Due to rounding, numbers presented in the tables included in this Form 10-K may not add up precisely to the totals provided.
We aspire to be the world’s best underwriter by matching well-structured risks with efficient sources of capital and our mission is to produce superior returns for our shareholders over the long term. We seek to accomplish these goals by being a trusted, long-term partner to our customers for assessing and managing risk, delivering responsive and innovative solutions, leveraging our core capabilities of risk assessment and information management, investing in these core capabilities in order to serve our customers across market cycles, and keeping our promises. Our strategy focuses on superior risk selection, superior customer relationships and superior capital management. We provide value to our customers and joint venture and managed fund partners in the form of financial security, innovative products, and responsive service. We are known as a leader in paying valid claims promptly. We principally measure our financial success through long-term growth in tangible book value per common share plus the change in accumulated dividends, which we believe is the most appropriate measure of our financial performance, and in respect of which we believe we have delivered superior performance over time. The principal drivers of our profit are underwriting income, investment income and fee income generated by our third-party capital management business.
We have determined our business consists of the following reportable segments: (1) Property, which is comprised of catastrophe and other property reinsurance and insurance written on behalf of our operating subsidiaries and certain entities managed by our ventures unit, and (2) Casualty and Specialty, which is comprised of casualty and specialty reinsurance and insurance written on behalf of our operating subsidiaries and certain entities managed by our ventures unit.
We continually explore appropriate and efficient ways to address the risk needs of our clients and the impact of various regulatory and legislative changes on our operations. We have created and managed, and continue to manage, multiple capital vehicles across several jurisdictions and may create additional risk bearing vehicles or enter into additional jurisdictions in the future. In addition, our differentiated strategy and capabilities position us to pursue bespoke or large solutions for clients, which may be non-recurring. This, and other factors including the timing of contract inception, could result in significant volatility of premiums in both our Property and Casualty and Specialty segments. As our product and geographical diversity increases, we may be exposed to new risks, uncertainties and sources of volatility.
We approach estimation of our potential loss exposure by dividing our exposures into three categories: (1) event-like losses, such as event contingency, event-based casualty class and certain types of accident and health, (2) developing losses, such as traditional casualty lines, financial credit lines, such as mortgage and
trade credit and surety, and (3) known unknowns, which is primarily business interruption. We continue to evaluate industry trends and our potential exposure associated with the ongoing COVID-19 pandemic, and expect historically significant industry losses to emerge over time as the full impact of the pandemic and its effects on the global economy are realized. A longer or more severe recession will increase the probability of losses. Potential legislative, regulatory and judicial actions are also causing significant uncertainty with respect to policy coverage and other issues. Among other things, we continue to actively monitor information received from or reported by clients, brokers, industry actuaries, regulators, courts, and others, and to assess that information in the context of our own portfolio.
While we believe we have been able to operate effectively with most of our employees working remotely, an extended period of remote work arrangements could strain the Company’s business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and adversely affect the Company’s ability to manage our business. For additional information see "-Current Outlook" and "Part II, Item 1A, Risk Factors."
(2) Represents the fair value of RenaissanceRe UK's reserve for claims and claim expenses, net of reinsurance recoverable, disposed of on August 18, 2020.
(3) Represents the fair value of TMR's reserve for claims and claim expenses, net of reinsurance recoverable, acquired at March 22, 2019.
Reserving for our claims involves other uncertainties, such as the dependence on information from ceding companies, the time lag inherent in reporting information from the primary insurer to us or to our ceding companies, and different reserving practices among ceding companies. The information received from ceding companies is typically in the form of bordereaux, broker notifications of loss and/or discussions with ceding companies or their brokers. This information may be received on a monthly, quarterly or transactional basis and normally includes paid claims and estimates of case reserves. We may also receive an estimate or provision for IBNR from certain ceding companies. This information is often updated and adjusted from time to time during the loss settlement period as new data or facts in respect of initial claims, client accounts, industry or event trends may be reported or emerge in addition to changes in applicable statutory and case laws.
