Company’s integrated risk management, as well as features of its products, provides flexibility in making decisions regarding investments. The Company’s investments are currently comprised of a high grade fixed maturities portfolio and an alternative investment portfolio that currently employs ten strategies invested in approximately 45 underlying trading entities designed to provide diversification and to generate positive returns while attempting to reduce the frequency and severity of loss outcomes. The alternative investment portfolio also includes two strategic reinsurance private equity investments. Based on fair value at December 31, 2003, the allocation of invested assets was approximately 68.5% in cash and fixed maturities and 31.5% in alternative investments.
Year ended December 31, 2003 compared to year ended December 31, 2002
Gross premiums written. Gross premiums written for the year ended December 31, 2002 were $647.4 million compared to $710.6 million for the year ended December 31, 2001, a decrease of 8.9%. Gross premiums written for property and casualty were $632.7 million for the year ended December 31, 2002 compared to $496.5 million for the year ended December 31, 2001. Gross premiums written for property and casualty increased principally due to increased demand for, and improved pricing of, the Company’s products and the expansion of the product offering to include traditional property and casualty reinsurance risks during 2002. Gross premiums written for life and annuity were $14.7 million for the year ended December 31, 2002 compared to $214.1 million for the year ended December 31, 2001. The Company believes that the lack of life and annuity underwriting production during the year ended December 31, 2002 was attributable to the low interest rate environment and weak global economy in 2002. The demand for the type of life and annuity reinsurance that the Company offers is typically weak during periods when interest rates are low.
Net income (loss). Net loss for the year ended December 31, 2002 was $5.8 million compared to net income of $2.5 million for the year ended December 31, 2001. The change to a net loss in 2002 compared to net income in 2001 resulted from the unfavorable development on the Company’s reinsurance reserves and lower investment returns than necessary to support the Company’s increased reinsurance liabilities.
On each of January 31, 2003, May 1, 2003 and July 25, 2003, the Company’s Board of Directors declared a quarterly shareholder dividend of $0.02 per share payable to shareholders of record on February 17, 2003, May 12, 2003 and August 8, 2003, respectively. On October 31, 2003, the Board of Directors declared a shareholder dividend of $0.03 per share payable to shareholders of record on November 14, 2003. Continuation of cash dividends in the future will be at the discretion of the Board of Directors and will be dependent upon the Company’s results of operations and cash flows, and its financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant. On January 30, 2004, the Board of Directors declared a dividend of $0.03 per share to be paid on February 23, 2004 to shareholders of record on February 13, 2004.
rating agency’s opinion of the Company’s financial strength, operating performance and ability to meet obligations. If an independent rating agency downgrades or withdraws any of the Company’s ratings, the Company could be severely limited or prevented from writing any new reinsurance contracts, which would significantly and negatively affect its business. To date, the Company’s ratings have been affirmed by A.M. Best and Fitch on each rating review. Ratings are based upon factors relevant to policyholders and are not directed toward the protection of investors.