We use a tabular reserve methodology for our Unum US group and individual long-term disability claims and for our Closed Block group and individual long-term care claims that have been reported. Under the tabular reserve methodology, reserves for reported claims are based on certain characteristics of the actual reported claimants, such as age, length of time disabled, and medical diagnosis, as well as assumptions regarding claim duration, discount rate, and policy benefit offsets. We believe the tabular reserve method is the most accurate to calculate long-term liabilities and allows us to use the most available known facts about each claim. IBNR claim reserves for our long-term products are calculated using the count and severity method using historical patterns of the claims to be reported and the associated claim costs. For Unum US group short-term disability products, an estimate of the value of future payments to be made on claims already submitted, as well as on IBNR claims, is
Interest and debt expense was lower in 2017 relative to 2016 due primarily to a lower level of outstanding debt offset partially by a higher overall rate of interest. Interest and debt expense was higher in 2016 relative to 2015 due primarily to higher levels of outstanding debt during 2016. See Note 8 of the "Notes to Consolidated Financial Statements" contained herein in Item 8 for further discussion.
Other expenses and compensation expense, on a combined basis, increased in each of the years presented above. The increase for 2017 was due primarily to a loss incurred from a guaranty fund assessment related to an unaffiliated insurer that was declared insolvent in the first quarter of 2017. Excluding the loss from a guaranty fund assessment, the year-over-year premium growth rates more than offset the growth rates in compensation and other expenses as we continue our focus on expense management and operating efficiencies, resulting in a decline in the other expense ratios relative to the prior years.
Benefits experience for the individual disability product line was less favorable compared to 2015 due primarily to a higher average claim size and lower claim recoveries. Benefits experience for voluntary benefits was generally consistent with 2015, with favorable experience in our disability and critical illness product lines offset somewhat by less favorable experience in our life product line. Benefits experience in the dental and vision product line since acquisition was consistent with expectations.
We had goodwill of £29.4 million, or $39.8 million, at December 31, 2017, none of which is currently believed to be at risk for future impairment.
We use derivative financial instruments primarily to manage reinvestment, duration, foreign currency, and credit risks. Historically, we have utilized current and forward interest rate swaps and options on forward interest rate swaps and U.S. Treasury rates, current and forward currency swaps, forward treasury locks, currency forward contracts, forward contracts on specific fixed income securities, and credit default swaps. Credit exposure on derivatives is limited to the value of those contracts in a net gain position, including accrued interest receivable less collateral held. At December 31, 2017, we had no credit exposure on derivatives. We held $15.7 million of cash collateral from our counterparties at December 31, 2017. The carrying value of fixed maturity securities posted as collateral to our counterparties was $46.4 million at December 31, 2017. We had no cash collateral posted to our counterparties at December 31, 2017. We believe that our credit risk is mitigated by our use of multiple counterparties, all of which have an investment-grade credit rating, and by our use of cross-collateralization agreements.
Unum Group and/or certain of its intermediate holding company subsidiaries may also receive dividends from our U.K. subsidiaries, the payment of which may be subject to applicable insurance company regulations and capital guidance in the U.K. Unum Limited is subject to the requirements of Solvency II, a European Union (EU) directive that became effective in 2016, which prescribes capital requirements and risk management standards for the European insurance industry. Our European holding company is also subject to the Solvency II requirements relevant to insurance holding companies, while its subsidiaries (the Unum European Economic Area (EEA) Group), which includes Unum Limited, are subject to group supervision under Solvency II. The Unum EEA Group received approval from the U.K. Prudential Regulation Authority to use its own internal model for calculating regulatory capital and also received approval for certain associated regulatory permissions including transitional relief as the Solvency II capital regime continues to be implemented. There are currently no indications that capital requirements for the Unum EEA Group will change as a result of the U.K. formally commencing the process to leave the EU, but economic conditions may in the near term cause volatility in our solvency ratios.
We made contributions of $66.4 million and £3.2 million to our U.S. and U.K. defined contribution plans, respectively, in 2017 and expect to make contributions of approximately $70 million and £3 million during 2018. We made a de minimis amount of contributions to our U.S. qualified defined benefit pension plan and no contribution to our U.K. defined benefit pension plan during 2017. We do not expect to make any contributions to either plan during 2018. We have met all minimum pension funding requirements set forth by the Employee Retirement Income Security Act. We have estimated our future funding requirements under the Pension Protection Act of 2006 and under applicable U.K. law and do not believe that any future funding requirements will cause a material adverse effect on our liquidity. See Note 9 of the "Notes to Consolidated Financial Statements" contained herein in Item 8 for further discussion of our employee benefit plans.
Northwind Holdings made principal payments on its floating rate, senior secured notes of $60.0 million, $64.0 million, and $74.4 million in 2017, 2016, and 2015, respectively.