In accident years with a low level of insured catastrophe losses, our other property lines of business would contribute a greater proportion of our overall incurred claims and claim expenses within our Property segment, compared to years with a high level of insured catastrophe losses. Our other property lines of business tend to generate less volatility in future accident years and, as such, we would expect to see a slower more stable increase or decrease in estimated incurred net claims and claim expenses over time. Certain of our other property contracts are also exposed to catastrophe events, resulting in increased volatility of incurred claims and claim expenses driven by the occurrence of catastrophe events. In addition, volatility of the initial estimate associated with large catastrophe losses and the speed at which we settle claims can vary dramatically based on the type of event. We anticipate losses from the COVID-19 pandemic will be highly complex and uncertain given the unprecedented situation and will take longer to develop given the nature of the losses.
The table below shows the impact on our gross reserve for claims and claim expenses, net income and shareholders’ equity as of and for the year ended December 31, 2020 of a reasonable range of possible outcomes associated with our estimates of gross ultimate losses for claims and claim expenses incurred within our Property segment. The reasonable range of possible outcomes is based on a distribution of outcomes of our ultimate incurred claims and claim expenses from large losses. In addition, we adjust the loss ratios and development curves in our other property lines of business in a similar fashion to the sensitivity analysis performed for our Casualty and Specialty segment, discussed in greater detail below. In general, our reserve for claims and claim expenses for more recent losses are subject to greater uncertainty and, therefore, greater variability and are likely to experience material changes from one period to the next. This is due to uncertainty with respect to the size of the industry losses, which contracts have been exposed to the loss and the magnitude of claims incurred by our clients. As our claims age, more information becomes available and we believe our estimates become more certain, although there is no assurance this trend will continue in the future. As a result, the sensitivity analysis below is based on the age of each accident year, our current estimated incurred claims and claim expenses for the losses occurring in each accident year, and a reasonable range of possible outcomes of our current estimates of claims and claim expenses by accident year. The impact on net income and shareholders’ equity assumes no increase or decrease in reinsurance recoveries, loss related premium or profit commission, or redeemable noncontrolling interest.
The following table details our Casualty and Specialty segment incurred claims and claim expenses, net of reinsurance, as of December 31, 2020.
The reserving methodology for our Casualty and Specialty segment is weighted more heavily to our initial estimate in the early periods immediately following the contracts’ inception through the use of the expected loss ratio method. The expected loss ratio method estimates the incurred losses by multiplying the initial expected loss ratio by the earned premium. Under the expected loss ratio method, no reliance is placed on the development of claims and claim expenses. The determination of when reported losses are sufficient and credible to warrant selection of an ultimate loss ratio different from the initial expected loss ratio also requires judgment. We generally make adjustments for reported loss experience indicating unfavorable variances from the initial expected loss ratio sooner than reported loss experience indicating favorable variances as reporting of losses in excess of expectations tends to have greater credibility than an absence of, or lower than expected level of, reported losses. Over time, as a greater number of claims are reported and the credibility of reported losses improves, actuarial estimates of IBNR are typically based on the Bornhuetter-Ferguson actuarial method. The Bornhuetter-Ferguson method places weight on claims and claim expenses development experience. If there is adverse development of prior accident years claims and claim expenses, we generally select the Bornhuetter-Ferguson method to ensure the claim experience is considered in the determination of our estimated claims and claim expenses with the associated business. If we believe we lack the claims experience in the early stages of development of a line of business, we may not select the Bornhuetter-Ferguson method until such time as we believe there is greater credibility in the level of reported losses. As development experience for claims and claim expenses on prior accident years becomes credible, the Bornhuetter-Ferguson method is generally selected which places greater weight on this reported experience as it develops. The Bornhuetter-Ferguson method estimates our expected ultimate claims and claim expenses by applying our initial estimated loss ratio to our undeveloped premium, and adding the reported losses to the estimate. The impact of these methodologies can be observed in the table above. For example, the 2014 accident year ultimate loss remained relatively consistent for the first two years of development (i.e., the years ended December 31, 2015 and 2016), before experiencing favorable development in years three and four (i.e., the years ended December 31, 2017 and 2018), reflecting the timing of our adoption of the Bornhuetter-Ferguson method as the reported experience became more credible.
