Net Investment Income decreased by $6.5 million in 2015 due primarily to $27.5 million in lower net investment income from Dividends on Equity Securities, partially offset by $10.0 million of higher investment income on Equity Method Limited Liability Investments and $8.8 million of higher Interest and Dividends on Fixed Maturities. See MD&A, “Investment Results,” under the sub-caption “Net Investment Income” beginning on page 44 for additional discussion.
discussion. Net Impairment Losses Recognized in Earnings for the years ended December 31, 2015 and 2014 were $27.2 million and $15.2 million, respectively. See MD&A, “Investment Results,” under the sub-caption “Net Impairment Losses Recognized in Earnings” beginning on page 46 for additional discussion. The Company cannot predict when or if similar investment gains or losses may occur in the future.
See the “Reinsurance” subsections of the “Property and Casualty Insurance Business” and “Life and Health Insurance Business” sections of Item 1(c), “Description of Business,” and Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs.
Catastrophe losses and LAE (excluding reserve development) were $80.8 million in 2014, compared to $38.2 million in 2013. Favorable loss and LAE reserve development was $14.8 million in 2014, compared to $20.1 million in 2013.
Net Cash Provided by Operating Activities increased by $81.4 million for the year ended December 31, 2015, compared to 2014. Net Cash Provided by Operating Activities increased by $11.5 million for the year ended December 31, 2014, compared to 2013.
The Company accounts for the present value of the future profits embedded in Property and Casualty Insurance Broker Relationships Acquired (“P&C Broker Relationships”) based on the present value of estimated future cash flows from the broker relationships acquired. P&C Broker Relationships was $18.1 million at December 31, 2015. P&C Broker Relationships is amortized on a straight-line basis over 15 years. P&C Broker Relationships is tested for recoverability using undiscounted projections of future cash flows and written down to estimated fair value if the carrying value exceeds the sum of such projections of undiscounted cash flows.
Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2015 were:
The assumptions used in the Black-Scholes pricing model for Tandem Awards granted during the years ended December 31, 2015, 2014 and 2013 are presented below.
The weighted-average grant-date fair values of Tandem Awards granted during 2015, 2014 and 2013 were $7.85, $10.49 and $10.20, respectively. Total intrinsic value of Tandem Awards exercised was $4.6 million, $0.4 million and $4.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. Cash received from exercises of Tandem Awards was $3.9 million, $0.5 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. Total tax benefit realized for tax deductions from exercises of Tandem Awards was $1.6 million, $0.1 million and $1.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.
The grant-date fair values of DSU awards granted to Non-employee Directors are determined using the closing price of Kemper common stock on the date of grant. DSU awards granted to Non-employee Directors are fully vested on the date of grant. The total fair value of DSUs that vested during the years ended December 31, 2015, 2014 and 2013 was $0.1 million, $0.2 million and $0.1 million, respectively.
The Company’s awards of restricted stock contain rights to receive non-forfeitable dividends and participate in the undistributed earnings with common shareholders. The Company’s awards of RSUs and DSUs also contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders. Accordingly, the Company is required to apply the two-class method of computing basic and diluted earnings per share. A reconciliation of the numerator and denominator used in the calculation of Basic Income from Continuing Operations Per Unrestricted Share and Diluted Income from Continuing Operations Per Unrestricted Share for the years ended December 31, 2015, 2014 and 2013 is presented below.
In the fourth quarter of 2015, the Illinois Department of Revenue informed the Company that it intends to commence an examination of the Illinois Income Tax Returns for the years ended December 31, 2012 and 2013. The Company does not expect any material changes to the returns as originally filed.
Fair value measurements for the Pension Plan’s assets at December 31, 2015 are summarized below.
Earned Premiums by product line for the years ended December 31, 2015, 2014 and 2013 were:
Total catastrophe loss and LAE reserves, net of reinsurance recoverables, developed favorably by $7.8 million, $14.7 million and $14.5 million in 2015, 2014 and 2013, respectively. The Property & Casualty Insurance segment reported favorable catastrophe reserve development of $7.9 million, $15.8 million and $12.5 million in 2015, 2014 and 2013, respectively. The Life & Health Insurance segment reported adverse catastrophe reserve development of $0.1 million in 2015, adverse catastrophe reserve development of $1.1 million in 2014 and favorable catastrophe reserve development of $2.0 million in 2013.
The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2014 is summarized below.
The results of unclaimed property audits, examinations and other actions by state insurance regulators and litigation, including challenges to the constitutionality of laws purporting to have retroactive application.