Premiums. Gross written premiums increased by $133.6 million, or 4.0%, in 2010 compared to 2009, reflecting an increase of $125.5 million in our reinsurance business and $8.1 million increase in our insurance business. The increase in reinsurance premiums was primarily the result of increased writings in our U.S. treaty property and international books of business, driven by a combination of new business, increased participations on renewal contracts, rate increases in select areas and economic and insurance growth in several regions. The increase in insurance premiums was due to increased writings in professional liability and California workers’ compensation business, partially offset by a reduction in the audit premium accrual for workers’ compensation business. Net written premiums increased by $53.4 million, or 3.1%, in 2010 compared to 2009. The fluctuations in net written premiums in comparison to the fluctuations in gross written premiums were primarily attributable to fluctuations in cessions under the affiliated quota share agreement. Premiums earned increased $28.8 million, or 1.6%, in 2010 compared to 2009. The change in net premiums earned is relatively consistent with the increase in net written premiums.
Net investment income decreased by 27.8% in 2009 compared to 2008, primarily due to approximately $747.0 million of transferred investments at the end of 2008 in conjunction with a loss portfolio transfer agreement with an affiliate, lower yields on new money and an increase in losses from our limited partnership investments that principally invest in public and non-public securities, both equity and debt. As a result, net pre-tax investment income, as a percentage of average invested assets, was 3.4% for 2009 compared to 4.5% for 2008.
Incurred losses and LAE were lower by $373.9 million, or 25.5%, in 2009 compared to 2008. The absence, in 2009, of any large catastrophe losses as experienced in 2008, reduced the loss ratio 8.8 points, or $166.6 million, period over period. The $135.2 million decrease, period over period, in current year attritional losses was the result of a decrease in earned premiums; the shift to property business, which tends to have lower losses, as opposed to casualty business and changes in the ceding percentages under the affiliated quota share agreement. The $72.0 million, 3.6 point decrease in prior years’ unfavorable reserve development, primarily attritional losses, was principally due to no additional development on the run-off auto loan credit insurance program in 2009 compared to the $85.3 million incurred in 2008.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees decreased by $9.5 million, or 2.8%, for the year ended December 31, 2010 compared to the same period in 2009. The change was primarily the result of the mix of business and lower contingent commissions on the specialty underwriting book of business.
Commission, brokerage, taxes and fees decreased by $54.0 million, or 13.6%, in 2009 compared to the same period in 2008. The change in this directly variable expense was influenced by the decline in net earned premiums, changes in the mix of business and increased cessions under the affiliated quota share agreement.
Other Underwriting Expenses. Other underwriting expenses, which have remained stable in relation to premium volume, were $139.8 million, $142.6 million and $124.3 million in 2010, 2009 and 2008, respectively.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $54.6 million and $70.9 million for 2010 and 2009, respectively. The decrease was primarily due to the combination of the repurchase of debt in March 2009 and the maturing of senior notes in 2010.
Interest, fees and other bond amortization expense was $70.9 million and $79.0 million for 2009 and 2008, respectively. The decrease, period over period, was primarily due to the partial repurchase of our long term subordinated notes in March 2009.
Our net income was $265.4 million and $395.9 million in 2010 and 2009, respectively. The decrease was primarily driven by a few large catastrophe losses in 2010 compared to no similar catastrophe events in 2009 and the realized gain on debt repurchase in 2009, partially offset by an increase in net realized capital gains and a reduction in income taxes, in addition to the other components discussed above.
Our combined ratio increased by 19.2 points to 107.6% in 2010 compared to 88.4% in 2009. The loss ratio component increased 20.3 points in 2010, over the same period last year, principally due to the increase in current year catastrophe losses as a result of the Chilean earthquake, Australian hailstorms and floods, New Zealand earthquake and the Canadian hailstorm. Both the other underwriting expense ratio component and the commission and brokerage ratio component declined slightly over the same periods last year.
Our combined ratio decreased by 17.3 points to 88.4% in 2009 compared to 105.7% in 2008. The loss ratio component decreased 16.7 points in 2009 compared to the same period last year, principally due to the significant decrease in catastrophe losses and lower current year attritional losses as a result of the mix and blend of business. The commission and brokerage ratio component decreased by 1.9 points in 2009 compared to the same period last year, due to mix of business, while the other underwriting expense ratio component increased by 1.3 points in 2009 compared to 2008.
Stockholder's equity increased by $655.8 million to $2,858.8 million at December 31, 2009 from $2,203.0 million at December 31, 2008, principally as a result of $395.9 million of net income; $219.0 million of unrealized appreciation on investments, net of tax; $28.1 million of foreign currency translation adjustments; $7.5 million of pension adjustments and $5.4 million of share-based compensation transactions.
Net investment income increased 33.7% to $350.3 million in 2010 compared to $262.1 million in 2009. The increase in 2010, period over period, was primarily due to an increase in recorded gains from our limited partnership investments and an increase in dividend income from owning more shares of our parent’s common shares.
securities and other invested assets, partially offset by $17.9 million of net realized capital losses from sales of fixed maturity and equity securities and $5.5 million of other-than-temporary impairments on fixed maturity securities. In 2008, we recorded $221.2 million in losses due to fair value re-measurements primarily on equity securities as a result of the global financial markets credit crisis, 193.5 million of losses from sales of our fixed maturity and equity portfolios and $74.5 million of other-than-temporary impairments on fixed maturity securities.
Premiums. Gross written premiums decreased by 2.4% to $1,143.7 million in 2010 from $1,172.3 million in 2009, primarily due to a $40.7 million (48.2%) decrease in the crop hail quota share treaties, a $32.4 million (8.9%) decrease in U.S. treaty casualty volume and a $28.6 million (29.2%) decrease in facultative volume, partially offset by a $73.7 million (11.8%) increase in treaty property volume. Net written premiums decreased 4.1% to $633.3 million in 2010 compared to $660.6 million for 2009, primarily due to the decrease in gross written premiums. Premiums earned decreased 6.7% to $630.8 million in 2010 compared to $676.4 million in 2009, primarily due to the decline in net written premiums.
Incurred losses were $100.8 million (19.7 points) higher at $445.3 million in 2010 compared to $344.5 million in 2009, primarily as a result of the $51.5 million (11.6 points) increase in current year attritional losses, reflective of current competitive market conditions, $25.1 million (4.3 points) increase in prior year attritional losses and a $24.6 million (3.9 points) increase in catastrophe losses, due to the New Zealand and Chilean earthquakes. The increase in prior years’ attritional losses was primarily driven by reserve strengthening in casualty lines for construction liability claims.
Incurred losses and LAE decreased by 24.7% to $317.8 million in 2009 compared to $422.2 million in 2008. This decrease was due to the decrease in net earned premiums and less unfavorable prior years’ attritional development. Unfavorable prior years’ attritional reserve development was $61.4 million less in 2009 compared to 2008. The 2009 unfavorable attritional reserve development of $26.0 million was primarily the result of reserve strengthening on contractor’s liability programs, package policy business and workers’ compensation business. The 2008 unfavorable attritional reserve development of $87.4 million was primarily the result of the $85.3 million reserve strengthening for an auto loan credit insurance program.
Segment Expenses. Commission and brokerage expenses decreased by 6.7% to $27.8 million in 2010 compared to $29.8 million in 2009. The decrease is primarily due to the impact of variations in reinsurance ceded, particularly under the affiliated quota share agreement. Segment other underwriting expenses in 2010 decreased to $69.7 million from $74.6 million in 2009. The decrease is the result of management’s direct actions to reduce expenses.
Premiums. Gross written premiums increased by 13.5% to $266.4 million in 2010 compared to $234.8 million in 2009, primarily due to an increase in A&H business with its entry into the stop-loss primary market for coverages on self-insured companies in 2010 and increased writings on special per risk reinsurance programs. Correspondingly, net written premiums increased 13.1% to $150.3 million in 2010 compared to $132.9 million in 2009. Premiums earned increased 12.8% to $157.0 million in 2010 compared to $139.1 million in 2009, relatively consistent with the increase in net written premiums.
Gross written premiums decreased by 9.8% to $234.8 million in 2009 compared to $260.4 million for 2008, primarily due to a $33.7 million decrease in marine premiums and a $5.9 million decrease in surety premiums, partially offset by a $10.0 million increase in aviation premiums and a $2.7 million increase in A&H premiums. Net written premiums decreased by 20.7% to $132.9 million in 2009 compared to $167.7 million in 2008 due to the decrease in gross writings coupled with the increased cessions under the affiliated quota share agreement. Premiums earned decreased to $139.1 million in 2009 compared to $168.4 million in 2008. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Incurred losses and LAE increased by 20.9% to $116.4 million in 2010 compared to $96.3 million in 2009, due to an increase in net premiums earned coupled with an increase in the loss ratio. Current year attritional losses increased $11.8 million as a result of losses on the offshore oil rig in the Gulf and higher expected loss ratios in A&H and surety lines of business. In addition, prior years’ attritional losses increased $9.0 million (6.2 points) due to unfavorable reserve development on select specialty classes of business in 2010 compared to favorable reserve development in 2009.
Segment Expenses. Commission and brokerage expenses increased 3.4% to $136.2 million in 2010 compared to $131.7 million in 2009. The increase was primarily in line with the increases in premiums earned. Segment other underwriting expenses in 2010 were $27.6 million compared to $23.1 million in 2009. The increase was consistent with the growth in premiums earned resulting in stable other underwriting expense ratios for the periods.
Commission and brokerage expenses increased 1.5% to $131.7 million in 2009 compared to $129.7 million in 2008. The increase was primarily due to the growth in premiums earned in conjunction with the blend of business mix. Segment other underwriting expenses were $23.1 million and $19.8 million for 2009 and 2008, respectively.