Net realized capital losses were $16.8 million in 1999 reflecting realized capital losses on the Company's investments of $33.9 million which were partially offset by $17.1 million of realized capital gains, compared to net realized capital losses of $0.8 million in 1998. The net realized capital losses in 1998 reflected realized capital losses of $13.5 million, which were partially offset by $12.7 million of realized capital gains. The realized capital losses in 1999 arose mainly from activity in the Company's taxable and tax-exempt U.S. fixed maturities portfolios, whereas the realized capital losses in 1998 were attributable to activity in the Company's tax-exempt fixed maturities portfolio. The realized capital gains in 1999 mainly arose from activity in the Company's U.S. equity portfolio, whereas the realized capital gains in 1998 were attributable to a combination of the activity in the Company's taxable U.S. fixed maturities portfolio and U.S. equity portfolio. The net realized capital losses in 1999 generally reflect a specific program, which has been completed, to realize capital losses aimed at recovering taxes on realized capital gains paid in prior years, with corresponding reinvestment of proceeds at current reinvestment rates, and enhancing the Company's long-term after-tax portfolio yield.
LOSS AND LAE RESERVES GENERAL. Gross loss and LAE reserves totaled $3,786.2 million at December 31, 2000, $3,647.0 million at December 31, 1999 and $3,800.0 million at December 31, 1998. The increase in 2000 was primarily attributable to the acquisition of Mt. McKinley together with normal variability in claim settlements and increased earned premiums. The decrease in 1999 was primarily attributable to a reduction in reserves for 1995 and prior periods as a result of a dispute resolution with Gibraltar together with normal variability in claims settlement and an unchanged level of earned premiums. Reinsurance receivables totaled $509.0 million at December 31, 2000, $742.5 million at December 31, 1999 and $982.0 million at December 31, 1998, with much of the changes reflecting the acquisition of Mt. McKinley and the attendant elimination of inter-company receivables. At December 31, 2000, $145.0 million, or 28.5%, was receivable from Continental Insurance Company ("Continental") and $70.0 million, or 13.8%, was receivable from London Life and Casualty Reinsurance Corp. ("London Life"), which are partially secured by funds held arrangements whereby the Company has retained the premium payments due the retrocessionaires, recognized liabilities for such amounts and reduced such liabilities as payments are due from the retrocessionaire. No other retrocessionaire accounted for more than $25.0 million of the Company's receivables.
ASBESTOS AND ENVIRONMENTAL EXPOSURES. The Company's asbestos claims typically involve liability or potential liability for bodily injury from exposure to asbestos or liability for property damage resulting from asbestos or asbestos containing materials. The Company's environmental claims typically involve potential liability for the mitigation or remediation of environmental contamination or bodily injury or property damages caused by the release of hazardous substances into the land, air or water. In addition to the previously described general uncertainties inherent in estimating reserves, there are significant additional uncertainties in estimating the amount of the Company's potential losses from asbestos and environmental claims. Among the complications impacting the estimation of such losses are: (1) potentially long waiting periods between exposure and manifestation of any bodily injury or property damage; (2) difficulty in identifying sources of asbestos or environmental contamination; (3) difficulty in properly allocating responsibility and/or liability for asbestos or environmental damage; (4) changes in underlying laws and judicial interpretation of those laws; (5) potential for an asbestos or environmental claim to involve many insurance providers over many policy periods; (6) long reporting delays, both from insureds to insurance companies and ceding companies to reinsurers; (7) historical data concerning asbestos and environmental losses, which is more limited than historical information on other types of casualty claims; (8) questions concerning interpretation and application of insurance and reinsurance coverage; and (9) uncertainty regarding
- ---------- (1) Net of $0.0 million in 2000, $0.0 million in 1999 and $138.5 million in 1998 ceded under the incurred loss reimbursement feature of the Stop Loss Agreement. (2) Net of $0.0 million in 2000, $118.8 million in 1999 and $39.7 million in 1998 ceded as paid losses under the Stop Loss Agreement. (3) Reported losses and paid losses for 2000 are net of ($311.3) million and $311.3 million, respectively, reflecting the establishment of Mt. McKinley's reserves at the acquisition date. Net paid losses, excluding the impact of the Mt. McKinley acquisition transaction, were ($42.3) million.
At December 31, 2000 and 1999, Holdings had outstanding borrowings under the Credit Facility of $235.0 million and $59.0 million, respectively. Interest expense incurred in connection with these borrowings was $8.5 million and $1.5 million at December 31, 2000 and 1999, respectively.
position. The fixed maturities in the investment portfolio are comprised of non-trading available for sale securities. Additionally, the Company invests in equity securities, which it believes will enhance the risk-adjusted total return of the investment portfolio.