imposition of damages, and changes and trends in general economic conditions, including the effects of inflation. A change in any of these factors from the assumptions implicit in our estimate can cause our actual loss experience to be better or worse than our reserves, and the difference can be material. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of reserves, because the eventual development of reserves and currently established reserves may not prove adequate in light of subsequent actual experience. To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the release is a credit to earnings in the period that redundancy is recognized.
Direct written premiums for the year ended December 31, 2006 decreased by $26.9 million, or 13.6%, to $171.1 million from $198.0 million in the comparable 2005 period. For the year ended December 31, 2006 the decrease is due to the following: our closed agents business that was acquired as part of previous replacement carrier transactions with OCIC, Met P&C and Sentry decreased by $51.0 million due to the fact that as a result of the continued increase in the competitive nature of the New Jersey auto insurance market those agents were able to place that business with other carriers in the New Jersey market. New business generated by our partner agents for the year ended December 31, 2006 was $31.4 million, offset by attrition of existing business of $7.3 million. For the
The table below shows certain of our selected financial results for the twelve months ended December 31, 2006, 2005 and 2004:
For the year ended December 31, 2006 the decrease is due to the following: our closed agents business that was acquired as part of previous replacement carrier transactions with OCIC, Met P&C and Sentry decreased by $51.0 million as a result of the continued increase in the competitive nature of the New Jersey auto insurance market those agents were able to place that business with other carriers in the New Jersey market. New business generated by our partner agents for the year ended December 31, 2006 was $31.4 million, offset by attrition of existing business of $7.3 million. For the twelve months ended December 31, 2006, direct written premium generated from The Hanover and Hartford renewal business was approximately $11.1 and $4.1 million, respectively.
Losses and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses incurred for the year ended December 31, 2006 decreased by $29.0 million, or 21.8%, to $103.8 million from $132.8 million in the comparable 2005 period. This decrease can be attributed to a decline in earned premium, a reduction in claim frequency in private passenger automobile coverage and significant growth in commercial lines business, which in 2006, have exhibit lower loss ratios. As a percentage of net earned premiums, losses and loss adjustment expenses incurred for the year ended December 31, 2006 were 66.0% compared to 76.9% for the year ended December 31, 2005. The ratio of net incurred losses, excluding loss adjustment expenses, to net earned premiums during 2006 was 61.5% compared to 65.6% for the comparable 2005 period.
For the years ended December 31, 2006, 2005 and 2004, our consolidated cash flows provided by operations was $7.2 million, $28.1 million and $73.6 million, respectively. The decrease in cash flows provided by operations for the year ended December 31, 2006 as compared to December 31, 2005 was due primarily to the a decrease in unpaid losses and loss adjustment expenses , partially offset by a decrease in reinsurance recoverables and receivables and increases in unearned premiums and income taxes payable. For the year ended December 31, 2006, unpaid losses and loss adjustment expenses decreased $28.0 million as compared with an increase of $35.1 million for the same period in 2005. Reinsurance recoverables and receivables for the year ended December 31, 2006 decreased $14.1 million as compared to an increase of $5.9 million for the same period in 2005. The decrease in cash flows provided by operations for the year ended December 31, 2005 as compared to December 31, 2004 was due primarily to the conversion of six-month to twelve-month policies and the related increases on premiums receivable and the deferred acquisition cost asset. Accrued interest income also increased during the period as a result of the increase in fixed income securities.
The table below sets forth the aggregate amount of dividends paid to us by our non-insurance subsidiaries during the years ended December 31, 2006, 2005 and 2004.
Because our non-insurance subsidiaries generate revenues, profits and net cash flows that are generally unrestricted as to their availability for the payment of dividends, we expect to use those revenues to service all of our corporate financial obligations, such as shareholder dividends, if declared. The percentage of our total revenues generated by our non-insurance subsidiaries for the years ended December 31, 2006 and 2005 were 5.1% and 4.1%, respectively.
As of December 31, 2006, we did not have any material commitments for capital expenditures.
Securities in an Unrealized Loss Position for Less than 6 Months
Loss cost trends - increases/decreases in inflationary factors (legal and economic) will influence ultimate claim payouts and their timing.