To reduce risk and volatility in our homeowners book of business, while at the same time providing us with additional catastrophe reinsurance protection, the State Auto Group entered into a quota share reinsurance agreement on December 31, 2011 with a syndicate of unaffiliated reinsurers covering its homeowners book of business (the “HO QS Arrangement”). Under the HO QS Arrangement, the State Auto Group ceded to the reinsurers 75% of its homeowners business under policies in force at December 31, 2011 and new and renewal policies thereafter issued during the term of the agreement. The HO QS Arrangement is in effect until December 31, 2014. See “Liquidity and Capital Resources - Reinsurance Arrangements” for a more detailed discussion of the HO QS Arrangement. We believe the long term benefits of our homeowner actions will be a more profitable book of homeowners business with reduced risk to our capital base.
The following tables set forth, on a GAAP and pro forma basis, certain of our key performance indicators before and after the impact of the HO QS Arrangement cession for the years ended December 31, 2013 and 2012.
CustomFitSM homeowners: Since 2011, we have used CustomFit, our by-peril rating approach, in states that represent approximately 80% of our homeowners' premium and 86% of our five-year wind/hail losses. During 2012, we released a second generation CustomFit product, which enhances our ability to model and price appropriately for non-weather related losses, and deployed it in two states in late 2013.
For the Programs unit, our strategy is to target small to medium sized programs underwritten by managing general underwriters with proven track records in terms of profitability and distribution. As reported net written premiums for our Programs unit for the year ended December 31, 2013 decreased 31.0%, compared to the same 2012 period (Table 5). Excluding the decrease in net written premiums associated with the former RED unit, the Programs unit pro forma net written premiums increased $34.1 million (Reconciliation Tables 8 and 9). The increase for the year ended December 31, 2013 was driven by growth in all programs, including the introduction of four new programs in 2013 and six new programs in 2012. As reported net written premiums for the year ended December 31, 2012 decreased 28.1%, compared to as reported net written premiums for the same 2011 period (Reconciliation Table 5). Excluding the impact of the 12.31.11 Pool Change, as reported net written premiums for the year ended December 31, 2012 decreased 18.1%, compared to pro forma net written premiums for the same 2011 period (Table 5) primarily due to the cancellation of substantially all the programs written through the former RED unit in 2012. During 2013, all remaining RED programs were terminated.
ULAE was $8.0 million lower than anticipated in the reserves at December 31, 2012.
In the personal and business insurance segments, the non-catastrophe loss and ALAE reserves accounted for $18.3 million of favorable development related to the latest four accident years, primarily in the other & product liability, commercial auto and homeowners with $8.3 million, $8.0 million and $2.9 million of the favorable development, respectively. The favorable development in these lines was driven by lower than anticipated severity in the casualty lines.
The loss and loss expenses payable at December 31, 2013 increased $22.1 million from the loss and loss expenses payable at December 31, 2012. This increase was primarily due to earned premium growth in our specialty and business insurance segments and the corresponding increase in claims activity. Our homeowners line of business declined $10.3 million primarily due to less exposure, as well as, lower catastrophe losses during the year. We conduct quarterly reviews of loss development reports and make judgments in determining the reserves for ultimate losses and loss expenses payable. Several factors are considered by us when estimating ultimate liabilities including consistency in relative case reserve adequacy, consistency in claims settlement practices, recent legal developments, historical data, actuarial projections, exposure changes, anticipated inflation, current business conditions, catastrophe developments, late reported claims, and other analytical reviews.
Diversifying our portfolio into small-cap equities and international equity funds was designed to achieve a greater total return with reduced volatility. We believe that in most market cycles, diversification of the portfolio will be beneficial to us, and we plan to continue to maintain a diversified portfolio.
The amortized cost value of our TIPS was $188.5 million for the year ended December 31, 2013, compared to $196.5 million and $231.4 million for the same 2012 and 2011 periods. The income earned on our TIPS securities, which is dependent on changes in the CPI Index, decreased by $2.7 million and $3.5 million, respectively, when compared to the same 2012 and 2011 periods.
We generally manage our cash flows through current operational activity and maturing investments, without a need to liquidate any of our other investments. However, should our written premiums decline or paid losses increase significantly, or a combination thereof, our cash flows from operations could be impacted requiring us to liquidate investments. This action was not necessary in 2013, 2012 or 2011, despite the increased level of catastrophe losses in 2012 and 2011.
The amendments in this guidance result in additional disclosure requirements under GAAP and do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new guidance requires an entity to present, either in a single note, or, parenthetically on the face of the statement where net income is presented, the effects of significant amounts reclassified from each component of accumulated other comprehensive income by the respective line items of net income, only, if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. If a component is not required to be reclassified to net income in its entirety, the entity would, instead, cross-reference it to the related disclosure required under GAAP. This guidance was effective prospectively for fiscal years and interim periods beginning after December 15, 2012. The Company adopted this guidance at January 1, 2013, and it did not have a material impact on the consolidated financial statements, see Note 10 - Other Comprehensive Income and Accumulated Other Comprehensive Income.
At December 31, 2013, the tax benefit of the net operating loss carryforward was $56.5 million; if not used, it will expire in 2032.
State Auto P&C, Milbank and SA Ohio are subject to regulations and restrictions under which payment of dividends from statutory surplus can be made to State Auto Financial during the year without prior approval of regulatory authorities. Under the insurance regulations of Iowa and Ohio (the states of domicile), the maximum amount of dividends that the Company may pay out of earned surplus to shareholders within a twelve month period without prior approval of the Department is limited to the greater of 10% of the most recent year-end policyholders' surplus or net income for the twelve month period ending the 31st day of December of the previous year-end. Pursuant to these rules, approximately $75.3 million is available for payment to State Auto Financial from its insurance subsidiaries in 2014 without prior approval. State Auto Financial received dividends from its insurance subsidiaries in the amount of $10.0 million, $20.0 million and $0 million in 2013, 2012 and 2011, respectively.
service as a director of the Company. During the restricted period, outside directors are credited with dividends, equivalent in value to those declared and paid on the Company’s common shares, on all RSU awards granted to them. At the end of the restricted period, outside directors receive distributions of their RSU awards either (i) in a single lump sum payment, or (ii) in annual installment payments over a five- or ten-year period, as previously elected by the outside director. The administrative committee for the RSU Plan (currently the Company’s Compensation Committee) retains the right to increase the annual number of RSU awards granted to each outside director to as many as 5,000 or to decrease such annual number to not less than 500, without seeking shareholder approval, if such increase or decrease is deemed appropriate by the administrative committee to maintain director compensation at appropriate levels. The RSU Plan automatically terminates on May 31, 2015. The Company accounts for the RSU Plan as a liability plan. There were 33,712 RSUs, 26,480 RSUs, and 23,928 RSUs granted in 2013, 2012 and 2011, respectively.