Investments

Net investment income for the quarter of $74 million represented a decrease of $42 million, or 36%, relative to the first quarter of this year, primarily due to a $2 million decline in the market value of our alternative investments ("other investments") this quarter, compared to a $40 million increase in the prior quarter. Compared to the prior year quarter, net investment income for the second quarter was down $26 million, or 26%, due to lower returns from our other investments and from our fixed maturities. Net investment income from fixed maturities was $77 million for the quarter, compared to $80 million in the first quarter of 2012 and $89 million in the second quarter of 2011; the declines were primarily due to lower reinvestment yields, partially offset by a higher average fixed maturity investment balance in the current quarter.

Net realized investment gains were $30 million, compared to net realized investment gains of $14 million in the prior quarter and $37 million in the prior year quarter.

Capitalization / Shareholders’ Equity

Our total capital at June 30, 2012 was $6.7 billion, including $1.0 billion of long-term debt and $503 million of preferred equity.

At June 30, 2012, diluted book value per common share on a treasury stock basis was $40.55, a 3% increase from $39.53 at March 31, 2012 and a 10% increase from $36.78 at June 30, 2011.

During the quarter we repurchased 2.7 million common shares at an average price of $34.03 per share, for a total cost of $90 million. As of July 30, 2012, we had $415 million of remaining authorization for common share repurchases through December 31, 2012.

The close of our 7.5% Series B preferred share tender offer in April 2012 marked the completion of three transactions effected to reduce the cost of our preferred equity capital. During the first quarter of 2012, we issued $400 million of 6.875% Series C shares and redeemed $150 million of 7.25% Series A shares. As a result of the tender offer, we repurchased $247 million of 7.5% Series B shares this quarter. While this series of transactions resulted in a $7 million reduction in book value, recognized during the second quarter, the combined execution produced a 42 basis point reduction in the weighted average annual dividend yield on our preferred equity.

If you liked this article you might like

How Well Do You Know Your Insurer -- and Its Reinsurer?

Buffett's Berkshire, Rivals Brace for Billions in Hurricane Harvey Claims

3 Financial Stocks Pushing The Sector Higher

Ex-Dividends To Watch: 3 Stocks Going Ex-Dividend Tomorrow: IRT, BXMT, AXS

Insider Trading Alert - AXS, FSB And MKC Traded By Insiders