cut-off and return of unearned premiums or other contract disruptions. The time lag involved in the process of reporting premiums is shorter than the lag in reporting losses. In addition to estimating premiums written, we estimate the earned portion of premiums written which is subject to judgment and uncertainty. Any adjustments to written and earned premiums, and the related losses and acquisition expenses, are accounted for as changes in estimates and are reflected in the results of operations in the period in which they are made.
The majority of the balance we have accrued as recoverable will not be due for collection until some point in the future. The amounts recoverable that will ultimately be collected are subject to uncertainty due to the ultimate ability and willingness of reinsurers to pay our claims at a future point in time, for reasons including insolvency or elective run-off, contractual dispute and various other reasons. In addition, because the majority of the balances recoverable will not be collected for some time, economic conditions as well as the financial and operational performance of a particular reinsurer may change, and these changes may affect the reinsurer’s willingness and ability to meet their contractual obligations to us. To reflect these uncertainties, we estimate and record a provision for current expected credit losses for potential uncollectible reinsurance recoverable which reduces reinsurance recoverable and net income.
We estimate our provision for current expected credit losses by applying specific percentages against each reinsurance recoverable based on our counterparty’s credit rating. The percentages applied are based on
In order to determine if a market is active or inactive for a security, we consider a number of factors, including, but not limited to, the volume of trading activity for the security in question, the price of the security compared to its par value (for fixed maturity investments), and other factors that may be indicative of market activity.
Refer to “Note 6. Fair Value Measurements” in our “Notes to the Consolidated Financial Statements” for additional information about fair value measurements.
We assess goodwill and other intangible assets for impairment in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of the annual impairment evaluation, we assess qualitative factors to determine if events or circumstances exist that would lead us to conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then we do not perform a quantitative evaluation. Should we determine that a quantitative analysis is required, we will first determine the fair value of the reporting unit and compare that with the carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, then goodwill is not considered impaired and no further analysis is required. If the carrying amount of a reporting unit exceeds its fair value, we then proceed to determine the amount of the impairment charge, if any. There are many assumptions and estimates underlying the fair value calculation. Principally, we identify the reporting unit or business entity that the goodwill or other intangible asset is attributed to, and review historical and forecasted operating and financial performance and other underlying factors affecting such analysis, including market conditions. Other assumptions used could produce significantly different results which may result in a change in the value of goodwill or our other intangible assets and a related charge in our consolidated statements of operations. An impairment charge could be recognized in the event of a significant decline in the implied fair value of those operations where the goodwill or other intangible assets are applicable. In the event we determine that the value of goodwill has become impaired, an accounting charge will be taken in the fiscal quarter in which such determination is made, which could have a material adverse effect on our results of operations in the period in which the impairment charge is recorded.
Investments in which we have significant influence over the operating and financial policies of the investee are classified as investments in other ventures, under equity method, and are accounted for under the equity method of accounting. Under this method, we record our proportionate share of income or loss from such investments in our results for the period. Any decline in the value of investments in other ventures, under equity method, including goodwill and other intangible assets arising upon acquisition of the investee, considered by management to be other-than-temporary, is reflected in our consolidated statements of operations in the period in which it is determined. As of December 31, 2020, we had $98.4 million (2019 - $106.5 million) in investments in other ventures, under equity method on our consolidated balance sheets, including $10.6 million of goodwill and $12.4 million of other intangible assets (2019 - $10.6 million and $14.3 million). The carrying value of our investments in other ventures, under equity method, individually or in the aggregate, may, and likely will, differ from the realized value we may ultimately attain, perhaps significantly so.
