Net income for the year ended December 31, 2014 was $2,164,125, as compared to net income of $1,968,763 for the year ended December 31, 2013. Results for the year ended December 31, 2014, improved over the same time frame last year primarily as a result of enhanced fee income from policy production and ceding commissions coming from our quota share reinsurance program.
Our expenses (policy acquisition, underwriting, and other operating expenses), as a percentage of direct earned premium was 33.89 % for the year ended December 31, 2014, compared to 32.46 % for the year ended December 31, 2013. The increase in our expense ratio is primarily attributable to higher property inspections, the result of an increase in quoting the Company's product by its agency force, and other underwriting expenses, including an increase in agent's compensation, employee compensation and compensation-related costs.
Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined loss and expense ratio measured to total earned revenues is more relevant in assessing overall performance. The combined loss and expense ratio to total earned revenue for the year ended December 31, 2014 was 88.36 % compared to 86.82 % for the year ended December 31, 2013.
Lastly, event losses are capped based on the company's catastrophe reinsurance coverage, so that no more than $4.0 million per event is included. Once the projected event limit reaches $4.0 million, no further retained IBNR is projected for the event, only gross and ceded IBNR.
Deferred policy acquisitions costs ("DAC") consist of commissions, premium taxes and policy underwriting and production expenses which are incurred through and vary directly with, the level of production of new and renewal insurance business and are amortized over the terms of the policies they relate to. The method used in calculating DAC limits the amount of the deferred cost to their estimated realizable value, which gives effect to allocating their expense along with other period costs associated with the insurance business, in relation to the amount of gross premium earned on policies to which they relate and investment income. DAC is reviewed to determine if it is recoverable from future income, including investment income. The amount of DAC considered recoverable could be reduced in the near term if management's estimates of future premium and investment income is reduced which could impair the Company's ability to recover these costs.
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets, which range from three to five years. The cost and related accumulated depreciation of assets sold or disposed are removed from the accounts and the resulting gain or loss is included in the consolidated statements of operations. Maintenance and repairs are expensed as incurred.
The Company regularly reviews its individual investment securities for OTTI. The Company considers various factors in determining whether each individual security is other-than-temporarily-impaired, including:
the Company's intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.
Rent expense under such leases in the year ended December 31, 2014 and December 31, 2013 was $123,187 and $101,746, respectively.