2 million in reinsurance reinstatement premiums, related to drilling operations in the North Sea, Gulf of Mexico and Russia, as well as an onshore industrial site.
In addition to the net adverse impacts noted above, the increase in our pre-tax underwriting loss in 2011 and 2010 was affected by the mix of business and loss trends, partially offset by $8.7 million of net adverse activity recorded in 2010. The net adverse activity recorded in 2010 primarily relates to a combined $22.5 million in reinstatement premiums related to the Deepwater Horizon and West Atlas losses, respectively, partially offset by net prior period reserve redundancies of $13.8 million. The net prior period reserve redundancies were driven by significant redundancies from our Property Casualty business partially offset by loss emergence from our Professional Liability business.
The following tables set forth our gross written premiums, net written premiums and net earned premiums by segment and line of business for the years ended December 31, 2011, 2010, and 2009:
Our Marine division saw increases in the average renewal premium rates in our Inland Marine and Lloyd’s lines of approximately 7.3% and 0.9%, respectively, for the year ended December 31, 2011 compared to the same period in 2010. U.S. Marine premiums rates decreased 0.3% while U.K. Branch Marine premiums rates increased 1.9% for the year ended December 31, 2011 compared to the same period in 2010. For our Navigators Technical Risk (“NavTech”) and Primary Casualty lines we experienced an average renewal premium rate increases of approximately 4.2% and 7.4% for the year ended December 31, 2011 compared to the same period in 2010, which was offset by a decline in our Excess Casualty lines of 1.2%, respectively. The Insurance Companies and Lloyd’s Professional Liability division overall experienced approximately a 1.5% decrease in average renewal premium rates for the year ended December 31, 2011 compared to 2010.
Our reinsurance program includes contracts for proportional reinsurance, per risk and whole account excess-of-loss reinsurance for both property and casualty risks and property catastrophe excess-of-loss reinsurance. In recent years we have increased our utilization of excess-of-loss reinsurance for marine, property and casualty risks. Our excess-of-loss reinsurance contracts generally provide for a specific amount of coverage in excess of an attachment point and sometimes provides for reinstatement of the coverage to the extent the limit has been exhausted for payment of additional premium (referred to as reinstatement premiums). The number of reinstatements available varies by contract.
We record an estimate of the expected reinstatement premiums for losses ceded to excess-of-loss agreements where this feature applies.
The decrease in the percentage of total ceded written premiums to total gross written premiums for the year ended December 31, 2011 compared to the same period of 2010 was primarily due to a change in the mix of business resulting from new business within our recently established Nav Re division, a reduction in reinsurance reinstatement premiums in 2011 compared to 2010 related to large loss activity for each year and, to a lesser extent, the expansion of products offered by our Professional liability business where our retention ratios are higher, partially offset by a reduction in the retention of our Lloyd’s Property Casualty business.
The increase in the percentage of total ceded written premiums to total gross written premiums for the year ended December 31, 2010 compared to the same period in 2009 was primarily due to the shift in business mix toward lines with lower cessions, offset by the impact of reinsurance reinstatement costs of $19.0 million and $3.5 million resulting from the Deepwater Horizon and West Atlas losses, respectively.
The decrease in total investment income before investment expenses for all years presented was primarily due to lower investment yields and shorter portfolio duration. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 3.0%, 3.5% and 3.8% for the years ended December 31, 2011, 2010 and 2009, respectively. The portfolio duration was 3.6 years, 4.4 years and 4.2 years for the years ended December 31, 2011, 2010 and 2009.
The ratio of net losses and LAE to net earned premiums (“loss ratios”) for the years ended December 31, 2011, 2010 and 2009 is presented in the following table:
The segment and line of business breakdown of the net loss and LAE ratios for the years ended December 31, 2011, 2010 and 2009 are as follows:
The segment and line of business breakdowns of prior period net reserve deficiencies (redundancies) for the years ended December 31, 2011, 2010 and 2009 are as follows:
Our Lloyd’s operations experienced $10.0 million of favorable development. This was driven by favorable development of $10.3 million and $5.5 million from the Marine and Nav Tech divisions respectively, which was partially offset by $5.8 million of unfavorable development from Professional Liability. The favorable development in Marine was primarily from the Cargo, Liability and Specie classes for accident years 2008 and prior. The favorable development in Nav Tech was from Offshore Energy primarily in accident years 2007 to 2009. The adverse development in Professional Liability was mostly from Errors and Omissions in accident years 2006 to 2008.
