We have also engaged HPS to manage a portion of our investment grade portfolio as a recently-created separate managed account. We will pay HPS a management fee equal to 0.60% per annum on the assets in the separate managed account. We also pay AIM monthly asset management fees related to the assets it manages for us. We are not obligated to pay performance fees to any of the Investment Managers managing our investment grade portfolios. We include the HPS non-investment grade portfolio base management fee and the AIM investment grade portfolio management fee in “investment management fees - related parties” in our consolidated statement of income, and as management fees are accrued and paid to HPS in connection with its management of a portion of our investment grade portfolio, we will include such fees therein as well. We include interest and other expenses on borrowings in “borrowing and miscellaneous other investment expenses” in our consolidated statement of income. The HPS non-investment grade portfolio performance fee, if applicable, is shown on a separate line in our consolidated statement of income.
Insurance programs and coinsurance: targeting program managers and/or coinsurers with unique expertise and niche products offering primary and excess general liability, umbrella liability, professional liability, workers’ compensation, personal and commercial automobile, inland marine and property business with minimal catastrophe exposure.
Gross premiums written were $735.0 million for the year ended December 31, 2018 compared to $600.3 million for the year ended December 31, 2017, an increase of $134.7 million, or 22.4%. Our 2018 premium growth was primarily due to the continued expansion of our U.S. and European insurance programs and coinsurance, while our reinsurance portfolio grew 3.2%. Within reinsurance, we grew our other specialty business by 16.0% and reduced our casualty business by 3.5%, which was reflective of our view of the relative market opportunities. During 2018, WICE grew its insurance gross premiums written by $66.1 million, or 57.2%, to $181.7 million. In addition, during 2018, WSIC and WIC collectively grew their insurance programs’ gross premiums written by $53.7 million, or 291%, to $72.1 million.
Cash provided by financing activities for the year ended December 31, 2018 was lower than 2017, which was primarily driven by a reduction in incremental borrowings used to purchase investments.
For the benefit of certain Arch entities and other third parties that cede business to us, we are required to post and maintain collateral to support our potential obligations under reinsurance contracts that we write. This collateral can be in the form of either investment assets held in collateral trust accounts or letters of credit. Under our credit facilities, in order for us to have the bank issue a letter of credit to our reinsurance contract counterparty, we must post investment assets or cash as collateral to the bank. In either case, the amounts remain restricted for the duration of the term of the trust or letter of credit, as applicable. See Note 14, “Commitments and
On March 28, 2019, the Company completed a direct listing of its common shares on the Nasdaq Global Select Market. On June 28, 2019, the Company completed a direct listing of its 8½% Cumulative Redeemable Preference Shares (the “preference shares”) on the Nasdaq Global Select Market. The Company did not issue any new common shares or preference shares, nor did the Company receive any proceeds from the sale of common shares or preference shares by the selling shareholders.
Reinstatement premiums are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums
is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment.
(1) Net realized gains (losses) from the fixed maturities available for sale portfolio consists of realized gains and realized losses of $86 thousand and $964 thousand, respectively.
Fixed maturities that have been non-income producing for the twelve months preceding December 31, 2019, 2018 and 2017 have a market value of $Nil, $1.0 million and $Nil.
The Company reviews its securities measured at fair value and discusses the proper classification of such investments with its investment managers and others. A discussion of the general classification of the Company’s financial instruments follows:
The Company’s investment strategy allows for the use of derivative securities. Beginning in the third quarter of 2018, the Company invested in call options to manage specific market risks; such derivative instruments are recorded at fair value, and shown as part of payable for securities sold short on its consolidated balance sheets. Such call options matured in the first quarter of 2019.
In return for its investment services, HPS receives a management fee, a performance fee and allocated operating expenses. The management fee is calculated at an annual rate of 1.0% of the aggregate net asset value of the assets that are managed by HPS, payable quarterly in arrears. For purposes of calculating the management fees, net asset value is determined by HPS in accordance with the investment management agreements and is measured before reduction for any management fees, performance fees or any expense reimbursement and as adjusted for any non-routine intra-month withdrawals. The Company has also agreed to reimburse HPS for certain expenses related to the management of the Company’s investment portfolios as set forth in the investment management agreements.
industry exposures. Collateral may be required, at the discretion of the Company, on certain transactions based on the creditworthiness of the counterparty.