realized. The valuation allowance assessment is performed separately in each taxable jurisdiction based on all available information including projections of future GAAP taxable income from each tax-paying component in each tax jurisdiction. The valuation allowance relates to a substantial portion of our net deferred tax assets in most jurisdictions in which we do business. It excludes Bermuda and our U.S. operations that existed prior to the acquisition of TMR, which only have a small valuation allowance against finite lived tax carryforwards.
We have unrecognized tax benefits of $Nil as of December 31, 2020 (2019 - $Nil). Interest and penalties related to unrecognized tax benefits, would be recognized in income tax expense. At December 31, 2020, interest and penalties accrued on unrecognized tax benefits were $Nil (2019 - $Nil).
Net income available to RenaissanceRe common shareholders was $731.5 million in 2020, compared to $712.0 million in 2019, an increase of $19.4 million. As a result of our net income available to RenaissanceRe common shareholders in 2020, we generated an annualized return on average common equity of 11.7% and our book value per common share increased from $120.53 at December 31, 2019 to $138.46 at December 31, 2020, a 16.0% increase, after considering the change in accumulated dividends paid to our common shareholders.
The most significant events affecting our financial performance during 2020, on a comparative basis to 2019, include:
Partially offsetting the impact of the 2020 Weather-Related Large Loss Events and COVID-19 losses was favorable development on prior accident years of $183.8 million, primarily related to large loss events in 2019, 2018 and 2017, as well as favorable movements in other assumed losses and ceded recoveries. This favorable development reduced the combined ratio by 4.6 percentage points and was principally in the Property segment.
In comparison, our underwriting result in 2019 was principally impacted by Typhoon Hagibis, the Q3 2019 Catastrophe Events (as defined below) and certain losses associated with aggregate loss contracts in 2019 (the “2019 Aggregate Losses” and collectively, the “2019 Large Loss Events”), which had a net negative impact on our underwriting result of $418.9 million and added 12.9 percentage points to the combined ratio, principally in the Property segment;
•Investment Results - our total investment result, which includes the sum of net investment income and net realized and unrealized gains on investments, was $1.2 billion in 2020, compared to $838.3 million in 2019, an increase of $336.4 million. The increase was primarily driven by net realized and unrealized gains on investments of $820.6 million in 2020, compared to $414.1 million in 2019. The net realized and unrealized gains on investments in 2020 were driven by net realized and unrealized gains on the fixed maturity investments portfolio, equity investments trading and investment-related derivatives;
•Net Income Attributable to Redeemable Noncontrolling Interests - our net income attributable to redeemable noncontrolling interests was $230.7 million in 2020, compared to $201.5 million in 2019. The increase was due to improved performance from Medici and Vermeer, compared to 2019, partially offset by lower underlying performance in DaVinci which was negatively impacted by the 2020 Weather-Related Large Loss Events and the COVID-19 losses; and
•Impact of Catastrophe Events - in 2019, we had a net negative impact on our net income available to RenaissanceRe common shareholders of $348.2 million from Hurricane Dorian and Typhoon Faxai (the “Q3 2019 Catastrophe Events”), Typhoon Hagibis and losses associated with aggregate loss contracts (collectively, the “2019 Large Loss Events”). This compares to a net negative impact on our net income available to RenaissanceRe common shareholders of $86.4 million from the combined impacts of the 2018 Large Loss Events and changes in estimates of the 2017 Large Loss Events, in 2018;
•Underwriting Results - we generated underwriting income of $256.4 million and had a combined ratio of 92.3% in 2019, compared to underwriting income of $244.9 million and a combined ratio of 87.6% in 2018. Our underwriting income in 2019 was comprised of $209.3 million of underwriting income in our Property segment and $46.0 million of underwriting income in our Casualty and Specialty segment. In comparison, our underwriting income in 2018 was comprised of our Property segment, which generated underwriting income of $262.1 million, and our Casualty and Specialty segment, which incurred an underwriting loss of $17.0 million.
