Net investment income for the 2012 third quarter was $73.2 million, or $0.53 per share, compared to $82.8 million, or $0.60 per share, for the 2011 third quarter. The annualized pre-tax investment income yield was 2.45% for the 2012 third quarter, compared to 2.83% for the 2011 third quarter. The decline in the 2012 third quarter yield primarily reflects the effects of lower prevailing interest rates available in the market and the Company’s investment strategy which puts a priority on total return. Such effects more than offset the benefit of a higher level of investable assets compared to the 2011 third quarter. Consolidated cash flow provided by operating activities for the 2012 third quarter was $334.7 million, compared to $309.9 million for the 2011 third quarter. The increase in operating cash flows in the 2012 third quarter was primarily due to a higher level of premium receipts than in the 2011 third quarter.

For the 2012 third quarter, the Company’s effective tax rates on income before income taxes and pre-tax operating income were an expense of 2.8% and 3.1%, respectively, compared to a benefit of 1.4% and 3.8%, respectively, for the 2011 third quarter. For the nine months ended September 30, 2012, the Company’s effective tax rates on income before income taxes and pre-tax operating income were an expense of 1.4% and 0.6%, respectively, compared to a benefit of 1.8% and 3.8%, respectively, for the 2011 period. The Company’s effective tax rates may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The Company’s quarterly tax provision is adjusted to reflect changes in its expected annual effective tax rate, if any. The Company’s estimated effective tax rate on pre-tax operating income was an expense of 0.6% for the nine months ended September 30, 2012, compared to a benefit of 0.6% for the six months ended June 30, 2012. The impact of applying the updated annual effective tax rate on pre-tax operating income for the six months ended June 30, 2012 reduced the Company’s after-tax results for the 2012 third quarter by $3.2 million, or $0.02 per share. In addition, the Company’s Bermuda-based reinsurer incurs federal excise taxes for premiums assumed on U.S. risks. The Company incurred $6.2 million of federal excise taxes for nine months ended September 30, 2012, compared to $7.3 million for the 2011 period. Such amounts are reflected as acquisition expenses in the Company’s consolidated statements of income.

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