The Insurance Companies recorded $14.9 million of net prior year savings for Property Casualty business in total. The favorable development included:
The following is a discussion of relevant factors impacting our $8.9 million net reserve redundancies for the year ended December 31, 2009:
$8.0 million of favorable development on our offshore energy (NavTech) book due to favorable claims trends across a number of prior underwriting years
The Lloyd’s Operations recorded $5.9 million of net favorable development which included $11.0 million on Marine business concentrated in the liability, specie and cargo books due to reported losses being less than our expectations in underwriting years 2004 to 2008 and $2.5 million on offshore energy business due to favorable loss trends in several years, partially offset by $4.7 million of adverse loss development in the professional liability books due to reported loss activity in excess of our expectations in the lawyers liability book of business for losses occurring in 2007 and $3.0 million in the property book due to an extension in the loss development pattern for the 2006 and 2007 underwriting years.
The reduction in net incurred loss and LAE shown for the 2005 Hurricanes was due to the release of a reinsurance bad debt reserve established when the events occurred due to the large ceded balances. As those balances have run off and the amounts were fully realized the bad debt reserve has been released back into our general reserve with no change to the overall balance, it has just been reclassified.
There can be no assurances, however, that material loss development may not arise in the future from existing asbestos claims or new claims given the evolving and complex legal environment that may directly impact the outcome of the asbestos exposures of our insureds.
Other operating expenses were $138.0 million for the year ended December 31, 2011 compared to $139.7 million for the same period in 2010. The decrease was primarily due to a reduction in stock grant expense related to performance based awards that are not expected to vest partially offset by increased expenses for continued investments in new underwriting teams. Other operating expenses for the year ended December 31, 2010 increased 5.3%, or $7.0 million compared to 2009 due to investments in new underwriting teams, additional letter of credit fees due to the increased size of our facility, higher Lloyd’s charges due to greater capacity and higher compliance costs due to Solvency II.
Interest expense relates to our Senior Notes due May 1, 2016. Interest on these Senior Notes is due each May 1 and November 1 and the effective interest rate, based on the proceeds net of discount and all issuance costs, is approximately 7.17%. Interest expense for the years ended December 31, 2011 and 2010 was $8.2 million, a $0.3 million decrease from the same period in 2009. The decrease is directly related to the $10.0 million of repurchases that were made in 2009.
The following table sets forth the results of operations for the Insurance Companies for the years ended December 31, 2011, 2010 and 2009:
Prior period net reserve deficiencies of $12.1 million largely attributable to significant emergence in our Profession Liability business, partially offset by redundancies from our Property Casualty business.
In addition to the net adverse impacts noted above, the increase in our Insurance Companies’ pre-tax underwriting loss in 2011 over 2010 was affected by the mix of business and loss trends, partially offset by $7.6 million of net adverse activity recorded in 2010. The net adverse activity recorded in 2010 is primarily related to a combined $13.1 million in reinstatement premiums related to the Deepwater Horizon and West Atlas losses, respectively, partially offset by net prior period reserve redundancies of $5.5 million driven by significant redundancies from our Property Casualty business partially offset by loss emergence from our Professional Liability business.
Our Insurance Companies’ combined ratio for the year ended December 31, 2010 was 101.2% compared to 97.6% for the same period in 2009. Our Insurance Companies’ pre-tax underwriting profit decreased $16.5 million to a $5.3 million pretax underwriting loss for the year ended December 31 2010 compared to $11.2 million of pre-tax underwriting profit for the same period in 2009. The decrease in pre-tax underwriting profit was primarily attributable to large loss activity, namely Deepwater Horizon and West Atlas, as well as reduced rates across all lines due to the soft market conditions, partially offset by net prior period redundancies.
