For several years, the Company's investment philosophy has emphasized the purchase of short-term bonds with superior quality and liquidity. As flat yield curves have not provided incentive to lengthen maturities in recent years, the Company has continued to maintain its fixed maturity portfolio at short-term levels. The average contractual life of the Company's fixed maturity and short-term investment portfolio decreased slightly to 4.5 years during 2016. The average duration of the Company's fixed maturity portfolio remains much shorter than both the contractual maturity average and the duration of the Company's liabilities. The Company also remains an active participant in the equity securities market using capital which is in excess of amounts considered necessary to fund current operations. The long-term horizon for the Company's equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuation, is the primary focus. Investments made by the Company's domestic Insurance Subsidiaries are regulated by guidelines promulgated by the National Association of Insurance Commissioners, which are designed to provide protection for both policyholders and shareholders.
Net pre-tax losses on investments, before taxes, totaled $1.3 million in 2015 compared to net pre-tax gains on investments of $14.9 million during 2014. The 2015 results were heavily influenced by direct trading results, with gains of $4.5 million in 2015 compared to direct trading gains of $7.9 million in 2014. In addition, our investments in limited partnerships produced losses of $1.7 million in 2015 compared to gains of $7.1 million during the prior year. Limited partnership ventures utilized by the Company are primarily engaged in the trading of public and private securities, including foreign securities and, to a lesser extent, small venture capital activities and real estate development. The aggregate of the Company's share of gains and losses in these entities represented a 2% decrease in value for 2015 compared to a 10% appreciation in value for 2014. During 2015, our investments in limited partnerships produced $1.7 million in net realized losses. Other-than-temporary impairments of $7.7 million, netted with losses of $4.4 million on previously impaired available-for-sale securities that were sold in 2015, are included in the net losses stated above.
A portion of the Company's fleet transportation business is produced by the direct sales efforts of Baldwin & Lyons, Inc. employees and, accordingly, this business does not incur commission expense on a consolidated basis. Rather, the expenses of the agency operations, including salaries and bonuses of salesmen, travel expenses, etc. are included in operating expenses. In general, commissions paid by the Insurance Subsidiaries to the parent company exceed related acquisition costs incurred in the production of the property and casualty insurance business. The ratio of net operating expenses of the Insurance Subsidiaries to net premiums earned was 32.2% in 2015 and 32.0% in 2014. Including the agency operations and corporate expenses, and after elimination of inter-company commissions, the ratio of operating expenses to operating revenue (defined as total revenue less gains or losses on investments) was 32.2% for 2015 compared with 31.8% for 2014.
Net income for 2015 of $23.3 million compared to net income of $29.7 million during 2014, with the decline attributable to realized investment losses. Diluted earnings per share of $1.55 were recorded in 2015 compared to diluted earnings per share of $1.98 in 2014.
The liability method is used in accounting for federal income taxes. Using this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The provision for deferred federal income tax is based on items of income and expense that are reported in different years in the financial statements and tax returns and are measured at the tax rate in effect in the year the difference originated. Net deferred tax liabilities reported at December 31 are as follows (dollars in thousands):
The following is information about paid claims development as of December 31, 2016, net of reinsurance.
The Insurance Subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product line basis. Certain treaties covering fleet transportation risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.
On October 31, 2008, the Company purchased a commercial lines specialty insurance agency for a cash purchase price of $3,500. The acquisition is part of the Company's property and casualty insurance segment. As part of the purchase, the Company recorded goodwill of $3,152 and intangible assets of $179. Accumulated amortization of intangible assets was $179 as of both December 31, 2016 and 2015.
Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.