At December 31, 2012, our workers compensation line of business recorded reserves, net of reinsurance, of $923 million or 35% of our total net reserves. During the past three years this line experienced unfavorable reserve development. The 2012 unfavorable development was driven by the 2011 accident year, due to an increase in the ultimate severity. This was partially offset by earlier accident years, in particular 2007 and 2008, due to a decrease in expected severities for those years. The unfavorable reserve development of $2 million during calendar year 2012 was substantially less than those in the prior two years, which were $7 million in 2011 and $22 million in 2010. The decrease in the development over the past three years reflects the significant underwriting and reserving actions taken on this line.
We service our Standard Insurance Operations' agency distribution channel through our field model, which includes FMSs, AMSs, SMSs, CMSs, and our Underwriting and Claims Service Centers, all of which service the entire population of insurance contracts acquired through each agency. For our E&S Insurance Operations, we use external adjusters to service claims on behalf of our customers.
OTTI charges are recognized as a realized loss to the extent that they are credit related, unless we have the intent to sell the security or it is more likely than not that we will be required to sell the security. In those circumstances, the security is written down to fair value with the entire amount of the writedown charged to earnings as a component of realized losses. To determine if an impairment is other than temporary, discounted cash flow analyses (“DCFs”) are performed on all fixed maturity securities meeting certain criteria. In addition, DCFs are performed on all previously-impaired debt securities in an unrealized loss position that continue to be held by us and all structured securities that were not of high-credit quality at the date of purchase. These impairment assessments include, but are not limited to, the following security types: commercial mortgage-backed securities (“CMBS”); residential mortgage-backed securities (“RMBS”); asset-backed securities (“ABS”); collateralized debt obligations (“CDOs”); and corporate fixed maturity securities.
Per occurrence cap on the total program of $84.0 million, an increase of $20.0 million from the prior treaty term of $64.0 million;
2 RMBS includes government guaranteed agency securities with a fair value of $91.0 million at December 31, 2012 and $98.2 million at December 31, 2011.
As of December 31, 2012, we had 11.5 million shares reserved for various stock compensation and purchase plans, retirement plans and dividend reinvestment plans. As a convenience to our employees and directors, we repurchase the Parent’s stock from time-to-time in conjunction with our stock-based compensation plans, although we have not had an authorized stock repurchase program since July 26, 2009. The following table provides information regarding the purchase of the Parent’s common stock during the 2010 through 2012 reporting periods:
2 Amounts are reported in “Net realized gains (losses)” for realized gains and losses and “Net investment income earned” for amortization of securities on the Consolidated Statements of Income.
The 2010 prior year favorable development of $44 million includes $39 million of casualty development and $5 million of property development. Overall, the prior year development was driven by accident years 2003 through 2006, partially offset by the 2008 accident year. The favorable development was driven by our premises and operations coverages in our general liability line. The unfavorable development in the 2008 accident year was driven by increases in average severity in our workers compensation line.
Our combined insurance operations are subject to certain geographic concentrations, particularly in the Northeast and Mid-Atlantic regions of the country. In 2012, approximately 23% of net premiums written were related to insurance policies written in New Jersey.
1In our original purchase price allocation, we recorded a net operating loss deferred tax asset of $4.8 million, which was valued based on preliminary information that was available at December 31, 2011, the time of closing. In September 2012, final information became available and this deferred tax asset was re-valued at $4.2 million, a decrease of $0.6 million. The Consolidated Balance Sheet as of December 31, 2011, as well as this schedule, has been restated to reflect this purchase price adjustment with a corresponding increase to the re-valued covenant not to compete included in other assets.