Our investment policy permits us to lend fixed maturity securities to unaffiliated financial institutions in short-term securities lending agreements, which increases our investment income with minimal risk. We account for all of our securities lending agreements and repurchase agreements as secured borrowings. We had $30.5 million of securities lending agreements outstanding which were collateralized by cash at December 31, 2017 and were reported as payables for collateral on investments in our consolidated balance sheets. The cash received as collateral was reinvested in short-term investments. The average balance during the year ended December 31, 2017 was $28.7 million, and the maximum amount outstanding at any month end was $35.9 million. In addition, at December 31, 2017, we had $135.6 million of off-balance sheet securities lending agreements which were collateralized by securities that we were neither permitted to sell nor control. The average balance of these off-balance sheet transactions during the year ended December 31, 2017 was $167.2 million, and the maximum amount outstanding at any month end was $201.6 million.
AM Best, Fitch, Moody's and S&P affirmed their ratings for our domestic insurance subsidiaries and issuer credit rating for Unum Group during 2017. On April 7, 2017, AM Best upgraded its rating of Unum Insurance Company to A- from B++, reflecting additional capital support from Unum Group and the launch of additional accident and health insurance products. There have been no other changes in any of the rating agencies' outlook statements or ratings during 2017 or in 2018 prior to the date of this filing.
At December 31, 2017, the fair value of investment-grade fixed maturity securities was $42,093.5 million, with a gross unrealized gain of $5,628.1 million and a gross unrealized loss of $66.5 million. The gross unrealized loss on investment-grade fixed maturity securities was 53.8 percent of the total gross unrealized loss on fixed maturity securities. Unrealized losses on investment-grade fixed maturity securities principally relate to changes in interest rates or changes in market or sector credit spreads which occurred subsequent to the acquisition of the securities.
As of December 31, 2017, we held 226 individual investment-grade fixed maturity securities and 47 individual below-investment-grade fixed maturity securities that were in an unrealized loss position, of which 134 investment-grade fixed maturity securities and 21 below-investment-grade fixed maturity securities had been in an unrealized loss position continuously for over one year.
The majority of our derivative instruments contain provisions that require us to maintain specified issuer credit ratings and financial strength ratings. Should our ratings fall below these specified levels, we would be in violation of the provisions, and our derivatives counterparties could terminate our contracts and request immediate payment. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position was $52.2 million and $52.8 million at December 31, 2017 and 2016, respectively.
For the years ended December 31, 2017, 2016, and 2015, there was no material ineffectiveness related to our fair value hedges, and no component of the derivative instruments' gain or loss was excluded from the assessment of hedge effectiveness. There were no instances wherein we discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.
Unum US group life, $8.1 million for Unum US voluntary life, and $12.4 million for Colonial Life voluntary life, for a total reserve increase of $39.0 million before tax. The reserves established were attributed to prior years incurred claims, thereby impacting the results shown in the preceding chart.
Interest paid on long-term and short-term debt and related securities during 2017, 2016, and 2015 was $154.4 million, $153.6 million, and $146.9 million, respectively.
The intrinsic value of options exercised and fair value of options vested are as follows:
Fairwind, which is domiciled in the State of Vermont, is required to follow GAAP in accordance with Vermont reporting requirements for pure captive insurance companies, unless the commissioner permits the use of some other basis of accounting. Fairwind has permission from Vermont to follow accounting practices that are generally consistent with current NAIC statutory accounting principles for its insurance reserves and invested assets supporting reserves. All other assets and liabilities are accounted for in accordance with GAAP, as prescribed by Vermont, which allows for the full recognition of deferred tax assets which are more likely than not to be realized. Statutory accounting principles have a stricter limitation for the recognition of deferred tax assets. The impact of following the prescribed and permitted practices of Vermont rather than statutory accounting principles prescribed by the NAIC resulted in higher capital and surplus for Fairwind of approximately $142 million and $213 million as of December 31, 2017 and 2016, respectively. The enactment of TCJA, which required the revaluation of the deferred tax asset at the new corporate rate of 21 percent, was the primary driver in the decline in the operating results and capital and surplus for Fairwind in 2017 compared to 2016. Northwind Re has no material state prescribed accounting practices that differ from statutory accounting principles prescribed by the NAIC.
Risk-based capital (RBC) standards for U.S. life insurance companies are prescribed by the NAIC. The domiciliary states of our U.S. insurance subsidiaries have all adopted a version of the RBC model formula of the NAIC, which prescribes a system for assessing the adequacy of statutory capital and surplus for all life and health insurers. The basis of the system is a risk-based formula that applies prescribed factors to the various risk elements in a life and health insurer's business to report a minimum capital requirement proportional to the amount of risk assumed by the insurer. The life and health RBC formula is designed to measure annually (i) the risk of loss from asset defaults and asset value fluctuations, (ii) the risk of loss from adverse mortality and morbidity experience, (iii) the risk of loss from mismatching of asset and liability cash flow due to changing interest rates, and (iv) business risks. The formula is used as an early warning tool to identify companies that are potentially inadequately capitalized. State insurance laws grant insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. The impacts of the TCJA, in particular the reduction of our admitted deferred tax assets due to the decrease in the U.S. corporate tax rate, have generally reduced our RBC ratios, however, the total adjusted capital of each of our U.S. insurance subsidiaries at December 31, 2017 is in excess of those RBC levels.
See Notes 6, 7, and 14 for further discussion of the above items.