(1)Certain amounts for prior years have been reclassified to conform to the current year's presentation.
Net Investment Income. Net investment income increased 8.3% in 2003 due to the increase in invested assets resulting from positive cash flow stemming from the increased premium volume and the proceeds from our October 2003 common stock offering. Our net proceeds from the offering amounted to $110.8 million. Net investment income decreased 6.7% in 2002 from the previous year due to lower interest rates during 2002 partially offset by increased invested assets. See the "Business-Investments" section included herein for additional information regarding our net investment income.
At December 31, 2003, a 10% change in the net loss reserves would equate to $37.4 million which would represent an after-tax charge to net income of $24.3 million and 8.4% of stockholders' equity. Loss reserve estimates are reviewed each quarter to evaluate whether the assumptions made continue to be appropriate. Any adjustments that result from this review are recorded in the quarter in which they are identified.
Our reserving practices and the establishment of any particular reserve reflect management's judgment concerning sound financial practice and do not represent any admission of liability with respect to any claims made against us. 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.
Interest Expense. The decreases in interest expense in 2003 and 2002 were primarily due to lower interest rates charged on the loan balance and a declining loan balance. The remaining loan balance was paid in October 2003 from a portion of the proceeds from the Company's common stock offering.
Following are the financial results of the Company's three segments: Insurance Companies, Lloyd's Operations and Navigators Agencies. We evaluate the performance of each segment including Navigators Agencies, primarily based on underwriting results. Other items of revenue and expenditure, including net investment income and realized capital gains and losses, are included herein based on the legal entity where they are recorded. Our underwriting performance is evaluated separately from the performance of our investment portfolios. See Note 13 to the consolidated financial statements for further information. Certain amounts for prior years have been reclassified to conform to the current year's presentation.
Following are the underwriting results of the Insurance Companies for each of the years in the three-year period ended December 31, 2003:
The Lloyd's operations consist of NUAL, which manages Lloyd's Syndicate 1221, Millennium Underwriting Ltd. and Navigators Corporate Underwriters Ltd. Both Millennium Underwriting Ltd. and Navigators Corporate Underwriters Ltd. are Lloyd's corporate members with limited liability and provide capacity to Lloyd's Syndicate 1221. NUAL owns Pennine Underwriting Ltd., an underwriting managing agency with offices in Manchester and Leeds, England, which underwrites cargo and engineering business for Lloyd's Syndicate 1221. The Lloyd's operations and Navigators Management (UK) Limited, a Navigators Agency, which produces business for the United Kingdom Branch of Navigators Insurance Company are subsidiaries of Navigators Holdings (UK) Limited located in the United Kingdom.
Our Lloyd's Syndicate 1221's 2003 stamp capacity was £125 million ($203.5 million) compared to £75.0 million ($112.7 million) in 2002 and £66.3 million ($95.5 million) in 2001. Stamp capacity is a measure of the amount of premium a Lloyd's syndicate is authorized to write as determined by the Council of Lloyd's. Syndicate 1221's stamp capacity is expressed net of commission (as is standard at Lloyd's) of approximately 21%. We provided 97.4%, 68.1% and 67.4% of Syndicate 1221's total capacity for the 2003, 2002 and 2001 underwriting years, respectively. In 2003, we provided a larger percentage of the gross capacity and are reinsuring 15.4% of our Syndicate 1221 capacity through the utilization of quota share reinsurance agreements to third parties who provide letters of credit used as collateral at Lloyd's. The Lloyd's marine business had been subject to deteriorating pricing beginning in the mid-1990's. The pricing competition showed some signs of stabilizing in 2000 and prices increased in 2001, 2002 and 2003. Lloyd's presents its results on an underwriting year basis, generally closing each underwriting year after three years. We make estimates for each underwriting year and timely accrue the expected results. Our Lloyd's operations included in the consolidated financial statements represent our participation in Syndicate 1221.