We and our subsidiaries currently occupy approximately 58,500 square feet of leased office space in Bermuda, New York and London. Management believes that the office space is adequate for its current and anticipated needs.
(3) Per share data for 2003, 2002 and 2001 are based on 75,000,000 shares outstanding prior to the IPO.
The fair value of these instruments depends on a number of factors including credit spreads, changes in interest rates, recovery rates and the credit ratings of referenced entities. Where available, we use quoted market prices to determine the fair value of these credit derivatives. If the quoted prices are not available, particularly for senior layer CDOs and equity layer credit protection, the fair value is estimated using valuation models for each type of credit protection. These models may be developed by third parties, such as rating agencies, or developed internally based on market conventions for similar transactions, depending on the circumstances. These models and the related assumptions are continuously reevaluated by management and enhanced, as appropriate, based upon improvements in modeling techniques and availability of more timely market information. The majority of our single name credit derivatives were valued using third-party market quotes. These exposures were substantially liquidated in the first quarter of 2005 as we are no longer involved in the single name credit derivatives business. Our exposures to CDOs are typically valued using a combination of rating agency models and internally developed models.
For the years ended December 31, 2005, 2004 and 2003, net earned premiums were $18.6 million, $33.7 million and $27.6 million, respectively. The decrease in net earned premiums in 2005 compared with 2004 reflects an $8.8 million release of unearned premium reserves related to the commutation of an excess of loss reinsurance contract in 2004, coupled with the run-off of our quota share treaty business. The increase in net earned premiums for 2004 compared with 2003 is due to the $8.8 million release of unearned premium reserves related to the commutation of an excess of loss reinsurance contract offset by a decline in our quota share treaty business.
Assured Guaranty US Holdings Inc., a subsidiary of the Company, issued $200.0 million of 7. 0% Senior Notes due in 2034. The proceeds of the offering were used to repay a $200.0 million promissory note, established as part of the IPO related formation transactions, issued to a subsidiary of ACE prior to the IPO in April 2004. The coupon on the Senior Notes is 7.0%, however, the effective rate will be approximately 6.4% due to a treasury hedge executed by the Company in March 2004. These senior notes are fully and unconditionally guaranteed by Assured Guaranty Ltd. We expect to have the capacity to repay and/or refinance the notes as they come due. During the years ended December 31, 2004 and 2003, ACE contributed capital of $78.9 million and $3.7 million, respectively, to us. These capital contributions were utilized to pay interest and principal on long-term debt. In all years, these were non-cash contributions (see Note 14 to the consolidated financial statements). Dividends paid to ACE were $35.0 million during the year ended December 31, 2003. No such dividends were paid in 2005 and 2004.
The following table summarizes our contractual obligations as of December 31, 2005:
When an insured issue is retired early, is called by the issuer, or is in substance paid in advance through a refunding accomplished by placing U.S. Government securities in escrow, the remaining unearned premium reserves are earned at that time. Unearned premium reserves represent the portion of premiums written that is applicable to the unexpired amount at risk of insured bonds.
In March 2001, the Company entered into a reinsurance agreement with an ACE affiliate, Westchester Fire Insurance Company, whereby the Company reinsured a portion of an auto residual value insurance contract. Losses and LAE incurred and premiums earned recorded at inception amounted to $84.8 million. The value of reinsurance business assumed recorded at the inception of the contract amounted to $31.5 million and represented the difference between the estimated ultimate amount of the losses assumed under the retroactive reinsurance contract of $116.3 million and the cash received of $84.8 million. In 2003 the Company recorded amortization of the value of reinsurance business assumed in the amount of $6.1 million This agreement was commuted in connection with the IPO. See Note 1 for more information.
The proceeds of the loans and letters of credit are to be used for working capital and other general corporate purposes of the borrowers and to support reinsurance transactions.
non-assessable. Holders of the Company’s common shares are entitled to receive such dividends as lawfully may be declared from time to time by the Company’s Board of Directors.
(1) Since the shares held as treasury stock were required to be settled by delivery of employer stock, those shares are included in the calculation of basic and diluted EPS.