Premiums - Agency renewal written premiums rose $126 million in 2017 and represented approximately half of the growth in earned premiums and net written premiums that rose in each of our property casualty segments. The renewal premium increase was largely due to average renewal price increases and a higher level of insured exposures. Price increases with enhanced precision continue to benefit operating results.
Personal auto, representing 47 percent of 2017 earned premiums for our personal lines insurance segment, was the only major line of business in that segment with a 2017 total loss and loss expense ratio significantly higher than we desired. During 2017, our personal auto policies experienced estimated premium rate increases averaging near the low end of the high-single-digit range. We believe the rate increases and other actions to improve pricing precision and reduce loss costs will improve future profitability. A similar approach was used to improve the total loss and loss expense ratio for our homeowner line of business to a satisfactory result in recent years.
Combined ratio - The combined ratio rose 4.1 percentage points in 2017, primarily due to less favorable reserve development on prior accident years.
The $21 million increase in 2017 renewal premiums reflected the opportunity to renew many policies for the first time as well as higher renewal pricing. Average renewal estimated price increases were in the low-single-digit range during 2017. We measure average changes in excess and surplus lines renewal pricing as the rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.
Excess and surplus lines reserve development on prior accident years continued to net to a favorable amount in 2017 as $29 million was recognized, compared with $34 million in 2016. Approximately two-thirds of the 2017 favorable development was for accident years 2015 and 2014, in aggregate, and was primarily due to lower-than-anticipated loss emergence on known claims.
Excess and surplus lines commission expense as a percent of earned premiums for 2017 decreased slightly from 2016 and matched 2015. Other underwriting expenses increased in 2017, compared with 2016, largely due to strategic investments such as enhancements to systems used in billing excess and surplus lines insurance policies. In 2016, the ratio also rose, in part due to upgrades to systems used in underwriting excess and surplus lines insurance policies. Those ratio-increase effects offset the favorable ratio-decrease effects of higher earned premiums and ongoing expense management efforts.
At December 31, 2017, we had a $225 million line of credit with commercial banks, with $24 million borrowed. That line of credit had a $20 million balance at December 31, 2016. During 2017, we borrowed a net $4 million as part of routine cash management. Access to this line of credit requires compliance with various covenants, including maintaining a minimum consolidated net worth and not exceeding a 30 percent debt-to-total capital ratio, as defined by the agreement. At December 31, 2017, we had approximately $550 million of net worth in excess of our covenant net worth requirement. We are considerably within compliance with all covenants under the credit agreement, and believe we will remain in compliance. The credit agreement provides alternative interest charges based on the type of borrowing and our debt rating. The interest rate charged is adjusted LIBOR plus an applicable margin.
To help determine appropriate reinsurance coverage for hurricane, earthquake and tornado/hail exposures, for business other than Cincinnati Re we use the RMS and AIR models to estimate the probable maximum loss from a single event or multiple events occurring in a one-year period. The models are proprietary in nature, and the vendors that provide them periodically update the models, sometimes resulting in significant changes to their estimate of probable maximum loss. As of the end of 2017, both models indicated that a hurricane event represents our largest amount of exposure to losses. The table below summarizes estimated probabilities and the corresponding probable maximum loss from a single hurricane event occurring in a one-year period, for business other than Cincinnati Re, and indicates the effect of such losses on consolidated shareholders’ equity at December 31, 2017. Net losses are net of reinsurance and income taxes, assuming a 21 percent federal tax rate, and assume our 2018 reinsurance programs apply.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The main provision of ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The effective date of ASU 2016-02 is for interim and annual reporting periods beginning after December 15, 2018. The ASU has not yet been adopted; however, it is not expected to have a material impact on our company's consolidated financial position, cash flows or results of operations.
Fair values for structured settlements were calculated based on internally developed models which assume the discount rates used to calculate the present value of expected payments are the risk-free spot rates plus an A3 rated bond spread for financial issuers at December 31, 2017 and 2016, to account for nonperformance risk. The structured settlements were classified as Level 2 as an active market does not exist, but fair value is based on observable inputs.
$29 million for the commercial property line, $20 million for commercial casualty line and $42 million for the other commercial lines due to reduced uncertainty of prior accident year loss and loss expense for these lines. We recognized unfavorable reserve development of $31 million for the commercial auto line and $18 million for the
The following table provides a reconciliation of the property casualty incurred losses and allocated loss adjustment expenses (ALAE) development and paid losses and ALAE development information at December 31, 2017.
December 31, 2017, 2016 and 2015, respectively. The related income tax benefit recognized was $9 million,
Risk-free rates are equal to the yield, as of the measurement date, of the zero-coupon U.S. Treasury bill that is commensurate with the performance measurement period.