The Specialty Admitted Insurance segment focuses on niche classes within the standard insurance markets, such as workers’ compensation coverage for building trades, healthcare employees, goods and services, manufacturing, specialty transportation, and agriculture, and on the fronting and program business. In our fronting business, we retain a small percentage of the risk and seek to earn fee income by allowing other carriers and producers to use our licensure, ratings, and infrastructure. Given market conditions and availability of reinsurance for program opportunities, we began de-emphasizing program business in 2017. Through Falls Lake National and its subsidiaries, this segment has admitted licenses in 49 states and the District of Columbia and distributes through a variety of sources, including independent retail agents, program administrators and MGAs. The Specialty Admitted Insurance segment produced 32.1% of our gross written premiums and 7.3% of our net written premiums for the year ended December 31, 2018.
dealers, and price data vendors that provide a composite price based on prices from multiple dealers. Such external pricing sources typically provide valuations for normal institutional size trading units of such securities using methods based on market transactions for comparable securities, and various relationships between securities, as generally recognized by institutional dealers. For investments in which the investment manager determines that only one external pricing source is appropriate or if only one external price is available, the investment is generally recorded based on such price.
The net premium retention for the Specialty Admitted Insurance segment decreased from 2017 to 2018 as a result of growth in the segment's fronting business, which generally has much lower net premium retention than our workers’ compensation business. Fronting gross written premium grew 17.2% for the year ended December 31, 2018 compared to the prior year. The net retention on the segment’s fronting business was 9.6% and 11.9% in the years ended December 31, 2018 and
As a result of the items discussed above, the underwriting profit of the Specialty Admitted Insurance segment increased 120.2%, from $3.2 million for the year ended December 31, 2017 to $7.0 million for the year ended December 31, 2018.
The amortized cost and fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity are as follows:
Other expenses for the years ended December 31, 2018 and 2017 were $1.3 million and $539,000, respectively. In 2018, these expenses included $1.4 million of employee severance. In 2017, these expenses included $535,000 of legal and other professional services related to secondary share offerings in 2017.
Our combined ratio for the year ended December 31, 2017 was 99.2%. In 2017, the combined ratio included $21.5 million, or 2.9 percentage points, of adverse reserve development on direct and assumed business underwritten by the Company on prior accident years, including $20.0 million of adverse reserve development from the Excess and Surplus Lines segment and $4.2 million of adverse reserve development from the Casualty Reinsurance segment offset partially by $2.7 million of favorable reserve development from the Specialty Admitted Insurance segment. The combined ratio for the year ended December 31, 2017 also includes $6.9 million, or 0.9 percentage points, of catastrophe losses from Hurricanes Harvey, Irma, and Maria.
A significant portion of the fronting and program business is ceded to third party reinsurers. As a result, our net written premium for this segment increased by less than our gross written premiums, increasing 9.2% and 24.2% for the years ended December 31, 2017 and 2016, respectively.
For the Casualty Reinsurance segment (which represents 21.8% of our 2017 consolidated gross written premiums), gross written premiums increased 27.7%, from $184.3 million for the year ended December 31, 2016 to $235.4 million for the year ended December 31, 2017.
Our effective tax rate fluctuates from period to period based on the relative mix of income reported by country and the respective tax rates imposed by each tax jurisdiction. In 2017, particularly, the Company experienced a higher proportion of U.S.-sourced income, increasing the effective tax rate for the year. For U.S.-sourced income, our U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities (state and municipal securities represented 13.1% and 10.4% of our available-for-sale securities at December 31, 2017 and 2016, respectively), dividends received income, and excess tax benefits on share based compensation. For the years ended December 31, 2017 and 2016, our effective tax rate was 21.0% and 6.1%, respectively. Income taxes for 2017 included $1.1 million of U.S. withholding taxes on an intercompany dividend paid from the U.S. holding company to our U.K. intermediate holding company. Income taxes for 2017 also include a $3.5 million tax benefit as the U.S. net deferred tax liability was remeasured at 21%, down from 35% in prior periods, due to the enactment of the Tax Act.
The following is a summary of our Excess and Surplus Lines segment’s ceded reinsurance in place as of December 31, 2018:
We define adjusted net operating income as net income excluding certain non-operating expenses such as net realized and unrealized investment gains and losses, expenses related to due diligence costs for various merger and acquisition activities, professional service fees related to the filing of registration statements for the offering of securities, severance costs associated with terminated employees and interest and other expenses on a leased building that we are deemed to own for accounting purposes. We use adjusted net operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and our definition of adjusted net operating income may not be comparable to that of other companies.