•Investment Results - our total investment result, which includes the sum of net investment income and net realized and unrealized gains on investments, was a gain of $838.3 million in 2019, compared to a gain of $86.8 million in 2018, an increase of $751.5 million. Impacting the investment results were higher returns on portfolios of fixed maturity and short term investments, equity investments trading, catastrophe bonds and investments-related derivatives. Also driving the investment result for 2019 was higher average invested assets, primarily resulting from the acquisition of TMR, combined with capital raised in certain of our consolidated third-party capital vehicles during 2019, including DaVinciRe, Upsilon RFO, Vermeer and Medici, and the subsequent investment of those funds as part of our consolidated investment portfolio; and
increase was principally due to improved performance from DaVinciRe and the addition of net income attributable to Vermeer in 2019, compared to 2018, which was negatively impacted by significant losses in DaVinciRe associated with Hurricane Michael, the wildfires in California during the fourth quarter of 2018 (the “Q4 2018 California Wildfires”) and changes in certain losses associated with aggregate loss contracts in 2018 (the “2018 Aggregate Losses”).
Meaningful uncertainty regarding the estimates and the nature and extent of the losses from catastrophe events, driven by the magnitude and recent nature of each event, the geographic areas impacted by the events, relatively limited claims data received to date, the contingent nature of business interruption and other exposures, potential uncertainties relating to reinsurance recoveries and other factors inherent in loss estimation, among other things.
The financial data in the table below provides additional information detailing the net negative impact of the 2020 Weather-Related Large Loss Events on our consolidated financial statements in 2020.
(2) “Q4 2020 Weather-Related Catastrophe Events” includes Hurricanes Zeta, Delta, Hurricane Eta and wildfires on the West Coast of the United States during the fourth quarter of 2020.
(4) “2020 Weather-Related Large Loss Events” includes the Q3 2020 Weather-Related Catastrophe Events, Q4 2020 Weather-Related Catastrophe Events and the aggregate losses in 2020 described in footnote (3).
In 2020, losses related to the COVID-19 pandemic resulted in a net negative impact on net income available to RenaissanceRe common shareholders of $286.6 million, which reflects a net negative impact on underwriting result of $351.9 million, offset by redeemable noncontrolling interest of $65.4 million. The net negative impact on underwriting result had a 8.9 percentage point impact on the consolidated combined ratio, and is comprised of net claims and claims expenses incurred of $385.6 million, offset by net reinstatement premiums earned and earned profit commissions of $33.6 million. The net negative impact on underwriting result was $235.0 million in the Property Segment, principally representing the cost of claims incurred but not yet reported with respect to exposures such as business interruption coverage, and $117.0 million for the Casualty and Specialty segment, primarily representing the cost of claims incurred but not yet reported, with respect to exposures such as event contingency and event-based casualty covers.
The financial data below provides additional information detailing the net negative impact of certain events on our segment underwriting results and consolidated combined ratio in 2019.
(2) “Q4 2018 Catastrophe Events” includes Hurricane Michael and the Q4 2018 California Wildfires.
The financial data below provides additional details regarding the net negative impact of certain events on our segment underwriting results and consolidated combined ratio in 2018.
(1) Impact on Casualty and Specialty segment result includes loss estimates from catastrophe exposed contracts within certain specialty lines of business (i.e., energy, marine, and regional multi-line business). Amounts shown for the Q4 2018 Catastrophe Events, which includes the Q4 2018 California Wildfires, do not reflect impacts from certain casualty liability exposures within the Casualty and Specialty segment associated with the Q4 2018 California Wildfires, as different actuarial techniques are used to estimate losses related to such exposures.
