However, during the fourth quarter of 2012, the industry sustained significant losses from Superstorm Sandy and also sustained significant losses during 2011 from Australian floods, the New Zealand earthquake, the earthquake and tsunami in Japan, storms in the U.S., and the Thailand floods. It is too early to determine the longer term impact on market conditions as a result of these events. While the 2011 events have resulted in meaningful rate increases for catastrophe coverages in some global catastrophe prone regions, particularly areas impacted by these losses, whether the magnitude of these 2012 and 2011 losses is sufficient to increase rates and improve market conditions for other lines of business remains to be seen.
Premiums. Gross written premiums increased by 0.3% to $3,569.4 million in 2012 compared to $3,558.5 million in 2011, reflecting an $80.1 million increase in our insurance business, partially offset by a $69.2 million decrease in our reinsurance business. The increase in insurance premiums was primarily due to the growth in crop and primary A&H medical stop loss insurance, partially offset by the termination and runoff of several large casualty programs. The decreases in reinsurance premiums was primarily due to the non-renewal of a large Florida quota share reinsurance contract and a $27.7 million decline due to movement in foreign exchange rates, partially offset by increases in new business and rate increases on renewals, particularly for catastrophe exposed contracts. Net written premiums decreased by 3.6% to $1,691.6 million in 2012 compared to $1,754.0 million in 2011. The variance between the changes in gross and net written premiums was primarily attributable to the growth in the crop business, for which the Company uses a higher level of reinsurance. Premiums earned decreased by 1.1% to $1,773.9 million in 2012 compared to
$1,793.9 million in 2011. The fluctuations in premiums earned in comparison to net written premiums were primarily attributable to changes in the mix of business, particularly crop insurance which has a different premiums earning pattern.
Gross written premiums increased by 2.6% to $3,558.5 million in 2011 compared to $3,467.8 million in 2010, reflecting a $103.7 million increase in our insurance business, partially offset by a $12.9 million decrease in our reinsurance business. The year over year increase in insurance premiums was primarily due to the acquisition of Heartland, which provided $169.6 million of new crop insurance business, our recent initiative in primary medical stop loss insurance, which added $54.0 million of premium and improved premium rates on our California workers’ compensation business, partially offset by our reduced participation on a large casualty program. The decrease in reinsurance premiums was due to the continued reduction in U.S. casualty business, the loss of several large crop reinsurance contracts, as well as the planned reduction of catastrophe exposed business in certain territories, partially offset by higher reinstatement premiums, $24.5 million resulting from catastrophe losses and favorable foreign exchange impact, year over year, of $33.4 million. Net written premiums decreased by 1.9% to $1,754.0 million in 2011 compared to $1,788.7 million in 2010. The fluctuations in net written premiums relative to the change in gross written premiums were due to a combination of a higher percentage of premiums ceded under an affiliated quota share agreement and a lower level of ceded reinsurance in the Insurance segment due to the planned reduction in one casualty program. Premiums earned decreased 1.1% to $1,793.9 million in 2011 compared to $1,813.8 million in 2010. The change in net premiums earned is relatively consistent with the decline in net written premiums.
Net Realized Capital Gains (Losses). Net realized capital gains were $391.7 million, net realized capital losses were $41.1 million and net realized capital gains were $65.3 million in 2012, 2011 and 2010, respectively. Of the $391.7 million, there were $364.5 million of gains from fair value re-measurements and $33.9 million of net realized capital gains from sales on our fixed maturity and equity securities, partially offset by $6.6 million of other-than-temporary impairments on our available for sale fixed maturity securities. The net realized capital losses of $41.1 million in 2011 were the result of $16.7 million of losses from fair value re-measurements, $14.5 million of other-than-temporary impairments on our available for sale fixed maturity securities and $9.9 million of net realized capital losses from sales on our fixed maturity and equity securities. The net realized capital gains of $65.3 million in 2010 were the result of $93.8 million of gains of fair value re-measurements, partially offset by $26.4 million of net realized capital losses from sales on our fixed maturity and equity securities and $2.1 million of other-than-temporary impairments.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees decreased by 8.3% to $310.7 million in 2012 compared to $338.7 million in 2011. The 2012 decrease is due primarily to an increase in excess of loss business which carries a lower commission than pro rata business, and growth in crop insurance on a direct distribution basis, which has lower acquisition costs, partially offset by the one-time effect of the non-renewal of the Florida quota share and the adoption of new accounting standards concerning the accounting for acquisition costs.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $50.7 million, $50.8 million and $54.6 million in 2012, 2011 and 2010, respectively. The decrease from 2010 to 2011 was primarily due to the maturing of debt in March, 2010.
