To Our Shareholders continued...
The year 2008 was marked by a number of headlines, including a deepening economic recession and a collapsing of the capital markets. Our business was not immune to a number of these historic events. Without question, the weakening economy put tremendous strain on the finances of our customers, many of whom live in urban areas, where the economic downturn was especially severe. Many were compelled to cut back on expenses and, in some instances, that meant cutting back on auto insurance expenditures. As a consequence, the pursuit of our strategy to become the insurance provider of choice in our target markets hit some speed bumps as our gross written premium fell by 12% during the year.
Nor were our financial results immune from the collapsing prices in the bond and equity markets. Our own portfolio generated a 0.2% total return, including investment impairments. While below the portfolio’s long-term performance, it was much better than other markets, such as that for equities, which fell over 35% for the year. By avoiding significant losses our conservative approach to investing allowed us to preserve capital for future opportunities.
In spite of the recession and poor capital markets, we continued to deliver very strong underwriting profits for 2008 while resisting the temptation of chasing undisciplined competitors for short-term growth opportunities at the expense of sustained pricing adequacy. With disciplined pricing, effective claims handling, aggressive expense management and adequate reserves, our 2008 operating earnings per share increased 12% over 2007.
We also continued in 2008 to aggressively buy back shares, acquiring approximately 2.1 million shares or 12.7% of the shares outstanding. And earlier in 2009 we increased the dividend rate to shareholders by 9% to $0.48 per share annually. Other good news includes our book value, which was up slightly in 2008, and our capital levels, which remain strong and more than adequate to support operations into the future.
In short, while we took a few lumps in 2008, we have come through the eventful year in great shape and poised to take advantage of future opportunities.