Below is a summary of the underwriting results and ratios for our Property segment:
In 2020, our Property segment gross premiums written increased by $568.2 million, or 23.4%, to $3.0 billion, compared to $2.4 billion in 2019.
Gross premiums written in our catastrophe class of business were $1.9 billion in 2020, an increase of $291.3 million, or 18.3%, compared to 2019. The increase in gross premiums written in our catastrophe class of business in 2020 was primarily driven by expanded participation on existing transactions, certain new transactions, rate improvements and business acquired as a result of the acquisition of TMR.
relationships and through new opportunities we believe have comparably attractive risk-return attributes, rate improvements, and business acquired in connection with the acquisition of TMR.
As our other property class of business has become a larger percentage of our Property segment gross premiums written, the amount of proportional business has increased. Proportional business typically has relatively higher premiums per unit of expected underwriting income, together with a higher acquisition expense ratio and combined ratio, than traditional excess of loss reinsurance.
Ceded premiums written in our Property segment increased $71.0 million, to $776.7 million, in 2019, compared to $705.7 million in 2018. The increase in ceded premiums written was principally due to a significant portion of the increase in gross premiums written in the catastrophe class of business noted above being ceded to third-party investors in our managed vehicles, in particular Upsilon Fund, as well as an overall increase in ceded purchases.
Principally impacting the Property segment underwriting result and combined ratio in 2020 were the 2020 Weather-Related Large Loss Events, which resulted in a net negative impact on the underwriting result of $651.9 million and added 35.0 percentage points to the combined ratio, and COVID-19 losses, which resulted in a net negative impact on the underwriting result of $235.0 million and added 12.3 percentage points to the combined ratio. Partially offsetting the impact of the 2020 Weather-Related Large Loss Events and COVID-19 losses was favorable development on prior accident years of $157.3 million, primarily related to large loss events in 2019, 2018 and 2017, as well as favorable movements in other assumed losses and ceded recoveries. This favorable development reduced the Property segment combined ratio by 8.1 percentage points. In comparison, 2019 was principally impacted by the 2019 Large Loss Events, which resulted in a net negative impact on the Property segment underwriting result of $414.4 million and a corresponding increase in the Property segment combined ratio of 26.7 percentage points.
In addition, in 2019, net favorable development on prior accident years net claims and claim expenses of $2.9 million, or a decrease in the combined ratio of 0.2 percentage points, was primarily driven by favorable development on the 2017 Large Loss Events, which was mostly offset by adverse development on the 2018 Large Loss Events, compared to net favorable development of $221.3 million, or 21.0 percentage points, in 2018. The net favorable development in 2018 included the decreases in the estimates of the net negative impact of the 2017 Large Loss Events noted above. Refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Summary of Critical Accounting Estimates-Claims and Claim Expense Reserves” and “Note 8. Reserve for Claims and Claim Expenses” in our “Notes to the Consolidated Financial Statements” for additional discussion of our reserving techniques and prior year development of net claims and claim expenses.
In 2020, our Casualty and Specialty segment gross premiums written increased by $430.3 million, or 18.1%, to $2.8 billion, compared to $2.4 billion in 2019. The increase was due to growth from new and existing business opportunities written in the current period and prior periods across various classes of business within the segment, and business acquired in connection with the acquisition of TMR.
Ceded premiums written in our Casualty and Specialty segment increased by $98.4 million, to $747.9 million, in 2020, compared to $649.5 million in 2019, primarily resulting from increased gross premiums written subject to our retrocessional quota share reinsurance programs.
Ceded premiums written in our Casualty and Specialty segment increased by $176.7 million, to $649.5 million, in 2019, compared to $472.8 million in 2018, primarily resulting from increased gross premiums written subject to our retrocessional quota share reinsurance programs.
The increase in the combined ratio in 2020 was principally driven by net claims and claim expenses associated with the COVID-19 losses of $122.1 million, which added 6.1 percentage points to the net claims and claim expense ratio during 2020.