Stockholder's equity decreased by $186.3 million to $2,941.4 million at December 31, 2011 from $3,127.7 million at December 31, 2010, principally as a result of $202.8 million of net loss, $29.5 million of net benefit plan obligation adjustments and $0.9 million of foreign currency translation adjustments, partially offset by $41.1 million of unrealized appreciation on investments, net of tax, and $6.4 million of share-based compensation transactions.
Net investment income decreased 2.2% to $306.1 million in 2012 compared to $312.9 million in 2011. The decrease was primarily due to a decline in income from our fixed maturities resulting from lower reinvestment rates, partially offset by additional dividend income from equity investments.
Net realized capital gains were $391.7 million, net realized capital losses were $41.1 million and net realized capital gains were $65.3 million in 2012, 2011 and 2010, respectively. In 2012, we recorded $364.5 million of gains due to fair value re-measurements on fixed maturity, equity securities and other invested assets and $33.9 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $6.6 million of other-than-temporary impairments on fixed maturity securities. The fixed maturity sales in 2012 related primarily to maintaining a balanced foreign currency exposure and the equity sales related primarily to reducing our equity exposure. In 2011, we recorded $16.7 million of losses due to fair value re-measurements on fixed maturity and equity securities and other invested assets, $14.5 million of other-than-temporary impairments on fixed maturity securities and $9.9 million of net realized capital losses from sales of fixed maturity and equity securities. In 2010, we recorded $93.8 million in gains due to fair value re-measurements on fixed maturity and equity securities and other invested assets, partially offset by $26.4 million of net realized capital losses from sales of fixed maturity and equity securities and $2.1 million of other-than-temporary impairments on fixed maturity securities. The losses in 2011 and 2010 included the impact of selling part of our municipal bond portfolio as credit concerns arose in this market sector. We were able to carry the 2010 realized losses back for income tax purposes to offset previously realized gains. This carry back availability expired at the end of 2010.
Segment Expenses. Commission and brokerage expenses increased 8.1% to $168.6 million in 2012 compared to $156.0 million in 2011. These variances were primarily due to the increase in premiums earned and the effect resulting from commissions of the non-renewed Florida quota share contract. Segment other underwriting expenses increased to $44.8 million in 2012 compared to $39.3 million for the same period in 2011. These increases were primarily due to higher share-based compensation and employee benefit plan expenses.
Premiums. Gross written premiums decreased by 2.7% to $1,209.5 million in 2012 compared to $1,242.6 million in 2011, primarily due to a shift in the mix of business towards excess of loss business, which generates a lower premium rate commensurate with lower loss exposure, a $25.0 million decline due to the impact of foreign exchange rate movement and a lower level of reinstatement premiums in 2012. Net written premiums decreased by 10.5% to $550.7 million in 2012 compared to $615.1 million in 2011, primarily due to the decline in gross written premiums and the impact of changes in our affiliated quota share agreements. Premiums earned decreased by 10.1% to $572.5 million in 2012 compared to $636.7 million in 2011. The change in premiums earned is comparable to the change in net written premiums.
Incurred losses and LAE increased 52.4% to $856.1 million in 2011 compared to $561.9 million in 2010. The increase was principally due to a $357.5 million (55.5 points) increase in 2011 current year catastrophes as discussed above. The $253.0 million of current year catastrophe losses for 2010 related primarily to the Chile earthquake ($187.8 million), the 2010 Australian hailstorms and floods ($33.8 million) and the 2010 New Zealand earthquake ($28.0 million). Current year attritional losses decreased by $42.6 million (7.5 points), primarily due to a shift in the mix of business towards property, catastrophe and excess of loss business, which generally carries a lower loss ratio. Prior years’ attritional losses decreased by $29.9 million (4.6 points) due to favorable development on non-catastrophe property business in Singapore and other international markets.
Segment Expenses. Commission and brokerage expenses decreased 12.5% to $124.6 million in 2012 compared to $142.3 million in 2011. This is consistent with the reduction in earned premium and a shift in the mix of business towards property catastrophe and excess of loss business which have lower commission rates. Segment other underwriting expenses increased to $29.3 million in 2012 compared to $27.3 million in 2011. The increases relate to higher personnel benefit costs.
Commission and brokerage expenses increased 4.5% to $142.3 million in 2011 compared to $136.2 million in 2010. These variances were due to the changes in premiums and the mix of business. Segment other underwriting expenses decreased slightly to $27.3 million in 2011 compared to $27.6 million in 2010.
Segment Expenses. Commission and brokerage expenses decreased 56.5% to $17.5 million in 2012 compared to $40.4 million in 2011, driven by growth in direct distribution business, which has lower acquisition costs and changes in our affiliated quota share agreements. Segment other underwriting expenses in 2012 increased to $96.5 million from $87.7 million in 2011. These increases are primarily the result of increased personnel benefit costs.