Personal lines: Our largest line of business is personal lines, consisting of homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies.
Ceding commission revenue was $5,333,000 in Year Ended 2018 compared to $9,933,000 in Year Ended 2017. The decrease of $4,600,000, or 46.3%, was due to a decrease in provisional ceding commissions earned, as well as a decrease in contingent ceding commissions earned. The reduction in provisional ceding commissions occurred due to the decision to retain more of our profitable business (see below for discussion of provisional ceding commissions earned and contingent ceding commissions earned).
During 2018, the net loss ratio increased compared to 2017 primarily due to the impact of catastrophe losses. In 2018 there were nine catastrophic events that affected us, with most of the impact related to several major winter storms from the first quarter. We recorded a 6.0 point impact from catastrophes in 2018 in comparison to no impact from catastrophe events during 2017. In addition to the impact of catastrophes, we recorded 1.1 points of unfavorable prior year loss development in 2018 compared to 0.1 points of favorable prior year development in 2017. The underlying loss ratio excluding the impact of catastrophes and prior year development was 49.2% in 2018, an increase of 4.9 points from the 44.3% underlying loss ratio for 2017. The underlying loss ratio rose due to an increased impact from larger fire and liability claims in 2018 compared to 2017. Average claim severity on smaller non-weather related water claims has also increased significantly over the last year. See table below under “Additional Financial Information” summarizing net loss ratios by line of business.
The overall increase of 2.0 percentage points in the net underwriting expense ratio was driven almost entirely by the change in our quota share ceding rates and its impact on provisional ceding commission revenue as a result of the additional retention resulting from the Cut-off to our quota share treaty on July 1, 2018. The components of our net underwriting expense ratio related to commissions and other underwriting expenses improved in nearly all categories, but this was more than offset by reductions in the reinsurance ceding commission revenue components.
See discussions above with regard to “Net Loss and LAE”, as to catastrophe losses in 2018.
The key measures for our insurance underwriting business for the years ended December 31, 2018 and 2017 are as follows:
The year ended December 31, 2018, includes the sum of net catastrophe losses and loss adjustment expenses of $6,227,883.
Net cash provided by financing activities was $6,137,000 in 2018 compared to $55,917,000 provided in 2017. The $62,055,000 decrease in net cash provided by financing activities is the result of the $30,137,000 net proceeds we received from the public offering of our common stock in January/February 2017 and the $29,122,000 net proceeds we received from the issuance of long-term debt pursuant to the public offering in December 2017 and a $1,065,000 increase in dividends paid due to an increase in the shares outstanding and dividend paid per share.