The Insurance Companies’ Property Casualty gross written premiums for the year ended December 31, 2011 increased by 42.4% to $445.3 million compared to the same period in 2010. The increase was primarily driven by our recently established Nav Re division which produced $106.5 million in gross written premiums for the year ended December 31, 2011. Additionally, we saw growth in our Excess Casualty and Primary Casualty lines due to an increase in underwriting activity resulting from an expansion of our underwriting team and competition dislocation in Excess Casualty. The increases were offset by activity within our Specialty Run-off division, reported within Other in the table above, which decreased as a result of the sale of our NavPac business to Tower Insurance Company of New York via a renewal rights transaction.
Our Lloyd’s Operations combined ratio for the year ended December 31, 2011 was 100.8% compared to 99.8% for the same period in 2010. Our Lloyd’s Operations pre-tax underwriting profit decreased by $2.1 million to a $1.7 million pre-tax underwriting loss for the year ended December 31, 2011 compared to $0.4 million of underwriting profit for the same period in 2010. The decrease in pre-tax underwriting profit includes the following adverse activity:
Large current accident year energy losses with a net adverse impact of $9.5 million, inclusive of $2.7 million in reinsurance reinstatement premiums, related to drilling operations in the North Sea, Gulf of Mexico and Russia, as well as an onshore industrial site.
The 2011 Lloyd’s Operations Marine gross written premiums decreased 8.3% to $167.6 million compared to the same period in 2010. The reduction is attributed to a decrease in Cargo and Hull production. Cargo production has decreased as a result of depressed activity and a reduction in commodity prices due to an unfavorable economic environment. Hull gross written premium declined by 46.1% from prior year as we continue our strategy to reduce the book. Partially offsetting the decrease in activity was the War business which produced $12.9 million in gross written premium for the year ended December 31, 2011 due to the widening of hazardous war zones. Average renewal premium rates for 2011 increased approximately 0.9% compared to the same period in 2010, with larger increases on our marine and energy liability products.
The 2010 Lloyd’s Operations Marine gross written premiums decreased 4.8% to $182.7 million compared to 2009 due to declines mostly in Cargo and specie lines as a result of the global economic slowdown. Our marine liability lines experienced a 19.6% increase due to improved energy liability activity. The average renewal premium rates increased approximately 3% in 2010 compared to the previous year.
The following table sets forth the best estimate of our known contractual obligations with respect to the items indicated as of December 31, 2011:
We monitor our capital adequacy to support our business on a regular basis. The future capital requirements of our business will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. Our ability to underwrite is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. In particular, we require (1) sufficient capital to maintain our financial strength ratings, as issued by several ratings agencies, at a level considered necessary by management to enable our Insurance Companies to compete, (2) sufficient capital to enable our Insurance Companies to meet the capital adequacy tests performed by statutory agencies in the United States and the United Kingdom and (3) letters of credit and other forms of collateral that are necessary to support the business plan of our Lloyd’s Operations.
Our capital resources consist of funds deployed or available to be deployed to support our business operations. As of December 31, 2011 and 2010, our capital resources were as follows:
For 2011, the Company repurchased 1,979,107 shares of the Parent Company’s common stock at an aggregate purchase price of $90.9 million and a weighted average price per share of $45.91 pursuant to the share repurchase program. Since 2007, the Company has repurchased 3,609,721 shares of the Parent Company’s common stock at an aggregate purchase price of $161.1 million and a weighted average price per share of $44.64. As of December 31, 2011, authorization for the share repurchase program has expired.
In July 2009, we filed a universal shelf registration statement with the Securities and Exchange Commission. This registration statement, which expires in July 2012, allows for the future possible offer and sale by the Company of up to $500 million in the aggregate of various types of securities including common stock, preferred stock, debt securities, depositary shares, warrants, units or stock purchase contracts, stock purchase units and trust preferred securities guaranteed by the Parent Company. The shelf registration statement enables us to efficiently access the public equity or debt markets in order to meet future capital needs, if necessary. This report is not an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.
