By offering insurance products to all sizes of risks, we believe we have hedged against the possibility that there will be a reduction in demand for the products we offer. We believe that we will continue to have opportunities to grow and profit with both traditional and ART customers based on our assumptions regarding future economic and competitive conditions. We generally incur low start-up costs for new businesses, typically less than $0.5 million incurred over several quarters. We believe our flexible processes and scalable systems, along with controlled increase of businesses, allow us to manage costs and match them with the revenue flow.
To succeed as a transportation and personal lines underwriter, we must understand and be able to quantify the different risk characteristics of the risks we consider quoting. Certain coverages are more stable and predictable than others and we must recognize the various components of the risks we assume when we write any specific class of insurance business. Examples of trends that can change and, therefore, impact our profitability are loss frequency, loss severity, geographic loss cost differentials, societal and legal factors impacting loss costs (such as tort reform, punitive damage inflation and increasing jury awards) and changes in regulation impacting the insurance relationship. Any changes in these factors that are not recognized and priced for accordingly will affect our future profitability.
Included in the $23.1 million of unfavorable development was $6.0 million related to reserve strengthening in our accident year 2011 commercial auto liability line recorded during the second quarter of 2013. The accident year 2011 reserve strengthening was predominately related to products in runoff within the program business portion of our ART component, as well as the discontinuance of our commercial vehicle product. We experienced higher than initially anticipated frequency and severity levels in accident year 2011, and though in 2011 enhancements to our pricing and reserving practices were made and underwriting actions were implemented to stem such adverse results and improve the claim frequency, our severity experience had not improved as anticipated. During 2013 we took rate actions or non-renewed over $65 million in unprofitable business.
2013 compared to 2012. Other operating and general expenses increased $0.6 million, or 3.0%, to $19.7 million during the year ended December 31, 2013 compared to $19.2 million for the same period in 2012, primarily attributable to expenses necessary to support the current and planned growth in our business. Such increase was partially offset by a decrease in our variable compensation expense as compared to the prior year. As a percentage of premiums earned, such expenses were 3.8% and 4.2% for the years ended December 31, 2013 and 2012, respectively.
2014 compared to 2013. During 2014 we incurred $2.2 million in transaction expenses related to the tender offer initiated on February 5, 2014 and withdrawn on March 16, 2014, by Great American, a wholly-owned subsidiary of AFG, to purchase for cash all outstanding shares of our common stock that Great American did not already own. Transaction expenses primarily consist of financial advisory and legal services incurred in connection with the tender offer and related litigation. Included in the transaction expenses is $0.6 million, recorded during the first quarter of 2014, related to a settlement agreement reached with our director, Alan R. Spachman, for a portion of the legal fees and expenses that he incurred personally in connection with the tender offer by Great American.
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturities, equity securities and other invested assets are as follows:
A summary of restricted stock activity in the LTIP is as follows:
For the year ended December 31, 2014, 2013 and 2012, there were 97,870, 100,000 and 214,468, respectively, outstanding options and restricted shares excluded from dilutive earnings because they were anti-dilutive.
The Company has an agreement with American Money Management Corporation (“AMMC”), a wholly-owned subsidiary of AFG, whereby AMMC manages approximately 59.0% of the Company’s investment portfolio at an annual cost of 15 basis points of the portfolio’s fair value. Fees for such services were approximately $0.9 million for the years ended December 31, 2014 and 2013, and $0.2 million for the year ended December 31, 2012.