The following tables present selected historical financial information of James River Group Holdings, Ltd. derived from our consolidated balance sheets as of December 31, 2015, 2014, 2013 and 2012, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for each of the four years in the period ended December 31, 2015, which have been audited by Ernst & Young, LLP, and our unaudited condensed consolidated balance sheet as of December 31, 2011 and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for the year ended December 31, 2011. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of our management, the unaudited condensed consolidated financial statements presented in the tables below reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of our consolidated financial position and results of operations as of the dates and for the periods indicated.
In applying these methods to develop an estimate of the reserve for losses and loss adjustment expenses, our internal actuaries use judgment to determine three key parameters for each accident year and line of business: the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the five actuarial methods to be used for each accident year and line of business. For the Excess and Surplus Lines and Specialty Admitted Insurance segments, the actuary performs a study on each of these parameters annually in the third quarter and makes recommendations for the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the five actuarial methods by accident year and line of business. Members of the Reserve Committee review and approve the parameter review actuarial recommendations, and these approved parameters are used in the reserve estimation process for the next four quarters at which time a new parameter study is performed. For the Reinsurance segment, periodic assessments are made on a contract by contract basis with the goal of keeping the initial expected loss ratios and the incurred and paid loss development factors as constant as possible until sufficient evidence presents itself to support adjustments. Method weights are generally less rigid for the Casualty Reinsurance segment given the heterogeneous nature of the various contracts, and the potential for significant changes in mix of business within individual treaties.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU No. 2015-02 changes the analysis that a reporting entity must perform to determine whether entities should be consolidated if they are deemed variable interest entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. The Company is currently evaluating the impact of the adoption of ASU No. 2015-02, but adoption is not expected to have a material effect on our consolidated financial statements.
Energy division (representing 9.9% of this segment’s 2015 business) which increased $1.6 million (or 5.7%) over the prior year.
Net investment income was $44.8 million for the year ended December 31, 2015 compared to $43.0 million in the prior year. The increase in net investment income was primarily attributable to growth in our cash and invested assets. Cash and invested assets increased $40.1 million or 3.1% in 2015 (from $1,310.6 million at December 31, 2014 to $1,350.7 million at December 31, 2015) due to our profitability, a 4.7% increase in net written premiums, and our positive cash flows from operations. Dividend payments of $70.0 million on September 30, 2014 and $47.4 million in 2015 reduced our investable assets. Additionally, net investment income was affected by an increase in the approximate duration of our portfolio (from 3.1 years at December 31, 2014 to 3.5 years at December 31, 2015) and declining portfolio yields, which partially offset some of the increase associated with the higher asset base.
Of our total cash and invested assets of  $1,350.7 million at December 31, 2015, $106.4 million represents the cash and cash equivalents portion of the portfolio. The majority of the portfolio, or $973.8 million, is comprised of fixed maturity and equity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income or loss. Also included in our investments are $191.7 million of bank loan participations, $54.5 million of other invested assets, $19.3 million of short-term investments, and $5.0 million of fixed maturity securities classified as trading and held at the U.S. holding company. Our trading portfolio is carried at fair value with changes to the value reported as net investment income in our consolidated income statement.
Our combined ratio for the year ended December 31, 2013 was 91.2%. The combined ratio for the year ended December 31, 2013 included $37.5 million, or 11.4 percentage points, of net favorable reserve development on direct and assumed business underwritten by the Company on prior accident years, including $40.7 million of favorable reserve development from the Excess and Surplus Lines segment and $1.4 million of favorable reserve development from the Specialty Admitted Insurance segment offset by $4.7 million of adverse development from the Casualty Reinsurance segment.
The components of the increase in gross written premiums for the Specialty Admitted Insurance segment are as follows:
For the Casualty Reinsurance segment (which represents 39.8% of our gross written premiums for the year ended December 31, 2014), gross written premiums increased 32.9%, from $155.5 million for the year ended December 31, 2013 to $206.7 million for the year ended December 31, 2014. The Casualty Reinsurance segment generally writes large casualty-focused treaties that are expected to have lower volatility relative to property and catastrophe treaties. We rarely write stand-alone property reinsurance. When treaties that include property exposure are written, it is done with relatively low catastrophe sub-limits.
Underwriting results for the year ended December 31, 2014 include fee income of  $873,000.
For the year ended December 31, 2014, we recognized net realized investment losses of  $1.3 million. The realized losses included $2.0 million in impairment losses related to our investment exposure to entities located in the Commonwealth of Puerto Rico. For the year ended December 31, 2013, we recognized net realized investment gains of  $12.6 million principally from the sale of fixed maturity securities and bank loan participations. We sold securities in 2013 to fund the $110.8 million repurchase of our common shares and to shorten the duration of our portfolio to reduce our exposure to interest rate risk.
In August 2014, we declared a dividend payable to our shareholders of record as of June 30, 2014, in the aggregate amount of  $70.0 million, which we financed with a $50.0 million dividend paid to the Company by JRG Re and approximately $20.0 million in additional borrowings under our senior revolving credit facility.
For certain casualty underwriting divisions of the Excess and Surplus Lines segment, we do not believe that the purchase of reinsurance is necessary since our total exposure to any one claim is a maximum of $1.0 million. The underwriting divisions that do not require reinsurance are Manufacturers and Contractors, General Casualty, Sports and Entertainment, and Small Business. These underwriting divisions comprise 62.4% of the Excess and Surplus Lines segment’s gross written premiums for the year ended December 31, 2015.
Our sources of operating funds consist primarily of premiums written, investment income, reinsurance recoveries and proceeds from offerings of debt and equity securities and from sales and redemptions of investments. We use the operating cash flows primarily to pay operating expenses, losses and loss adjustment expenses, and income taxes. Cash flow from operations may differ substantially from net income. The potential for a large claim under an insurance or reinsurance contract means that substantial and unpredictable payments may need to be made within relatively short periods of time.