In presenting the Company’s results, management has included and discussed certain non-GAAP financial measures, as such term is defined in Item 10(e) of Regulation S-K promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP.
We measure segment income or loss as underwriting income or loss plus other insurance-related income and expenses, which may include the net earnings from our claims administration services operation, insurance agency operation, changes in fair value for insurance and reinsurance contracts accounted for as derivatives, and other income or expense that is not directly related to our underwriting operations. We also measure the results for each segment's underwriting income or loss on the basis of the “loss and loss expense ratio,” “acquisition cost ratio,” “general and administrative expense ratio,” “expense ratio” and the “combined ratio.” Because we do not manage our assets by segment, investment income, interest expense and total assets are not allocated to individual reportable segments. General and administrative expenses are allocated to segments based on various factors, including staff count and each segment’s proportional share of gross premiums written.
Standard & Poor's Pricing: We use Standard & Poor's to price our states, municipalities and political subdivisions securities. The prices are obtained from the new issue market.
The decrease in the current year non-catastrophe losses and loss expenses was primarily due to the overall reduction in our net premiums earned, particularly in our Reinsurance segment. The increase in the current year non-catastrophe losses and loss expenses ratio was primarily due to higher loss ratio assumptions, partially offset by lower non-catastrophe property losses in the current period compared to the prior period. The lower non-catastrophe property losses resulted in a decrease in the non-catastrophe losses and loss expenses ratio of 0.4 percentage points.
gross premiums written of $182.1 million from the acquired Asian operations partially offset by the impact of foreign currency movements during the year; and
Net premiums written decreased by $134.7 million, or 9.9%, for the year ended December 31, 2016 compared to the year ended December 31, 2015. The decrease in net premiums written was primarily due to higher ceded premiums. We ceded 34.1% of gross premiums written for the year ended December 31, 2016 compared to 25.2% for 2015. The increase in ceded premiums was primarily due to increased cessions for our professional liability, healthcare, casualty and property lines of business. For our professional liability and healthcare lines of business, we changed the structure of the reinsurance treaty that renewed from an excess-of-loss treaty to a quota share treaty, and as such we have increased ceded premiums and ceding commission income compared to the prior period. For our property line of business, we purchased additional reinsurance on our general property and inland marine lines of business business during the current year.
Net favorable prior year reserve development primarily related to our professional liability, property and programs lines of business due to lower than expected loss emergence. The net unfavorable prior year reserve development in our professional liability line of business for the 2009 and prior loss years was due to adverse development on several large claims. The net unfavorable prior year reserve development for the 2014 loss year was primarily due to a single claim in the mergers and acquisitions line of business.
Acquisition costs. Acquisition costs increased by $33.6 million, or 31.7%, for the year ended December 31, 2015 compared to the year ended December 31, 2014. The increase was driven by the growth in net premiums earned, an increase in other acquisition-related costs, an increase in average broker commissions and lower ceding commission income due to restructuring some of our underlying reinsurance programs. The acquisition cost ratio increased to 10.7% for the year ended December 31, 2015 from 9.5% for 2014 due to the increase in other acquisition-related costs, higher commissions charged by brokers and lower ceding commission income.
During the year ended December 31, 2016, we incurred property catastrophe losses of $8.0 million related to Hurricane Matthew and $2.1 million related to the New Zealand earthquake. During the year ended December 31, 2015, we incurred $4.0 million in property catastrophe losses related to windstorms that occurred in the New South Wales region of Australia and $0.3 million related to explosions in the port of Tianjin, China.
Premiums. Gross premiums written increased by $195.8 million, or 69.8%, for the year ended December 31, 2015 compared to 2014. The increase was primarily due to gross premiums written of $182.1 million from the acquired Asian operations partially offset by the impact of foreign currency movements during the year.
that matured on August 1, 2016, as well as to increase the duration of our investment portfolio. The increase in the current year compared to the prior year was also due to lower net cash paid for acquisitions.
In October 2015, Allied World Bermuda issued $500 million aggregate principal amount of 4.35% senior notes due October 29, 2025, with interest payable April 29 and October 29 each year, commencing April 29, 2016. We used the proceeds from these senior notes to refinance the 2006 Senior Notes that matured in August 2016.