For the remaining fixed maturity and short-term investments in an unrealized loss position for which a decision to sell has not been made and it is more likely than not that the Company will not be required to sell, the Company performs additional reviews to determine whether the investment will recover its amortized cost.
During 2013, the yield on the benchmark three year U.S. Treasury bond fluctuated within a 67 basis point range, with a high of 0.96% and a low of 0.29%. Trading activity in the Company’s portfolio in 2013 included reductions in corporate securities, government and agency guaranteed corporate securities, residential mortgage-backed securities, municipal securities, asset-backed securities, and short-term investments, and increased allocations to equity securities, U.S. government and government agencies securities, foreign government bonds, commercial mortgage-backed securities, and other investments. The duration of the fixed maturity portfolio held at December 31, 2013 increased to 3.11 years at December 31, 2013 from 2.49 years at December 31, 2012 and 2.39 years at December 31, 2011 due to the increase in interest rates which reduced the estimated rate of prepayments underlying the Company’s mortgage-backed securities portfolio, causing the extension of the average expected maturity of these securities.
The following table summarizes the underwriting results and associated ratios for the Company’s Insurance segment for the years ended December 31, 2013, 2012 and 2011:
Acquisition Expenses. The Company’s acquisition expense ratio in the Reinsurance segment for the year ended December 31, 2013 was modestly higher than in 2012 and comparable to 2011. The increase over 2012 was a result of the growth in certain property reinsurance earned premiums and a reduction in catastrophe earned premiums which attract lower levels of commission.
Our investment returns for the years ended December 31, 2013, 2012 and 2011 were as follows:
On May 28, 2013, prior to John R. Charman becoming the Company’s Chairman and Chief Executive Officer, Mr. Charman, together with members of his family, purchased from the Company $30.0 million of newly issued ordinary shares.
Current and prior year incurred losses and loss expenses by segment and line of business for the year ended December 31, 2013 were as follows:
At December 31, 2013 and 2012, the Company had reinsurance recoverables of $758.0 million and $774.9 million, respectively, related to its ceded reinsurance agreements. The Company remains obligated for amounts ceded in the event that its reinsurers or retrocessionaires do not meet their obligations, except for amounts ceded to the U.S. federal government in the agriculture line of business. Accordingly, the Company has evaluated the reinsurers and retrocessionaires that are providing reinsurance and retrocessional protection and will continue to monitor the stability of its reinsurers and retrocessionaires. At December 31, 2013 and 2012, the Company held collateral of $14.2 million and $11.5 million, respectively, related to its ceded reinsurance agreements. The Company has an allowance of nil for estimated uncollectible reinsurance recoverable balances at December 31, 2013 (2012 - $0.1 million). The balance of losses recoverable at December 31, 2013 was distributed as follows based on the ratings of the reinsurers:
Contractual maturities of the Company’s fixed maturity and short-term investments are shown below as of December 31, 2013 and 2012. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
During the year ended December 31, 2013, the Company recorded ceded losses of $683.2 million (2012 - $737.8 million; 2011 - $667.0 million). At December 31, 2013, the Company has an allowance for estimated uncollectible premiums receivable of $2.3 million (2012 - $3.4 million) and an allowance for estimated uncollectible losses recoverable of nil (2012 - $0.1 million). The balance of reinsurance recoverable on paid and unpaid losses at December 31, 2013 was distributed as follows based on the ratings of the reinsurers:
Dividends on the Series A Preferred Shares and Series B Preferred Shares, when, as and if declared by the Board of Directors of Endurance Holdings or a duly authorized committee of the board, accrue and are payable on the liquidation preference amount from the original issue date, quarterly in arrears on each dividend payment date, at an annual rate of 7.75% in the case of the Series A Preferred Shares and an annual rate of 7.5% in the case of the Series B Preferred Shares. Dividends on the Series A Preferred Shares and Series B Preferred Shares are not cumulative.
Restricted shares granted to non-employee directors vest twelve months following the date of grant and are forfeited upon departure from the Board of Directors for any reason prior to the applicable vesting date.
For the years ended December 31, 2013, 2012 and 2011, compensation costs recognized in earnings (losses) for all restricted shares and restricted share units were $23.5 million, $11.2 million, and $14.8 million, respectively. At December 31, 2013, compensation costs not yet recognized related to non-vested awards was $29.7 million (2012 - $8.8 million). This expense is expected to be recognized between 2014 and 2018, with approximately 57.4% expected to be recognized during 2014.