Noninsurance revenue and Other operating expenses. Noninsurance revenue and other operating expenses primarily include sales and expenses associated with our Alleghany Capital segment. Other operating expenses also include the long-term incentive compensation of our reinsurance and insurance segments, which totaled $49.8 million, $72.9 million and $76.1 million in 2018, 2017 and 2016, respectively. The decrease in long-term incentive compensation at our reinsurance and insurance segments in 2018 from 2017 primarily reflects the impact of depreciation in the value of our debt and equity securities portfolios in 2018 compared with appreciation in the value of our equity and, to a lesser extent, debt securities portfolios in 2017. The decrease in long-term incentive compensation at our reinsurance and insurance segments in 2017 from 2016 primarily reflected the impact of losses arising from Hurricanes Irma, Harvey and Maria, partially offset by the impact of appreciation in the value of our equity and, to a lesser extent, debt securities portfolios. See Note 14 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for additional information.
The increase in net loss and LAE in 2017 from 2016 primarily reflected higher catastrophe losses. The catastrophe losses in 2016 related to wildfire losses in Alberta, Canada, earthquake losses in Japan, earthquake losses in Ecuador, all of which occurred in the second quarter, typhoon and flood losses in China in the third quarter, earthquake losses related to an earthquake in New Zealand in the fourth quarter and $21.8 million of losses related to Hurricane Matthew, which caused property damage and flooding in the Southeast Coast of the U.S. in October.
(3) Represents certain specialty lines of business written through a program administrator in connection with a terminated program in the 2010 and 2009 accident years and reflects (favorable) loss emergence compared with loss emergence patterns assumed in earlier periods for such business.
CapSpecialty. The increase in underwriting profit in 2018 from 2017 primarily reflects the impact of higher net premiums earned and, to a lesser extent, an increase in favorable prior accident year loss reserve development, all as discussed above. The slight decrease in underwriting profit in 2017 from 2016 primarily reflected the impact of higher 2017 accident year losses and less favorable prior accident year loss reserve development in 2017, partially offset by the impact of growing net premiums earned, all as discussed above.
past experience of our subsidiaries, modified for current trends. These emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value.
amounts payable); and (ii) acquire a 45 percent equity interest in Wilbert for $72.3 million. In addition, in 2017, we made a $4.0 million contribution to PacificComp prior to its sale on December 31, 2017, and we contributed $12.5 million to SORC for purposes of ongoing operations.
In 2016, we made capital contributions of $122.1 million to Alleghany Capital (excluding amounts for transaction-related expenses and estimates of future amounts payable) to acquire an additional 50 percent of Jazwares’ outstanding equity. In addition, in 2016, we made capital contributions of $24.0 million to PacificComp to provide additional capital support and we contributed $25.3 million to SORC for purposes of ongoing operations. We expect that we will continue to make capital contributions to our subsidiaries from time to time in the future for similar or other purposes.
Alleghany Corporation (“Alleghany”), a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006.
Bourn & Koch, Inc. (“Bourn & Koch”), a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois;
AFS securities are recorded at fair value. Unrealized gains and losses during the year, net of the related tax effect, for AFS securities, as well as partnership investments that Alleghany accounts for as AFS, are excluded from earnings and reflected in comprehensive income, and the cumulative effect is reported as a separate component of stockholders’ equity until realized. If a decline in fair value is deemed to be other than temporary, the investment is written down to its fair value and the amount of the write-down is recorded as an other than temporary impairment (“OTTI”) loss on the statement of earnings. In addition, any portion of such decline related to debt securities that is believed to arise from factors other than credit is recorded as a component of other comprehensive income rather than against earnings.
Acquisition costs related to unearned premiums that vary with, and are directly related to, the production of such premiums are deferred. Furthermore, such deferred costs: (i) represent only incremental, direct costs associated with the successful acquisition of a new or renewal insurance or reinsurance contract; (ii) are essential to the contract transaction; (iii) would not have been incurred had the contract transaction not occurred; and (iv) are related directly to the acquisition activities involving underwriting, policy issuance and processing. Acquisition costs principally relate to commissions. To a lesser extent, acquisition costs can include premium taxes and certain qualifying underwriting expenses. For insurance policies written, acquisition costs are generally incurred directly and include commissions, premium taxes and certain qualifying underwriting expenses. For reinsurance contracts written, acquisition costs are generally incurred through brokerage commissions and indirectly through ceding commissions, which are deferred. Deferred acquisition costs are amortized to expense as the related premiums are earned, generally over a period of one year. Deferred acquisition costs are reviewed at least annually to determine their recoverability from future income, including investment income. If any such costs are determined not to be recoverable they are charged to expense.
The following table presents property and casualty premiums written and earned for 2018, 2017 and 2016:
Earnings (losses) before income taxes from domestic operations were ($46.4) million, ($132.7) million and $407.7 million in 2018, 2017 and 2016, respectively. Earnings before income taxes from foreign operations were $86.0 million, $169.4 million and $240.1 million in 2018, 2017 and 2016, respectively. Foreign tax expense was primarily attributable to the U.K., Canada and Germany.
As of December 31, 2018, approximately $6.0 billion of Alleghany’s total equity of $7.7 billion was unavailable for dividends or advances to Alleghany from its subsidiaries. The remaining $1.7 billion was available for dividends or advances to Alleghany from its subsidiaries, or was retained at the Alleghany parent level and, as such, was available to pay dividends to Alleghany’s stockholders as of December 31, 2018.
Alleghany and its subsidiaries lease certain facilities, furniture and equipment under long-term lease agreements. In addition, certain land, office space and equipment are leased under non-cancelable operating leases that expire at various dates through 2038. Rent expense was $38.8 million, $37.0 million and $37.5 million in 2018, 2017 and 2016, respectively. The following table presents
We have audited Alleghany Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Alleghany Corporation and subsidiaries’ (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.