Montpelier Bermuda’s ending gross loss and LAE reserves at December 31, 2013 and 2012 include $8.4 million and $13.3 million, respectively, of losses assumed from Montpelier at Lloyd’s as a result of inter-segment excess-of-loss reinsurance arrangements. These inter-segment reserves have been eliminated in our consolidated results.
· Casualty IBNR (excluding medical malpractice) recorded over several prior years ($8.4 million decrease),
Underwriting results for Montpelier at Lloyd’s for the years ended December 31, 2013, 2012 and 2011 were as follows:
Montpelier at Lloyds’ prior year losses and LAE incurred also includes foreign currency transaction gains (losses) relating to its prior year loss and LAE reserves of $(1.4) million, $5.3 million and $2.7 million during 2013, 2012 and 2011, respectively. Since these foreign currency transaction gains (losses) are reported as decreases (increases) in Montpelier at Lloyds’ losses and LAE incurred, they have a direct impact on its underwriting results and its underwriting ratios.
Profit commissions, which are paid by assuming companies to ceding companies in the event of a favorable loss experience, change as Montpelier at Lloyds’ estimates of loss and LAE fluctuate and are accrued based on the estimated results of the subject contract. Profit commissions totaled $3.4 million, $1.1 million and $2.7 million during 2013, 2012 and 2011, respectively.
Net premiums written and earned by the Collateralized Reinsurance segment included reinstatement premiums of $0.3 million attributable to U.S. weather events that occurred during 2013. The level of reinstatement premiums that the Collateralized Reinsurance segment may realize in future periods will be dependent upon the occurrence of future losses; however, any such reinstatement premiums are not expected to be material.
The following tables summarize the loss and LAE reserve movements of the MUSIC Run-Off segment for the years ended December 31, 2013, 2012 and 2011, and the composition of its gross loss and LAE reserves at December 31, 2013 and 2012:
On November 5, 2012, we fully redeemed the 2013 Senior Notes at a “make-whole” redemption price of $237.6 million (104.2% of the principal thereof), plus accrued and unpaid interest to the redemption date. In connection with the redemption of the 2013 Senior Notes, we recorded a loss on early extinguishment of debt of $9.7 million.
During 2013, 2012 and 2011, our U.K. operations generated income (losses) before income taxes of $4.6 million, $(4.4) million and $(18.0) million, respectively, and certain of these operations are currently in a net operating loss position. Due to the uncertainty at this time as to whether certain of these operations will generate sufficient taxable income in future periods to utilize the resulting U.K. gross deferred tax assets, we have established offsetting valuation allowances against the majority of these assets.
During 2013, 2012 and 2011, our U.S. operations generated income before income taxes of $0.6 million, $0.1 million and $7.7 million, respectively, and are currently in a cumulative net operating loss position. Due to the uncertainty at this time as to whether such operations will generate sufficient taxable income in future periods to utilize such assets, we have established offsetting valuation allowances against each of our existing U.S. gross deferred tax assets.