Condensed Parent Company balance sheets as of December 31, 2011 and 2010 are shown in the table below:
As a result of the April 1, 2011 replacement of the expiring credit facility, the applicable margin and applicable fee rate payable under the letter of credit facility are now based on a tiered schedule that is based on the Company’s then-current ratings issued by S&P and Moody’s with respect to the Company’s senior unsecured long-term debt securities, without third-party credit enhancement, and the amount of the Company’s own ‘Funds at Lloyd’s’ collateral.
Generally, for excess of loss reinsurers we pay monthly or quarterly deposit premiums based on the estimated subject premiums over the contract period (usually one year) that are subsequently adjusted based on actual premiums determined after the expiration of the applicable reinsurance treaty. Paid losses subject to excess of loss recoveries are generally billed as they occur and are usually settled by reinsurers within 30 calendar days for the Insurance Companies and 30 business days for the Lloyd’s Operations.
Net cash used in financing activities was $88.8 million, $50.5 million and $12.1 million for the years ended December 31, 2011, 2010 and 2009. The increase in the use of cash is primarily related to the repurchase of the Parent Company’s common stock under our share repurchase program.
As of December 31, 2011, the weighted average rating of our fixed maturity investments was “AA” by S&P and “Aa” by Moody’s. The entire fixed maturity investment portfolio, except for investments with a fair value of $16.5 million, consists of investment grade bonds. As of December 31, 2011, our portfolio had a duration of 3.6 years. Management periodically projects cash flow of the investment portfolio and other sources in order to maintain the appropriate levels of liquidity in an effort to ensure our ability to satisfy claims. As of December 31, 2011 and 2010, all fixed maturity securities and equity securities held by us were classified as available-for-sale.
The following tables set forth our cash and investments as of December 31, 2011 and 2010:
Invested assets increased over the last year primarily due to unrealized gains in 2011. The consolidated average investment yield of the portfolio for 2011, 2010 and 2009 was 3.0%, 3.5% and 3.8%, respectively due to the general decline in market yields over the period. The tax equivalent yields for 2011, 2010 and 2009 on a consolidated basis were 3.5%, 4.0% and 4.6%, respectively. The portfolio’s duration was 3.6 years and 4.4 years as of December 31, 2011 and 2010, respectively. Since the beginning of 2011, the tax-exempt portion of our investment portfolio has increased by $31.0 million to approximately 19.7% of the fixed maturities investment portfolio at December 31, 2011 compared to approximately 18.1% at December 31, 2010.
We own $135.4 million of municipal securities which are credit enhanced by various financial guarantors. As of December 31, 2011, the average underlying credit rating for these securities is AA-. There has been no material adverse impact to our investment portfolio or results of operations as a result of downgrades of the credit ratings for several of the financial guarantors.
We analyze our mortgage-backed and asset-backed securities by credit quality of the underlying collateral distinguishing between the securities issued by the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”) which are Federal government sponsored entities, and the non-FNMA and non-FHLMC securities broken out by prime, Alternative A-paper (“Alt-A”) and subprime collateral. The securities issued by FNMA and FHLMC are the obligations of each respective entity. Legislation has provided for guarantees by the U.S. Government of up to $100 billion each for FNMA and FHLMC.
The following table sets forth the composition of the investments categorized as residential mortgage obligations in our portfolio by generally equivalent S&P and Moody’s ratings (not all securities in our portfolio are rated by both S&P and Moody’s) as of December 31, 2011.
The following table sets forth the composition of the investments categorized as commercial mortgage-backed securities in our portfolio by generally equivalent S&P and Moody’s ratings (not all securities in our portfolio are rated by both S&P and Moody’s) as of December 31, 2011.
The following table sets forth the composition of the investments categorized as corporate bonds in our portfolio by generally equivalent S&P and Moody’s ratings (not all securities in our portfolio are rated by both S&P and Moody’s) as of December 31, 2011.
The following table summarizes all securities in a gross unrealized loss position as of December 31, 2011 and 2010, showing the aggregate fair value and gross unrealized loss by the length of time those securities had continuously been in a gross unrealized loss position as well as the number of securities:
The contractual maturity by the number of years until maturity for fixed maturity securities with unrealized losses as of December 31, 2011 is shown in the following table: