A replay of this call will be available on the Tower website at www.twrgrp.com. Also during the course of this call, Michael and I will be referring to slides that are available on our website in the Investor Relations section under the caption Events. Now, I'd like to turn the call over to Michael.

Michael Lee

Thank you, Bill and good morning, everyone. I'd like to thank all of you for joining us on this conference call to discuss our second quarter operating results. As described in last night's press release, we continued to see positive trends in our business during this quarter despite significant industry catastrophe losses and challenging market conditions. As shown on Page 2, our operating income increased by 15% to $26 million in the second quarter from $22.6 million during the same period last year. Our diluted operating EPS increased by 24% to $0.63 per share compared to $0.51 per share during the same period last year. As we previously announced, we experienced $4.6 million or $0.11 per share of losses from the tornado activity in Alabama and Massachusetts. The storm losses added 1.8 points to the second quarter 2011 loss ratio of the combined segments. Tower reported no severe weather losses in the second quarter of 2010. Excluding the cat losses, our second quarter 2011 net income and operating EPS would have been $30.6 million and $0.74, respectively. Our book value increased by 4% to $1.07 billion from $1.03 billion even after repurchasing $60.8 million of shares since the second quarter of last year and after making $23 million in dividend payments. Our book value per share increased by 8% this quarter from the second quarter of last year even after making $0.56 per share in dividend payments since the second quarter of 2010.

As shown on Page 3, we continue to see positive trends in our operating results as measured by growth, combined ratio and return on equity. The most significant positive factor that we are seeing is our ability to continue to grow our business profitably despite the challenging industry market conditions. Our gross premiums written and managed increased by 41% in the second quarter to $468 million from $332 million for the same period last year. This growth was driven primarily by the acquisition of the OneBeacon Personal Lines division and the organic growth from new business units, customized solutions and assumed reinsurance and risk sharing. I will provide more details on these initiatives later on this call. In addition to achieving an impressive top line growth rate, we were able to maintain our underwriting discipline as demonstrated by a 94.9% combined ratio this quarter compared to 94.5%...

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