Reserves for the Company’s Lloyd’s Operations are reviewed separately for the marine, property and casualty, and professional liability lines by product. The major marine products are marine liability, transport, marine energy liability, cargo, specie and marine reinsurance. The major property and casualty products are offshore energy, engineering, onshore energy, operational engineering and direct and facultative property. The major products for professional liability are international D&O and international E&O.
The portfolio duration was 3.7 years for the year ended December 31, 2013 and was 3.6 years for each of the years ended December 31, 2012 and 2011.
Our net OTTI losses recognized in earnings for the periods indicated were as follows:
Our Lloyd’s Operations recorded $47.2 million of net prior period reserve releases across all businesses and divisions. In connection with the Company’s implementation of the Solvency II technical provisions in its Lloyd’s operation, the Company’s actuaries undertook a comprehensive review during 2012 of the historical claims emergence patterns for all lines of business underwritten through Syndicate 1221. As a result of this review, the Company updated the loss emergence patterns used to project ultimate losses for all such lines of business, aligning these loss emergence factors with the historical median. This caused a reduction in ultimate loss estimates for all Lloyd’s segments other than certain lines of business in Property Casualty segment, which increased. The Lloyd’s Operation also experienced significant reserve redundancies in several large claims. The amount of reserve redundancies attributable to these settlements was $5.0 million, consisting of $4.1 million from the Lloyd’s Marine business and $0.9 million from Lloyd’s Professional Liability business. A summary of the resulting prior period redundancies for each business within our Lloyd’s Operations by prior UY is set forth below:
We have controlled 100% of Syndicate 1221’s stamp capacity since 2006. Stamp capacity is a measure of the amount of premium a Lloyd’s syndicate is authorized to write based on a business plan approved by the Council of Lloyd’s. Syndicate 1221’s stamp capacity was £195 million ($323.7 million) in 2013, £184 million ($300 million) in 2012, £175 million ($271 million) in 2011.
Our Lloyd’s Operations Marine gross written premiums for the year ended December 31, 2013 decreased 6.9% compared to the same period in 2012. The decrease is driven by reduction in renewals across the division, particularly on Cargo. The Lloyd’s Operation Marine business experienced average renewal rate increases of 3.4% for the year ended December 31, 2013.
In July 2012, we filed a universal shelf registration statement with the SEC. This registration statement, which expires in July 2015, allows for the future possible offer and sale by the Company of up to $500 million in the aggregate of various types of securities including common stock, preferred stock, debt securities, depositary shares, warrants, units or stock purchase contracts and stock purchase units. The shelf registration statement enables us to efficiently access the public equity or debt markets in order to meet future capital needs, if necessary. This report is not an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.
On October 4, 2013, we completed a public debt offering of $265 million principal amount of 5.75% Senior Notes due October 15, 2023 (“5.75% Senior Notes”) and received net proceeds of $263 million. We used the proceeds of the 5.75% Senior Notes for general corporate purposes including the redemption of our 7.0% Senior Notes due May 1, 2016. We incurred a charge of $17.9 million for the payment of call premium in connection with the redemption of the 7.0% Senior Notes due 2016. The effective interest rate related to the net proceeds received from the 5.75% Senior Notes is approximately 5.86%. Interest will be paid on the 5.75% Senior Notes each April 15 and October 15 with the first payment due on April 15, 2014.
Net cash provided by operating activities for the year ended December 31, 2013, 2012 and 2011 was $136.9 million, $96.7 million and $118.3 million, respectively. The increase in cash flow from operations for 2013 as compared to 2012 is largely attributable to the growth of our business as well as improved collections on premiums receivable. The decrease in cash flow from operations for 2012 as compared to 2011 was due to an increase in claims payments, partially offset by improved collections on reinsurance recoverables as well as premiums receivable.
As of December 31, 2013 and 2012, debt securities for which non-credit OTTI was previously recognized and included in other comprehensive income are now in an unrealized gains position of $0.5 million and $20 thousand, respectively.