We have also recorded favorable development on our attritional loss reserves aggregating $658.3 million over the past three years. The $272.3 million of adverse development on catastrophe loss reserves experienced in 2006 largely emanated from Hurricanes Katrina, Rita and Wilma. The unprecedented size and widespread damage from these events, particularly Katrina, made projecting ultimate losses extremely difficult.
Other Underwriting Expenses. Other underwriting expenses for 2007 increased by $14.6 million, or 10.6%, compared to 2006, primarily due to higher compensation and benefits expense and an increased staff count, primarily in the U.S. Insurance segment. Included in other underwriting expenses were corporate underwriting expenses, which are expenses that are not allocated to segments, of $13.1 million for 2007 compared to $26.5
Our income tax expense was $150.9 million, which represented a 15.2% effective tax rate for 2006 compared to an income tax benefit of $62.3 million, which represented a 22.2% effective tax rate for 2005. The fluctuation in the effective tax rate is principally due to the impact of the large catastrophe losses in 2005.
Imbedded pre-tax yield of cash and invested assets at December 31
Gross written premiums decreased by 7.1% to $866.3 million for 2006 from $932.5 million for 2005. The decrease was primarily the result of declines in our workers’ compensation and contractors liability writings in response to increased competition, partially offset by some growth from new programs. Net written premiums decreased 7.6% to $753.3 million for 2006 compared to $815.3 million for 2005, primarily due to the decrease in gross written premiums. Net premiums earned decreased 7.5% to $761.7 million for 2006 from $823.0 million for 2005, in line with the decrease in net written premiums.
Incurred losses and LAE decreased 2.0% to $519.9 million for 2006 from $530.8 million for 2005, primarily due to lower earned premiums, which related to the reduction in the California workers’ compensation business and cancellation of the auto loan credit insurance program. The segment loss ratio increased 3.8 points, primarily due to higher losses on the auto loan credit insurance program.
Gross written premiums decreased 20.2% to $251.2 million for 2006 from $314.6 million for 2005. This decrease was the result of a $53.2 million (39.0%) decrease in A&H writings, a $14.8 million (19.0%) decrease in marine writings and an $8.9 million (20.5%) decrease in aviation writings, partially offset by a $13.4 million (23.5%) increase in surety writings. Net written premiums decreased 18.5% to $243.8 million for 2006 compared to $299.3 million for 2005, due to the decrease in gross written premiums. Net premiums earned decreased 18.9% to $244.5 million for 2006 compared to $301.5 million for 2005, generally in line with the growth in net written premiums. By line of business, we experienced a $51.2 million (40.1%) decrease in A&H business, a $17.8 million (22.7%) decrease in marine business and a $7.4 million (17.7%) decrease in aviation business, partially offset by an increase of $19.0 million (35.5%) in surety business.
Incurred losses and LAE increased by 31.1% to $501.9 million for 2007 compared to $382.8 million for 2006. The segment loss ratio increased by 9.2 points, principally due to an increase in the catastrophe loss ratio by 6.1 points. In 2007, catastrophe losses included Tabasco, Mexico floods, $28.5 million; New South Wales storm, $21.1 million; Peruvian earthquake, $10.0 million; Hurricane Dean, $9.0 million and Jakarta flood, $6.8 million. The 2007 accident year attritional loss ratio was 54.2%, about the same as 2006; however, the reduction in favorable reserve development, year over year, accounted for 3 points of the increase in the segment loss ratio in 2007 compared to 2006.
Premiums Written and Earned. Premiums written by us are earned ratably over the coverage periods of the related insurance and reinsurance contracts. We establish unearned premium reserves to cover the unexpired portion of each contract. Such reserves are computed using pro rata methods based on statistical data received from ceding companies. Premiums earned, and the related costs, which have not yet been reported to us, are estimated and accrued. Because of the inherent lag in the reporting of written and earned premiums by our ceding companies, we use standard accepted actuarial methodologies to estimate earned but not reported premium at each financial reporting date. These earned but not reported premiums are combined with reported earned premiums to comprise our total premiums earned for determination of our incurred losses and loss and LAE reserves. Commission expense and incurred losses related to the change in earned but not reported premium are included in current period company and segment financial results. See also Note 1 of Notes to the Consolidated Financial Statements.
Ultimate loss projections for asbestos and environmental liabilities cannot be accomplished using standard actuarial techniques. In response to our recent asbestos experience, and in view of industry asbestos experience, we completed a detailed study of our experience and our cedants’ exposures and also considered recent industry
Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S./Bermuda (“foreign”) operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Generally, we prefer to maintain the capital of our operations in U.S. dollar assets, although this