For several years, the Company’s investment philosophy has emphasized the purchase of short-term bonds with superior quality and liquidity. As flat yield curves have not provided incentive to lengthen maturities in recent years, the Company has continued to maintain its fixed maturity portfolio at short-term levels. The average contractual life of the Company’s bond and short-term investment portfolio remained level at 4.8 years during 2014. The average duration of the Company’s fixed maturity portfolio remains much shorter than the contractual maturity average and significantly shorter than the duration of the Company’s liabilities. The Company also remains an active participant in the equity securities market using capital which is in excess of amounts considered necessary to fund current operations. The long-term horizon for the Company’s equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuation, is the primary focus. Investments made by the Company’s domestic Insurance Subsidiaries are regulated by guidelines promulgated by the National Association of Insurance Commissioners which are designed to provide protection for both policyholders and shareholders.
Premiums written by the Reinsurance segment totaled $54.7 million during 2013, a decrease of $2.4 million (4%) from 2012. Premiums generated by property reinsurance products decreased $5.5 million (16%), reflective of management’s decision to reduce exposures to property catastrophe losses. Partially offsetting the property decrease was an increase of $3.1 million (14%) in the Company’s growing book of professional liability reinsurance assumed.
Losses and loss expenses incurred during 2013 increased $12.6 million (9%) from 2012 to $150.7 million, an increase generally consistent with the increased premium volume described above. The 2013 consolidated loss and loss expense ratio was 59.6% compared to 58.1% for 2012. The Company's loss and loss expense ratios for major product lines are summarized in the following table:
The investment commitments in the above table relate to maximum unfunded capital obligations for limited partnership investments and unfunded bridge loan obligations at December 31, 2014. The actual call dates for such funding could vary from that presented.
Favorable loss development is influenced by the Company’s long-standing policy of reserving for losses realistically and a willingness to settle claims based upon a seasoned evaluation of its exposures. Loss reserves pertaining to the Company’s property reinsurance business are established partially by the ceding reinsurers although the Company routinely adjusts such reserves if management determines that additional reserves could be necessary. Accordingly, there is potential for fluctuations in loss developments related to reinsurance assumed to be more pronounced than those experienced on directly produced business which is reserved entirely by Company personnel. In addition, changes in the Company’s net retention under reinsurance treaties will impact developments as more or less business is retained. These trends were considered in the establishment of the Company’s reserves at December 31, 2014 and 2013.