We also have entered into leases for office space in locations of our U.S. subsidiary operations. These locations include Boston, Massachusetts; Rocky Hill, Connecticut; Pasadena, California; Manhattan Beach, California; Atlanta and Johns Creek, Georgia; Miami, Florida; and Jersey City, New Jersey. We have small serviced office contracts in Alamo, California; Oakbrook, Barrington and Lisle, Illinois; and Brookfield, Wisconsin. In 2010, we entered into a five-year lease for office space in Manhattan, New York, covering 24,000 square feet. An additional floor of 24,000 square feet was also leased in Manhattan in 2011. Also, in 2011, we leased a 5,000 square foot of office space in Chicago, Illinois; a 6,300 square foot office space in San Francisco, California and a small serviced office in Houston, Texas. Our Scottsdale, Arizona and Alpharetta, Georgia offices were closed in 2011.
Net investment income. In 2011, we generated net investment income of $225.6 million, a decrease of 2.8% on the prior year (2010 - $232.0 million, 2009 - $248.5 million). In 2011, lower reinvestment rates and declining book yields from fixed income securities were partially offset by $6.2 million of dividend income from global equity securities. In 2010, the lower interest rate environment and hence lower reinvestment rates resulted in lower net investment income for the year compared to 2009. In addition, investment income in 2009 benefited from a $19.8 million contribution from our investments in funds of hedge funds which we exited on June 30, 2009.
capital. The term ‘hybrid’ refers to securities, such as our preference shares, which have characteristics of both debt and equity.
As of December 31, 2011, we had in issue $934.3 million and £18.0 million in letters of credit to cedants, against which we held $1,344.1 million and £19.3 million of collateral. Our reinsurance receivables increased by 52.4% from $279.9 million at December 31, 2010 to $426.6 million at December 31, 2011, mainly as a result of the recognition of recoveries associated with the New Zealand earthquake and Thailand floods.
Group Chief Financial Officer. On February 14, 2012, we announced that Mr. Richard Houghton will be stepping down from his role as Group Chief Financial Officer and director with effect from February 29, 2012.
Other-than-temporary Impairment of Investments. A security is impaired when its fair value is below its amortized cost. The Company reviews its available for sale fixed income investment portfolio on an individual security basis for potential other-than-temporary impairment (“OTTI”) each quarter based on criteria including issuer-specific circumstances, credit ratings actions and general macro-economic conditions.
Information related to prior periods has been represented to conform to the current period presentation, where applicable.
The policy acquisition expense ratio of 17.7% of net premiums earned for 2010 was 1.1 percentage points lower than in 2009 due largely to the mix of business with more property catastrophe business written which attracts lower average commission rates. This line of business has lower brokerage costs and provides a greater contribution to the total amount of business written.
reduced when compared 2010 where we declined business that did not meet our profitability requirements coupled with higher client retention in some classes.
In 2010, we had higher prior year reserve strengthening of $48.6 million compared to a reserve strengthening of $19.3 million in 2009. Prior year reserve releases are further discussed under “Reserves for Losses and Loss Expenses.”
The Company considers prices for other securities that may not be as actively traded which are priced via pricing services, index providers vendors and broker-dealers, or with reference to interest rates and yield curves, to be derived based on inputs that are observable for the asset, either directly or
The principal capital management transactions during 2011 and 2010 were as follows:
As at December 31, 2011 and 2010, Aspen Holdings held $125.3 million and $354.0 million, respectively, in cash and cash equivalents which, taken together with dividends declared or expected to be declared by subsidiary companies and our credit facilities, management considered sufficient to provide Aspen Holdings liquidity at such time. As at December 31, 2011, we also held $298.2 million of short-term investments that are available for sale to meet any future liquidity needs. For a discussion of the volatility and liquidity of our other investments, see Part I, Item 1A, “Risk Factors - Market and Liquidity Risks,” and for a discussion of the impact of insurance losses on our liquidity, see Part I, Item 1A, “Risk Factors - Insurance Risks.”
The liquidity of the Operating Subsidiaries is also affected by the terms of contractual obligations to U.S. policyholders and by undertakings to certain regulatory authorities to facilitate the issue of letters of credit or maintain certain balances in trust funds for the benefit of policyholders. The following table shows the forms of collateral or other security provided to policyholders as at December 31, 2011 and 2010:
Our international offices for our subsidiaries include locations with leased office space in Paris, Zurich, Geneva, Singapore, Cologne and Dublin. We believe that our office space is sufficient for us to conduct our operations for the foreseeable future in these locations.