Our Casualty and Specialty segment experienced net favorable development on prior accident years net claims and claim expenses of $26.8 million, or 1.4 percentage points, during 2020, compared to $23.9 million, or 1.4 percentage points, respectively, in 2019. The net favorable development during 2020 and 2019 was principally driven by reported losses coming in lower than expected. Refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Summary of Critical Accounting Estimates-Claims and Claim Expense Reserves” and “Note 8. Reserve for Claims and Claim Expenses” in our “Notes to the Consolidated Financial Statements” for additional discussion of our reserving techniques and prior year development of net claims and claim expenses.
Our Casualty and Specialty segment generated underwriting income of $46.0 million in 2019, compared to an underwriting loss of $17.0 million in 2018. In 2019, our Casualty and Specialty segment generated a net claims and claim expense ratio of 66.1%, an underwriting expense ratio of 31.2% and a combined ratio of 97.3%, compared to 67.3%, 34.5% and 101.8%, respectively, in 2018.
In addition to the total fee income earned through third-party capital management, joint ventures, managed funds and certain structured retrocession agreements to which we are a party that are recorded through underwriting income, as detailed above, we also earn other fee income on certain other underwriting-related activities. These fees, in the aggregate, are recorded as a reduction to operating expenses or acquisition expenses, as applicable. The total fees, including the total fee income detailed in the table above plus other fee income we earn on certain other underwriting activities, earned by us in 2020 that were recorded as a reduction to operating expenses or acquisition expenses were $118.7 million and $28.1 million, respectively, resulting in a reduction to the combined ratio of 3.7% (2019 - $92.6 million, $15.3 million and 3.2%, respectively; 2018 - $81.6 million, $15.0 million and 4.9%, respectively).
Net investment income was $354.0 million in 2020, compared to $424.2 million in 2019, a decrease of $70.2 million. Impacting our net investment income for 2020 was lower returns in our fixed maturity and short term investments, primarily as a result of lower yields on these investments following the decline in interest rates in early 2020, partially offset by higher returns on our catastrophe bonds due to growth in the portfolio.
Net investment income was $424.2 million in 2019, compared to $270.0 million in 2018, an increase of $154.2 million. Impacting our net investment income for 2019 was improved performance in our fixed maturity and short term investment portfolios, combined with higher average invested assets, primarily resulting from the acquisition of TMR and additional capital raised in certain of our consolidated third-party capital vehicles.
Low interest rates in 2020 have lowered the yields at which assets have been invested relative to 2019 and longer-term historical levels. If the current lower yield environment should persist, we would expect that the yield on our portfolio would be adversely impacted by this low interest rate environment.
Net realized and unrealized gains on investments were $820.6 million in 2020, compared to net realized and unrealized gains of $414.1 million in 2019, an increase of $406.5 million. Principally impacting our net realized and unrealized gains on investments in 2020 were:
•net realized and unrealized gains on our fixed maturity investments trading of $493.8 million in 2020, compared to net realized and unrealized gains of $260.4 million in 2019, an increase of $233.3 million, principally higher as a result of realized gains generated on the sale of fixed maturity investments;
•net realized and unrealized gains on our investment-related derivatives of $68.6 million in 2020, compared to gains of $58.9 million in 2019, an increase of $9.7 million, principally driven by higher net realized and unrealized gains on interest rate futures during 2020, compared to 2019; and
•net realized and unrealized gains on our fixed maturity investments trading of $260.4 million in 2019, compared to net realized and unrealized losses of $127.1 million in 2018, an increase of $387.5 million, principally driven by a downward shift in the interest rate yield curve during 2019, compared to an upward shift in the yield curve in 2018;
•net realized and unrealized gains on equity investments trading of $95.1 million in 2019, compared to net realized and unrealized losses of $39.2 million in 2018, an improvement of $134.3 million,