The Company's principal executive office is located at Chevron House, 11 Church Street, Hamilton HM 11, Bermuda. This office space is provided to the Company by IAS.
Underwriting Income. The Company commenced underwriting on January 27, 1998. Premiums written for the period ended December 31, 1998 were $138.2 million. These premiums were derived primarily from workers' compensation aggregate excess of loss reinsurance assumed from Safety National in the amount of $82.1 million, from the group long-term disability quota share reinsurance assumed from RSL in the amount of $39.8 million, from a professional liability aggregate excess reinsurance agreement in the amount of $13.4 million, and from a rent-a-captive program in the amount of $2.9 million.
Investment Losses. For the period ended December 31, 1998, the net investment loss totaled $7.8 million and the net realized loss on sales of investments totaled $8.3 million. Investment results are derived primarily from investment vehicles of independent investment managers, which are accounted for under the equity method, with earnings and losses included in net investment income. The managers' investment losses for the period were primarily the result of extreme and adverse conditions affecting a number of sectors in the global financial markets.
The Company believes that the sources of funding available at the holding company and insurance subsidiary levels, respectively, will be adequate to satisfy on both a short-term and long-term basis the companies' applicable liquidity requirements.
Investments and Market Risk. At December 31, 1998, the Company has allocated $77.2 million, or 81% of the Company's investment portfolio, among a number of investment managers that utilize diverse investment strategies. The investment managers' general strategy categories include, among others, diversified hedging, hedged equity, common stock/specialized trading, short selling, risk arbitrage, distressed securities, futures and commodities and foreign securities investing. The managers primarily invest in a variety of marketable securities and other liquid assets. The Company has invested in the investment vehicles of the managers, which are generally in the form of a corporation or partnership, or through managed accounts in which the manager invests directly on behalf of the Company. The Company can redeem its investment from substantially all these investment vehicles on at least an annual basis with many of the managers providing quarterly or more frequent liquidity.
In addition, 19% of the Company's investment portfolio at December 31, 1998 was invested in fixed maturity securities, which had a weighted average credit rating of "AAA" as rated by Standard & Poor's Corporation. At December 31, 1998, 91% of the Company's fixed maturity securities portfolio consisted of mortgage-backed securities. Mortgage-backed securities subject the Company to a degree of interest rate risk, including prepayment and extension risk, which is generally a function of the sensitivity of each security's underlying collateral to prepayments under varying interest rate environments and the repayment priority of the securities in the particular securitization structure. The Company seeks to limit the extent of this risk by emphasizing the more predictable payment classes and securities with stable collateral.
All of the Company's computer related systems are furnished by its third party administrative services provider, a substantial and reputable firm which provides similar services to other Bermuda based insurance companies. This firm has provided the Company an assurance that it has completed its Year 2000 assessment and that all of its computer related systems will be Year 2000 compliant by April 1999. The Company has also requested assurances of Year 2000 compliance from its other significant business partners and vendors in an effort to resolve any potential problems with the products and services they provide. In most cases, alternative vendors could be utilized in the event Year 2000 problems are encountered. During 1999, the Company will develop appropriate contingency plans in the event any of the computer systems of its administrative services provider, business partners and vendors are not Year 2000 compliant. The costs of the Company's activities relating to the Year 2000 issue have not been and are not expected to be material to the Company's financial condition or results of operations. The Company does not believe that the Year 2000 issue will have a material effect on its operations; however, no assurance can be given in this regard.