Gross written premiums increased by 15.2% to $2,059.2 million in 2017 compared to $1,787.0 million in 2016. Excluding the impact of the sale of Heartland, which accounted for $230.4 million of gross written premiums in 2016, gross written premiums increased $502.1 million. This increase was driven by expansion of various insurance lines of business including retail casualty, retail property, accident and health and premiums written through the Lloyd’s Syndicate. Net written premiums increased by 17.7% to $1,630.6 million in 2017 compared to $1,385.7 million in 2016 which is consistent with the change in gross written premiums. Premiums earned increased 13.2% to $1,461.4 million in 2017 compared to $1,291.2 million in 2016. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period, as well as changes in the mix of business.
Our shareholders’ equity increased to $8,369.2 million as of December 31, 2017 from $8,075.4 million as of December 31, 2016. This increase was the result of $469.0 million of net income, $121.9 million of net foreign currency translation adjustments, $25.0 million of share-based compensation transactions and $6.5 million of net benefit plan obligation adjustments, partially offset by $207.2 million of shareholder dividends, $71.3 million of unrealized appreciation on investments, net of tax and repurchases of 0.2 million common shares for $50.0 million.
Liquidity. Our liquidity requirements are generally met from positive cash flow from operations. Positive cash flow results from reinsurance and insurance premiums being collected prior to disbursements for claims, which disbursements generally take place over an extended period after the collection of premiums, sometimes a period of many years. Collected premiums are generally invested, prior to their use in such disbursements, and investment income provides additional funding for loss payments. Our net cash flows from operating activities were $610.1 million, $1,162.7 million and $1,383.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Additionally, these cash flows reflected net tax recoveries of $65.1 million in 2018, and net tax payments of $53.7 million and $42.6 million for the years ended December 31, 2018, 2017 and 2016, respectively, as well as net catastrophe loss payments of $1,125.9 million, $745.0 million and 206.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.
No single universal model or group of models is currently capable of projecting the amount and probability of loss in all global geographic regions in which we conduct business. In addition, the form, quality and granularity of underwriting exposure data furnished by ceding companies is not uniformly compatible with the data requirements for our licensed models, which adds to the inherent imprecision in the potential loss projections. Further, the results from multiple models and analytical methods must be combined to estimate potential losses by and across business units. Also, while most models have been updated to incorporate claims information from recent catastrophic events, catastrophe model projections are still inherently imprecise. In addition, uncertainties with respect to future climatic patterns and cycles could add further uncertainty to loss projections from models based on historical data.
August 2018, the Securities and Exchange Commission (“SEC”) issued Final Rule Release #33-10532 (“the Rule”) which addresses the simplification of the SEC’s disclosure requirements for quarterly and annual financial reports. The main changes addressed by the Rule that are applicable to the Company are 1) elimination of the requirement to disclose dividend per share information on the face of the Statements of Operations and Comprehensive Income (Loss) and 2) a new requirement to disclose changes in equity by line item with subtotals for each interim reporting period on the Statements of Changes in Shareholders’ Equity. The Rule became effective for all financial reports filed after November 5, 2018 (30 days after its publication in the Federal Register), except for the additional requirement for the Statements of Changes in Shareholders’ Equity which can be implemented for first quarter 2019 reporting. The Company has adopted the portions of the Rule that became effective November 5, 2018. The portion of the Rule related to the new requirement for the Statements of Changes in Shareholders’ Equity will be adopted by the Company in the first quarter of 2019.
Presentation and Disclosure of Net Periodic Benefit Costs. In March 2017, FASB issued ASU 2017-07 which outlines guidance on the presentation of net periodic costs of benefit plans. The new guidance requires that the service cost component of net periodic benefit costs be reported within the same line item of the statements of operations as other compensation costs are reported. Other components of net periodic benefit costs should be reported separately. Footnote disclosure is required to state within which line items of the statements of operations the components are reported. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. The adoption of ASU 2017-07 did not have a material impact on the Company’s financial statements.