property insurance and property reinsurance lines of business, $98.3 million was catastrophe related (Chilean and New Zealand earthquakes and the Australian floods), and $22.7 million related to attritional losses. We will continue to evaluate and monitor the development of these losses and the impact it has on our current and future assumptions. We believe recognition of the reserve changes in the period they were recorded was appropriate since a pattern of reported losses had not emerged and the loss years were previously too immature to deviate from the expected loss ratio method in prior periods.
Other invested assets: Comprised of funds invested in a range of diversified strategies. In accordance with U.S. GAAP, the fair values of the funds are based on the net asset value of the funds as reported by the fund manager, which we believe is an unobservable input, and as such, the fair values of the funds are included in the Level 3 fair value hierarchy.
During 2011, we performed the first step of the goodwill impairment testing on the goodwill. We use both market based and non-market based valuations. Our market based valuations are based on market multiples of
Net realized investment losses of $22.6 million primarily related to the mark-to-market adjustments for our other invested assets, equity securities and fixed maturity investments that are accounted for as trading securities.
Net realized investment loss of $0.4 million related to a U.S. Treasury yield hedge transaction that terminated in June 2010.
Net realized investment loss of $4.0 million related to a U.S. Treasury yield hedge transaction we purchased in May 2010 and terminated in June 2010.
The following table shows the favorable reserve development of $248.0 million by loss year for each of our segments for the year ended December 31, 2009. In the table, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.
The loss and loss expense ratio for the year ended December 31, 2011 was 66.2% compared to 57.4% for the year ended December 31, 2010. Net favorable reserve development recognized and the impact of the commutation adjustment to ceded IBNR in the year ended December 31, 2011 decreased the loss and loss expense ratio by 3.8 percentage points. Thus, the loss and loss expense ratio for the current loss year was 70.0%, which includes $8.3 million in losses from catastrophes. In comparison, net favorable reserve development recognized and the impact of the commutation adjustment to ceded IBNR in the year ended December 31, 2010 decreased the loss and loss expense ratio by 13.2 percentage points. Thus, the loss and loss expense ratio for that loss year was 70.6% which included a $12.0 million net loss on a Connecticut power plant explosion.
Net premiums written increased by $58.0 million, or 11.8%, for the year ended December 31, 2010 compared to the year ended December 31, 2009. The increase in net premiums written was primarily due to higher gross premiums written, as well as a reduction of premiums ceded. The reduction in premiums ceded was primarily due to lower cessions in our general casualty and general property lines of business, as well as the commutation and adjustment of certain variable-rated reinsurance contracts that have swing-rated provisions of $9.3 million. Overall, we ceded 24.4% of gross premiums written for the year ended December 31, 2010 compared to 26.9% for the year ended December 31, 2009. The decrease in the cession percentage was primarily due to the reduction of premiums ceded related to the commutation of the swing-rated reinsurance contracts. Excluding the impact of the commutation, we ceded 25.7% of gross premiums written during the year ended December 31, 2010.
Net premiums earned increased $70.9 million, or 15.8%, primarily due to the growth of our U.S. insurance operations during 2009 and 2010 and $9.3 million from the commutation, which was fully earned.
The loss and loss expense ratio for the year ended December 31, 2011 was 65.2%, compared to 47.3% for the year ended December 31, 2010. The net favorable reserve development recognized during the year ended December 31, 2011 decreased the loss and loss expense ratio by 37.4 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 102.6%. Comparatively, the net favorable reserve development recognized during the year ended December 31, 2010 decreased the loss and loss expense ratio by 53.3 percentage points. Thus, the loss and loss expense ratio related to that loss year was 100.6%. The increase in the loss and loss expense ratio for the current loss year was primarily due to net incurred catastrophe losses of $107.6 million which occurred during the year ended December 31, 2011 and contributed 33.9 percentage points to the current year’s loss and loss expense ratio compared to $112.3 million of large individual losses during the year ended December 31, 2010 which contributed 33.1 percentage points to the prior year’s loss and loss expense ratio.
Acquisition costs. Acquisition costs decreased $2.3 million for the year ended December 31, 2011 compared to the year ended December 31, 2010. The negative cost represents ceding commissions received on ceded premiums in excess of the brokerage fees and commissions paid on gross premiums written. The acquisition cost ratio decreased from negative 0.1% for the year ended December 31, 2010 to negative 0.9% for the year ended December 31, 2011.
In November 2010, Allied World Bermuda issued $300.0 million aggregate principal amount of 5.50% senior notes due November 1, 2020, with interest payable May 15 and November 15 each year, commencing May 15, 2011. Allied World Bermuda can redeem the senior notes prior to maturity, subject to payment of a “make-whole” premium; however, Allied World Bermuda currently has no intention of redeeming the notes.
The following table shows our aggregate contractual obligations by time period remaining until due date as of December 31, 2011: