Our corporate headquarters and Standard Commercial P&C operating unit are located at 777 Main Street, Suite 1000, Fort Worth, Texas. The suite is located in a high-rise office building and contains 27,808 square feet of space. The rent is currently $52,140 per month pursuant to a lease which expires June 30, 2022.
Our insurance activities are organized by operating units into the following reportable segments:
The method followed in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value. A premium deficiency exists if the sum of expected claim costs and claim adjustment expenses, unamortized acquisition costs, and maintenance costs exceeds related unearned premiums and expected investment income on those unearned premiums, as computed on a product line basis. We routinely evaluate the realizability of deferred policy acquisition costs. At December 31, 2017 and 2016, there was no premium deficiency related to deferred policy acquisition costs.
The range of unpaid losses and LAE estimated by our actuary as of December 31, 2017 was $427.1 million to $547.4 million. Our best estimate of unpaid losses and LAE as of December 31, 2017 is $527.1 million. Our carried reserve for unpaid losses and LAE as of December 31, 2017 is comprised of $268.9 million in case reserves and $258.2 million in incurred but not reported reserves. In setting this estimate of unpaid losses and LAE, we have assumed, among other things, that current trends in loss frequency and severity will continue and that the actuarial analysis was empirically valid. We have established a best estimate of unpaid losses and LAE which is $39.9 million higher than the midpoint, or 96.3% of the high end, of the actuarial range at December 31, 2017 as compared to $36.8 million above the midpoint, or 96.6% of the high end, of the actuarial range at December 31, 2016. We expect our best estimate to move within the actuarial range from year to year due to changes in our operations and changes within the marketplace. Due to the inherent uncertainty in reserve estimates, there can be no assurance that the actual losses ultimately experienced will fall within the actuarial range. However, because of the breadth of the actuarial range, we believe that it is reasonably likely that actual losses will fall within such range.
Through 2008, all business of our Contract Binding operating unit was produced under a fronting agreement with member companies of the Republic Group (“Republic”), which granted our Contract Binding operating unit the authority to develop underwriting programs, set rates, appoint retail and general agents, underwrite risks, issue policies and adjust and pay claims. We assumed 70% of the risk under this arrangement in 2008. In 2009, our Contract Binding operating unit wrote a portion of its policies under a fronting arrangement with Republic pursuant to which we assumed 100% of the risk. Our Contract Binding operating unit earns a commission based on a percentage of the earned premium it produced for Republic which was not assumed by AHIC. The commission percentage is determined by the underwriting results of the policies produced.
The following table details the profit sharing commission revenue sensitivity of the Contract Binding operating unit for each effective quota share treaty at 5.0% above and below the current estimate, which we believe is a reasonably likely range of variance ($ in thousands).
The following is additional business segment information for the years ended December 31, 2017 and 2016 (in thousands):
1 The net loss ratio is calculated as incurred losses and LAE divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. Net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio.
Gross premiums written for the Specialty Commercial Segment were $464.7 million for the year ended December 31, 2017, which was $75.8 million, or 19%, more than the $388.9 million reported for the same period in 2016. Net premiums written were $265.0 million for the year ended December 31, 2017 as compared to $249.1 million reported for the same period in 2016. The increase in gross and net premiums written was due to increased premium production in our Specialty Commercial operating unit.
The $277.9 million of total revenue for the year ended December 31, 2017 was $22.0 million higher than the $255.9 million reported for 2016. This increase in revenue was due to higher net premiums earned of $17.2 million due predominately to increased earned premium in both our Specialty Commercial and Contract Binding operating units. Further contributing to this increased revenue was higher net investment income of $3.8 million, higher commission and fees of $1.0 million and higher other income of $0.1 million, partially offset by lower finance charges of $0.1 million.
Pre-tax income for the Specialty Commercial Segment of $2.0 million for the year ended December 31, 2017 was $22.4 million lower than the $24.4 million reported for the same period in 2016. This decrease in pre-tax income was primarily due to higher loss and LAE expenses of $43.9 million and higher operating expense of $0.5 million, partially offset by the increased revenue discussed above.
The Specialty Commercial Segment reported a net loss ratio of 82.2% for the year ended December 31, 2017 as compared to 69.9% for the same period during 2016. The gross loss ratio before reinsurance was 76.5% for the year ended December 31, 2017 as compared to 67.3% for the same period in 2016. The higher gross and net loss ratios for the year ended December 31, 2017 were primarily the result of $40.5 million unfavorable prior year net loss reserve development recognized for the year ended December 31, 2017 as compared to $12.5 million unfavorable prior year net loss reserve development for the same period of 2016, as well as higher current accident year loss trends driven mostly by our commercial auto line of business and increased net catastrophe losses. The net unfavorable prior year development for 2017 was primarily driven by the continued emergence of increased frequency and severity trends for 2016 and prior accident years in the primary commercial auto lines of business of our Contract Binding operating unit. Our Specialty Commercial operating unit experienced net unfavorable development in general aviation primarily in the 2016, 2013 and 2010 and prior accident years, commercial excess liability primarily in the 2013 accident year and specialty risk programs primarily in the 2015 and prior accident years, partially offset by net favorable development in the medical professional liability and primary/excess commercial property lines of business primarily in the 2016 accident years. The Specialty Commercial Segment reported $3.8 million of net catastrophe losses during the year ended December 31, 2017, of which $1.3 million was attributable to Hurricane Harvey, as compared to $1.6 million of net catastrophe losses during the same period of 2016. The Specialty Commercial Segment reported a net expense ratio of 23.7% during the year ended December 31, 2017 as compared to 25.3% for the same period of 2016. The decrease in the expense ratio was due predominately to the impact of higher net premiums earned as well as increased ceding commission in our Specialty Commercial operating unit.
Gross premiums written for the Standard Commercial Segment were $78.2 million for the year ended December 31, 2017, which was $1.3 million, or 2%, more than the $76.9 million reported for the same period in 2016. The gross premiums written for the Standard Commercial P&C operating unit increased $6.8 million, offset by a decrease of $5.0 million due to the discontinued marketing of new and renewal occupational accident policies and a $0.5 million decrease in gross premiums written due to the discontinued marketing of workers compensation policies. Net premiums written were $69.3 million for the year ended December 31, 2017 as compared to $68.5 million reported for the same period in 2016. The net premiums written include a $5.6 million increase in our Standard Commercial P&C operating unit for the year ended December 31, 2017 as compared to the same period during 2016, offset by a decrease in premium volume of $4.8 million due to the discontinued marketing of new and renewal occupational accident policies. The net premiums written in our Standard Commercial P&C Operating unit includes the impact of $0.7 million of ceded reinstatement premium attributable to Hurricane Harvey.
Total revenue for the Standard Commercial Segment of $70.3 million for the year ended December 31, 2017 was $1.7 million less than the $72.0 million reported during the year ended December 31, 2016. This 2% decrease in total revenue was mostly due to a $1.3 million decrease in net premiums earned primarily as a result of a $4.8 million decrease in net premiums earned due to the discontinued marketing of new and renewal occupational accident policies, partially offset by $3.5 million higher net premiums earned in our Standard Commercial P&C operating unit due to increased premium production, which includes the impact of $0.7 million of ceded reinstatement premium attributable to Hurricane Harvey. Further contributing to the decrease in revenue was lower commission and fees of $0.8 million, partially offset by higher net investment income of $0.4 million for the year ended December 31, 2017 as compared to the same period in 2016.
Gross premiums written for the Personal Segment were $61.2 million for the year ended December 31, 2017, which was $22.1 million less than the $83.3 million reported for the same period in 2016. Net premiums written for our Personal Segment were $31.3 million for the year ended December 31, 2017, which was a decrease of $13.0 million from the $44.3 million reported for the same period of 2016. The decline in gross and net written premiums was primarily due to the intentional reduction in certain underperforming portions of this business to address loss ratio performance.
Total revenue for the Personal Segment decreased 19% to $40.4 million for the year ended December 31, 2017 from $49.8 million for the same period during 2016. The decrease in revenue was primarily due to lower net premiums earned of $8.2 million as a result of lower net premium volume discussed above, lower finance charges of $1.1 million and lower net investment income of $0.1 million.
The Personal Segment reported a net loss ratio of 84.0% for the year ended December 31, 2017 as compared to 98.7% for the same period of 2016. The gross loss ratio before reinsurance was 80.1% for the year ended December 31, 2017 as compared to 94.8% for the same period in 2016. The lower gross and net loss ratios were primarily the result of lower unfavorable prior year net loss reserve development of $0.6 million for the year ended December 31, 2017 as compared to unfavorable development of $5.0 million for the same period in the prior year, as well as lower current accident year loss trends. During 2017, net unfavorable development in our Specialty Personal Lines operating unit was mostly attributable to the 2016, 2014, 2013 and 2010 and prior accident years, partially offset by favorable development in the 2015 and 2011 accident years. The Personal Segment reported $0.3 million of net catastrophe losses for the year ended December 31, 2017, of which $0.1 million was attributable to Hurricane Harvey, as compared to $1.0 million of net catastrophe losses during the same period of 2016. The Personal Segment reported a net expense ratio of 29.3% for the year ended December 31, 2017 as compared to 21.5% for the same period of 2016. The increase in the expense ratio was due predominately to lower finance charges and lower net premiums earned.
Total revenue for Corporate decreased by $1.5 million for the year ended December 31, 2017 as compared to the same period the prior year. This decrease in total revenue was due to lower net investment income of $1.6 million, and higher other-than-temporary impairments of the investment portfolio of $3.0 million, partially offset by a $3.2 million increase in net realized gains recognized on our investment portfolio for the year ended December 31, 2017 as compared to the same period of 2016.
Management overview. During fiscal 2016, our total revenues were $376.0 million, which was $3.6 million more than the $372.4 million in total revenues for fiscal 2015. During the year ended December 31, 2016, our income before tax was $8.5 million as compared to $31.9 million during the same period of 2015.
The decrease in income before tax for the year ended December 31, 2016 was due primarily to increased loss and LAE of $23.5 million, higher operating expenses of $2.8 million and higher interest expense of $0.6 million, partially offset by the increased revenue discussed above. The increase in loss and LAE was primarily the result of unfavorable net prior year loss reserve development and higher current accident year loss trends in our Specialty Commercial Segment and Personal Segment, partially offset by higher favorable net prior year loss reserve development in our Standard Commercial Segment. During the twelve months ended December 31, 2016, we recorded unfavorable prior year net loss reserve development of $7.6 million as compared to $7.0 million of favorable prior year net loss reserve development for the same period of 2015. We incurred an aggregate of $11.0 million of net catastrophe losses during the year ended December 31, 2016 as compared to $9.3 million for the same period the prior year. Other operating expenses increased during the year ended December 31, 2016 primarily as the result of increased salary and related expenses in our Specialty Commercial Segment and a $1.8 million payment to settle the earn-out related to the previous acquisition of TBIC accrued during the second quarter of 2016, partially offset by lower production related expenses predominately in our Specialty Commercial Segment. The increase in interest expense was due to interest on our Facility B revolving credit facility entered into during the fourth quarter of 2015.
We reported net income of $6.5 million for the year ended December 31, 2016, as compared to net income of $21.9 million for the year ended December 31, 2015. On a diluted per share basis, net income was $0.34 per share for fiscal 2016 as compared to net income of $1.13 per share for fiscal 2015.
The net loss ratio for the year ended December 31, 2016 was 61.0% as compared to the 64.8% reported for the year ended December 31, 2015. The gross loss ratio before reinsurance was 59.6% for the year ended December 31, 2016 as compared to 63.4% for the prior year. The lower gross and net loss ratios resulted primarily from lower premium volume, lower current accident year non-catastrophe loss trends and increased favorable net loss reserve development partially offset by higher current accident year catastrophe losses. The net loss ratios for the year ended December 31, 2016 include $8.4 million of catastrophe related losses. The net loss ratios for the year ended December 31, 2015 include $7.8 million of catastrophe related losses. During the year ended December 31, 2016 and 2015, the Standard Commercial Segment reported favorable prior year net loss reserve development of $9.9 million and $7.4 million, respectively. During 2016, our Standard Commercial P&C operating unit experienced net favorable development primarily in the general liability line of business in the 2011-2015 accident years and the 2009 and prior accident years, partially offset by net unfavorable development in the occupational accident line of business in the 2014 and 2015 accident years. Our Workers Compensation operating unit experienced net favorable development in the 2015 and prior accident years. The Standard Commercial Segment reported a net expense ratio of 33.0% for the year ended December 31, 2016 as compared to 32.6% for the same period of 2015. The increase in the expense ratio was primarily due to the runoff of our Workers Compensation operating unit and the discontinued marketing of new and renewal occupational accident policies during 2016.
Gross premiums written for the Personal Segment were $83.3 million for the year ended December 31, 2016, which was $2.0 million more than the $81.3 million reported for the same period in 2015. Net premiums written for our Personal Segment were $44.3 million for the year ended December 31, 2016, which was an increase of $0.2 million from the $44.1 million reported for the same period of 2015.
The Personal Segment reported a net loss ratio of 98.7% for the year ended December 31, 2016 as compared to 88.6% for the same period in 2015. The gross loss ratio before reinsurance was 94.8% for the year ended December 31, 2016 as compared to 80.8% for the same period in 2015. The higher gross and net loss ratios were primarily the result of unfavorable prior year net loss reserve development of $5.0 million for the year ended December 31, 2016 as compared to unfavorable prior year net loss reserve development of $2.6 million for the same period of 2015, as well as higher current accident year loss trends. During 2016, our Specialty Personal Lines operating unit experienced net unfavorable development attributable to the 2015 and prior accident years in the private passenger auto liability line of business. The increase in operating expenses of $1.2 million was the combined result of $0.4 million increase in other operating expenses driven by our investment in technology, a $0.3 million increase in production related expenses, a $0.4 million increase in salary and related expenses and a $0.1 million increase in professional service fees and occupancy expenses. The Personal Segment reported a net expense ratio of 21.5% for the year ended December 31, 2016 as compared to 19.0% for the same period of 2015.
AHIC and TBIC, domiciled in Texas, are limited in the payment of dividends to their stockholders in any 12-month period, without the prior written consent of the Texas Department of Insurance, to the greater of statutory net income for the prior calendar year or 10% of statutory policyholders’ surplus as of the prior year end. HIC and HNIC, both domiciled in Arizona, are limited in the payment of dividends to the lesser of 10% of prior year policyholders’ surplus or prior year's net investment income, without prior written approval from the Arizona Department of Insurance. HSIC, domiciled in Oklahoma, is limited in the payment of dividends to the greater of 10% of prior year policyholders’ surplus or prior year’s statutory net income, not including realized capital gains, without prior written approval from the Oklahoma Insurance Department. For all our insurance companies, dividends may only be paid from unassigned surplus funds. During 2018, the aggregate ordinary dividend capacity of these subsidiaries is $27.6 million, of which $19.7 million is available to Hallmark. As a county mutual, dividends from HCM are payable to policyholders. During the years ended December 31, 2017 and 2016 our insurance company subsidiaries paid $11.4 million and $10.5 million, respectively, in dividends to Hallmark.
The state insurance departments also regulate financial transactions between our insurance subsidiaries and their affiliated companies. Applicable regulations require approval of management fees, expense sharing contracts and similar transactions. During 2017 our insurance subsidiaries did not pay management fees to Hallmark or our non-insurance company subsidiaries. The net amount paid in management fees by our insurance subsidiaries to Hallmark and our non-insurance company subsidiaries was $1.1 million and $1.3 million during 2016 and 2015, respectively.
We may use Facility B loan proceeds solely for the purpose of making capital contributions to AHIC and HIC. As amended, we may borrow, repay and reborrow under Facility B until December 17, 2019, at which time all amounts outstanding under Facility B are converted to a term loan. Through December 17, 2019, we pay Frost a quarterly fee of 0.25% per annum of the average daily unused balance of Facility B. Facility B bears interest at a rate equal to the prime rate or LIBOR plus 3.00%, at our election. Until December 17, 2019, interest only on amounts from time to time outstanding under Facility B are payable quarterly. Any amounts outstanding on Facility B as of December 17, 2019 are converted to a term loan payable in quarterly installments over five years based on a seven year amortization of principal plus accrued interest. All remaining principal and accrued interest on Facility B become due and payable on December 17, 2024. As of December 31, 2017, we had $30.0 million outstanding under Facility B.
Set forth below is a summary of long-term contractual obligations as of December 31, 2017. Amounts represent estimates of gross undiscounted amounts payable over time. In addition, certain unpaid losses and LAE are ceded to others under reinsurance contracts and are, therefore, recoverable. Such potential recoverables are not reflected in the table.