pooling arrangement permits the participating companies to rely on the capacity of the entire pool's capital and surplus, rather than being limited to policy exposures of a size commensurate with each participant’s own surplus level.
We evaluate profit or loss based upon operating and investment results. Profit or loss described in the following sections of this Management's Discussion and Analysis is reported on a pre-tax basis. Our primary sources of revenue are premiums and investment income. Major categories of expenses include losses and loss settlement expenses, future policy benefits, underwriting and other operating expenses and interest on policyholders' accounts.
Direct premiums written increased $59.1 million in 2017 as compared to 2016 due to organic growth from a combination of new business and geographical expansion. Written and earned premium growth were within management's expectations of 4 percent to 6 percent growth.
In 2017, 2016 and 2015, we did not exceed our catastrophe reinsurance retention level of $20.0 million per event.
In 2016, our losses and loss settlement expenses were 25.4 percent higher than 2015 and our net loss ratio increased 8.7 points due to an increase in catastrophe losses, which accounted for 2.7 percentage points of the increase, and an increase in large losses over $500 thousand in our commercial automobile and commercial fire & allied lines of business. Catastrophe losses increased to $61.2 million in both our direct business and assumed reinsurance business as compared to $32.3 million in 2015.
The challenges faced by workers' compensation insurance providers to attain profitability include the regulatory climates in some states that make it difficult to obtain appropriate premium rate increases and inflationary medical costs. Despite these pricing issues, we continue to believe that we can improve the results of this line of business. Consequently, we have increased the utilization of our loss control unit in the analysis of current risks, with the intention of increasing the quality of our workers' compensation book of business. We are currently using these modeling analytics to assist us in risk selection, and we will continue to evaluate the model results.
We invest funds required for short-term cash needs primarily in money market accounts, which are classified as cash equivalents. At December 31, 2017, our cash and cash equivalents included $16.8 million related to these money market accounts, compared to $16.8 million at December 31, 2016.
Net cash flows used in investing activities totaled $62.0 million, $112.4 million and $36.3 million in 2017, 2016 and 2015, respectively. In 2017, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments, from continuing operations, that totaled $205.1 million compared to $328.1 million and $252.2 million for the same period in 2016 and 2015, respectively. In 2017, we had cash inflows from scheduled and unscheduled investment maturities, redemptions, prepayments, and sales of investments, from discontinued operations, that totaled $148.6 million compared to $223.0 million and $422.7 million for the same period in 2016 and 2015, respectively. The cash inflows over the last three years primarily relate to redemptions of fixed maturity securities that are reinvested.
We offer our agents a profit-sharing plan as an incentive for them to place high-quality property and casualty insurance business with us. Based on business produced by the agencies in 2017, property and casualty agencies will receive profit-sharing payments of $15.1 million in 2018.
At December 31, 2017 and 2016, we had a number of securities with fair value less than the cost basis. The total unrealized loss on these securities was $16.9 million at December 31, 2017, compared with $34.8 million at December 31, 2016. At December 31, 2017, the largest pre-tax unrealized loss on an individual equity security was
The DAC asset recorded in connection with our non-traditional business is also adjusted with respect to estimated expected gross profits as a result of changes in the net unrealized gains or losses on available-for-sale fixed maturity securities allocated to support the block of deferred annuities and universal life policies. That is, because we carry available-for-sale fixed maturity securities at fair value, we make an adjustment to the DAC asset equal to the change in amortization that would have been recorded if we had sold such securities at their stated fair value and reinvested the proceeds at current yields. We include this adjustment, which is called "shadow" DAC, net of tax, as a component of accumulated other comprehensive income. At December 31, 2017 and 2016, the "shadow" DAC adjustment decreased our DAC asset by $6.3 million and $6.4 million, respectively.
Senior management meets with our internal actuary and controller quarterly to review the adequacy of carried IBNR reserves based on results from this actuarial analysis and makes adjustments for changes in business and other factors not completely captured by the data within the actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate. This method of
Included in the other liability and assumed reinsurance lines of business are reserves for asbestos and other environmental losses and loss settlement expenses. At December 31, 2017 and 2016, we had $2.6 million and $3.7 million, respectively, in direct and assumed asbestos and environmental loss reserves. The estimation of loss reserves for environmental claims and claims related to long-term exposure to asbestos and other substances is one of the most difficult aspects of establishing reserves, especially given the inherent uncertainties surrounding such claims. Although we record our best estimate of loss and loss settlement expense reserves, the ultimate amounts paid upon settlement of such claims may be more or less than the amount of the reserves, because of the significant uncertainties involved and the likelihood that these uncertainties will not be resolved for many years.
Net realized gains (losses) on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of net realized investment gains (losses) for 2017, 2016 and 2015, is as follows:
The following tables are a reconciliation for both continuing and discontinued operations of the presentation of the categorization for our financial instruments measured at fair value on a recurring basis at December 31, 2017 and 2016:
In 2015, we renewed our participation in all of our assumed programs and added one new program to our portfolio. The new assumed program is for international catastrophes excluding the United States with the largest exposure to European wind perils.
The following is a summary of the pension plan's actual and target asset allocations at December 31, 2017 and 2016 by asset category: