Everest Re's corporate offices are located in approximately 230,500 square feet of leased office space in Liberty Corner, New Jersey. Bermuda Re's corporate offices are located in approximately 5,800 total square feet of leased office space in Hamilton, Bermuda. The Company's other 26 locations occupy a total of approximately 208,850 square feet, all of which are leased. Management believes that the above-described office space is adequate for its current and anticipated needs.
Rates tend to fluctuate by specific region and products, particularly areas recently impacted by large catastrophic events. There was an unprecedented series of catastrophes in the third quarter of 2017 with Hurricanes Harvey, Irma and Maria, as well as a significant earthquake in Mexico City. Additional catastrophe events occurred in the fourth quarter of 2017 with the wild fires in California and Hurricanes Nate and Ophelia. The total industry losses for all of these events could exceed $100 billion. This is the second consecutive year with higher than average catastrophe losses. During 2016, catastrophe losses included the Fort McMurray Canadian wildfire, Hurricane Matthew which affected a large area of the Caribbean and southeastern United States, storms and an earthquake in Ecuador. There are industry reports that the catastrophe losses for 2016 reached their highest level in four years and the United States experienced the most loss events since 1980 and the highest total losses since 2012. While the future impact on market conditions from these catastrophes cannot be determined at this time, there was some firming in the markets impacted by the 2016 catastrophes and as catastrophe losses increased in 2017, there is a growing industry consensus that there will be a general firming of the (re)insurance markets resulting in rate increases, not only for catastrophe exposures, but also potentially for most other lines of business.
We monitor and evaluate our overall performance based upon financial results. The following table displays a summary of the consolidated net income (loss), ratios and shareholders' equity for the periods indicated.
Premiums. Gross written premiums increased by 18.9% to $7,173.9 million in 2017, compared to $6,033.9 million in 2016, reflecting a $867.8 million, or 20.4%, increase in our reinsurance business and a $272.2 million, or 15.2%, increase in our insurance business. The increase in reinsurance premiums was mainly due to new crop reinsurance transactions, increases in treaty property and financial lines of business and the influx of reinstatement premiums related to multiple catastrophe events in the third quarter. The rise in insurance premiums was primarily due to increases in many lines of business, including property, retail casualty, accident and health and business written through the Lloyd's Syndicate, partially offset by the impact of the sale of Heartland. Net written premiums increased by 18.5% to $6,244.7 million in 2017, compared to $5,270.9 million in 2016. These changes are consistent with the changes in gross written premiums. Premiums earned increased by 11.6% to $5,937.8 million in 2017, compared to $5,320.5 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.
Gross written premiums increased by 2.4% to $6,033.9 million in 2016, compared to $5,891.7 million in 2015, reflecting a $254.7 million, or 16.6%, increase in our insurance business, partially offset by a $112.6 million, or 2.6%, decrease in our reinsurance business. The rise in insurance premiums was primarily due to increases in most lines of business, as we have focused on expanding the insurance operations. The decline in reinsurance premiums was mainly due to a decrease in treaty property business, a decline in international premiums related to quota share agreements and a negative impact of $74.0 million from the year over year movement in foreign exchange rates. Net written premiums increased by 1.7% to $5,270.9 million in 2016, compared to $5,182.3 million in 2015. The changes are consistent with the changes in gross written premiums. Premiums earned increased by 0.5% to $5,320.5 million in 2016, compared to $5,292.8 million in 2015. 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.
Net investment income decreased by 0.1% to $473.1 million in 2016 compared with investment income of $473.5 million in 2015. Net pre-tax investment income, as a percentage of average invested assets, was 2.8% in 2016, compared to 2.9% in 2015. The slight decline in income and yield was primarily the result of lower reinvestment rates for the fixed income portfolios and lower dividends from equity securities, partially offset by higher income from our limited partnerships.
Other Income (Expense). We recorded other expense of $35.4 million and $10.6 million in 2017 and 2016, respectively, and we recorded other income of $88.3 million in 2015. The changes were primarily the result of fluctuations in foreign currency exchange rates and other income related to Mt. Logan Re for the corresponding periods. We incurred foreign currency exchange expense of $25.5 million, $21.2 million in 2017 and 2016, respectively and foreign currency exchange income of $61.5 million in 2015. The increase in expenses in 2017 mainly related to the impact on loss reserves from the strengthening of various currencies against the U.S. dollar. The foreign exchange losses in 2016 were primarily generated from our United Kingdom operations as a result of the decline in the Great British Pound (Sterling) in relation to other major currencies resulting from the United Kingdom vote to leave the European Union. Although we have foreign currency investments to mitigate the impact of foreign exchange movements, the offsetting foreign exchange impacts on the investments is reflected through Other Comprehensive Income.
Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by 9.7% to $1,304.0 million for the year ended December 31, 2017 compared to $1,188.7 million for the year ended December 31, 2016. The change was primarily due to the impact of the increases in premiums earned and changes in the mix of business.
Other Underwriting Expenses. Other underwriting expenses were $318.8 million, $302.7 million and $257.1 million in 2017, 2016 and 2015, respectively. The increase in other underwriting expenses for 2017 compared to 2016 was mainly due to the impact of the increase in premiums earned and costs incurred to support the continued expansion of the insurance business. The increase in other underwriting expenses for 2016 compared to 2015 was mainly due to costs incurred related to the expansion of the insurance business.
Income Tax Expense (Benefit). We had an income tax benefit of $63.8 million in 2017, which includes $8.2 million of tax expense related to the enactment of the TCJA, and income tax expenses of $103.5 million and $134.0 million for December 31, 2016 and 2015, respectively. Income tax expense is primarily a function of the geographic location of the Company's pre-tax income and the statutory tax rates in those jurisdictions, as affected by tax-exempt investment income and foreign tax credits. Variations in taxes generally result from changes in the relative levels of pre-tax income, including the impact of catastrophe losses and net capital gains (losses), among jurisdictions with different tax rates. The change in income tax expense (benefit) for 2017 compared to 2016 was primarily due to the significant catastrophe losses incurred in 2017.
Net investment income decreased by 0.1% to $473.1 million in 2016 compared to $473.5 million in 2015, primarily due to a decline in income from our fixed maturities, reflective of lower reinvestment rates and a decline in dividend income from equity securities, partially offset by an increase in limited partnership income.
with ceding companies from its Bermuda office and reinsurance to the United Kingdom and European markets through its UK branch and Ireland Re. The Insurance operation writes property and casualty insurance directly and through brokers, surplus lines brokers and general agents within the U.S., Canada and Europe.
Underwriting results include earned premium less losses and loss adjustment expenses ("LAE") incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which, respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned.
The following discusses the underwriting results for each of our segments for the periods indicated.
Gross written premiums decreased by 1.0% to $2,125.8 million in 2016 from $2,147.9 million in 2015, primarily due to a decrease in treaty property business, partially offset by an increase in treaty casualty business. Net written premiums increased by 6.2% to $1,970.6 million in 2016 compared to $1,855.9 million in 2015. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the assumption of the crop business due to the sale of Heartland and a concurrent new crop reinsurance contract. Premiums earned increased 6.1% to $2,072.2 million in 2016, compared to $1,952.7 million in 2015. The change in premiums earned relative to net written premiums is primarily the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Incurred losses increased by 52.8% to $1,632.8 million in 2017, compared to $1,068.5 million in 2016, primarily due to an increase of $581.6 million in current year catastrophe losses, partially offset by $39.1 million of more favorable development on prior years attritional losses in 2017 compared to 2016. The $165.5 million of favorable development on prior years attritional losses in 2017 was mainly related to property and short tail business. The $715.7 million of current year catastrophe losses in 2017 related to Hurricane Irma ($331.8 million), Hurricane Harvey ($204.3 million), the Northern California wildfires ($132.9 million), Hurricane Maria ($31.2 million), the Southern California wildfires ($9.6 million), and the 2017 US Midwest storms ($6.9 million). The $134.1 million of current year catastrophe losses in 2016 related to Hurricane Matthew ($86.2 million), the 2016 U.S. storms ($20.4 million), 2016 Tennessee wildfire ($14.7 million) and Hurricane Hermine ($13.5 million).
Segment Expenses. Commission and brokerage expenses decreased by 0.7% to $462.5 million in 2017 compared to $466.0 million in 2016. The decrease is mainly due to the impact of the new crop reinsurance contract which generally has a lower expense ratio and other changes in the mix of business. Segment other underwriting expenses increased slightly to $55.9 million in 2017 from $54.1 million in 2016.
Commission and brokerage expenses decreased by 5.5% to $466.0 million in 2016 compared to $493.3 million in 2015. The decrease is mainly due to the impact of the new crop reinsurance contract effective upon the sale of Heartland, the impact of quota share contracts and changes in the mix of business. Segment other underwriting expenses increased to $54.1 million in 2016 from $50.1 million in 2015. The increase was primarily due to the impact of changes in the mix of business and higher compensation costs.
Incurred losses and LAE increased by 117.8% to $1,059.6 million in 2017 compared to $486.6 million in 2016, primarily due to an increase of $277.5 million in current year catastrophe losses, favorable development of $224.8 million on prior years attritional losses in 2016 mainly related to property business which did not recur in 2017 and favorable development of $43.7 million on prior years catastrophe losses in 2016 which did not recur in 2017. The $456.3 million of current year catastrophe losses in 2017 related to Hurricane Maria ($263.2 million), Hurricane Irma ($107.6 million), the Mexico City earthquake ($25.6 million), the South Africa Knysna fires ($24.0 million), Cyclone Debbie in Australia ($17.1 million), the Peru storms ($15.2 million) and Hurricane Harvey ($3.7 million). The $178.8 million of current year catastrophe losses in 2016 were due to the Fort McMurray Canada wildfire ($97.5 million), Hurricane Matthew ($27.4 million), the Ecuador earthquake ($23.6 million), the 2016 Taiwan earthquake ($15.2 million) and the New Zealand earthquake ($14.0 million).
Segment Expenses. Commission and brokerage increased by 1.5% to $287.7 million in 2017 compared to $283.4 million in 2016. Segment other underwriting expenses increased to $38.8 million in 2017 compared to $35.5 million in 2016. The increases were mainly due to the impact of the increase in premiums earned.
Premiums. Gross written premiums increased by 35.3% to $1,205.0 million in 2017 compared to $890.4 million in 2016, primarily due to increased casualty and financial lines of business written through the Bermuda office and increased production from the U.K. and Ireland offices, partially offset by a negative impact of $6.5 million from the movement of foreign exchange rates. Net written premiums increased by 36.9% to $1,139.1 million in 2017 compared to $831.9 million in 2016, which is consistent with the change in gross written premiums. Premiums earned increased 30.5% to $1,093.3 million in 2017 compared to $838.0 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.
Incurred losses and LAE increased by 59.2% to $735.3 million in 2017 compared to $461.9 million in 2016, primarily due to an increase of $150.0 million in current year attritional losses related primarily to the impact of the increase in premiums earned and an increase of $134.4 million in current year catastrophe losses. The $159.9 million of current year catastrophe losses in 2017 primarily related to Hurricane Maria ($53.4 million), Hurricane Irma ($43.6 million), Hurricane Harvey ($40.7 million), the Northern California wildfires ($14.0 million), the Mexico City earthquake ($4.9 million) and Cyclone Debbie in Australia ($3.3 million). The $25.5 million of current year catastrophe losses in 2016 were due to Hurricane Matthew ($10.3 million), the Fort McMurray Canada wildfire ($10.0 million) and the 2016 New Zealand earthquake ($5.0 million).
Incurred losses and LAE increased by 1.2% to $461.9 million in 2016 compared to $456.4 million in 2015, primarily due to an increase of $25.5 million in current year catastrophe losses, partially offset by a decrease of $24.3 million in current year attritional losses mainly related to changes in the mix of business and the higher losses in 2015 due to the explosion at the Chinese port of Tianjin. The $25.5 million of current year catastrophe losses in 2016 are outlined above. There were no current year catastrophe losses in 2015.
Commission and brokerage increased by 8.3% to $234.0 million in 2016 compared to $216.0 million in 2015. The increase was mainly due to the impact of the increase in premiums earned and changes in the mix of business. Segment other underwriting expenses increased slightly to $36.3 million in 2016 compared to $36.0 million in 2015.
Premiums. 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.
Incurred losses and LAE decreased by 2.5% to $1,094.9 million in 2017 compared to $1,122.7 million in 2016, mainly due to $230.0 million of more favorable development on prior years attritional losses in 2017 compared to 2016, partially offset by an increase of $121.2 million in current year catastrophe losses and an increase of $79.4 million in current year attritional losses, primarily related to the increase in premiums earned. The $56.4 million of favorable development on prior years attritional losses in 2017 mainly related to workers compensation business. The $170.6 million of current year catastrophe losses in 2017 were due to Hurricane Irma ($75.1 million), Hurricane Harvey ($68.0 million), Hurricane Maria ($14.0 million), the 2017 US Midwest storms ($6.0 million), the Northern California wildfires ($3.0 million), the Southern California wildfires ($2.0 million), the Mexico City earthquake ($1.4 million) and Cyclone Debbie in Australia ($1.1 million). The $49.4 million of current year catastrophe losses in 2016 were due to the 2016 U.S. storms ($30.0 million), Hurricane Matthew ($11.0 million) and the Fort McMurray Canada wildfire ($8.4 million).
Incurred losses and LAE increased by 8.7% to $1,122.7 million in 2016 compared to $1,033.3 million in 2015 mainly due to an increase of $49.4 million in current year catastrophe losses, an increase of $21.5 million in prior years' attritional losses mainly related to run-off construction liability and umbrella program business and an increase of $18.7 million in current year attritional losses primarily related to the impact of the increase in premiums earned. The $49.4 million of current year catastrophe losses in 2016 are outlined above. There were no current year catastrophe losses in 2015.
Loss and LAE Reserves. Our most critical accounting policy is the determination of our loss and LAE reserves. We maintain reserves equal to our estimated ultimate liability for losses and LAE for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are based on estimates of ultimate losses and LAE by underwriting or accident year, we use a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves whenever an adjustment appears warranted. We consider many factors when setting reserves including: (1) our exposure base and projected ultimate premiums earned; (2) our expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies which analyze our loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss payments and product mix; (4) current legal interpretations of coverage and liability; (5) economic conditions; and (6) uncertainties discussed below regarding our liability for A&E claims. Our insurance and reinsurance loss and LAE reserves represent management's best estimate of our ultimate liability. Actual losses and LAE ultimately paid may deviate, perhaps substantially, from such reserves. Our net income (loss) will be impacted in a period in which the change in estimated ultimate losses and LAE is recorded. See also ITEM 8, "Financial Statements and Supplementary Data" - Note 1 of Notes to the Consolidated Financial Statements.
Investment Valuation. Our fixed income investments are classified for accounting purposes as available for sale and are carried at market value or fair value in our consolidated balance sheets. Our equity securities are also held as available for sale and are carried at market or fair value. Most securities we own are traded on national exchanges where market values are readily available. Some of our commercial mortgage-backed securities ("CMBS") are valued using cash flow models and risk-adjusted discount rates. We hold some privately placed securities, less than 1.5% of the portfolio, that are either valued by brokers or an investment advisor. In most instances, values provided by an investment advisor are supported with opinions from qualified independent third parties. In limited circumstances when broker prices are not available for a private placement, we will value the securities using comparable market information. At December 31, 2017 and 2016, our investment portfolio included $1,074.6 million and $917.0 million, respectively, of limited partnership investments whose values are reported pursuant to the equity method of accounting. We carry these investments at values provided by the managements of the limited partnerships and due to inherent reporting lags, the carrying values are based on values with "as of" dates from one month to one quarter prior to our financial statement date.
At December 31, 2017, we had net unrealized gains, net of tax, of $44.3 million compared to $115.6 million at December 31, 2016. Gains and losses from market fluctuations for investments held at market value are reflected as comprehensive income (loss) in the consolidated balance sheets. Gains and losses from market fluctuations for investments held at fair value are reflected as net realized capital gains and losses in the consolidated statements of operations and comprehensive income (loss). Market value declines for the fixed income portfolio, which are considered credit other-than-temporary impairments, are reflected in our consolidated statements of operations and comprehensive income (loss), as realized capital losses. We consider many factors when determining whether a market value decline is other-than-temporary, including: (1) we have no intent to sell and, more likely than not, will not be required to sell prior to recovery, (2) the length of time the market value has been below book value, (3) the credit strength of the issuer, (4) the issuer's market sector, (5) the length of time to maturity and (6) for asset-backed securities, changes in prepayments, credit enhancements and underlying default rates. If management's assessments change in the future, we may ultimately record a realized loss after management originally concluded that the decline in value was temporary. See also ITEM 8, "Financial Statements and Supplementary Data" - Note 1 of Notes to the Consolidated Financial Statements.
Cash and Invested Assets. Aggregate invested assets, including cash and short-term investments, were $18,626.5 million at December 31, 2017, an increase of $1,143.4 million compared to $17,483.1 million at December 31, 2016. This increase was primarily the result of $1,162.7 million of cash flows from operations, $242.0 million due to fluctuations in foreign currencies, $82.7 million in equity adjustments of our limited partnership investments and $49.3 million in fair value re-measurements, partially offset by $207.2 million paid out in dividends to shareholders, $94.8 million of pre-tax unrealized depreciation, $45.9 million of amortization bond premium, $30.2 million of unsettled securities and $7.1 million of other-than-temporary impairments.
Reinsurance receivables for both paid and recoverable on unpaid losses totaled $1,348.2 million at December 31, 2017 and $1,018.3 million at December 31, 2016. At December 31, 2017, $356.6 million, or 26.4%, was receivable from Mt. Logan Re collateralized segregated accounts; $153.8 million, or 11.4%, was receivable from Resolution Group; $113.9 million, or 8.4%, was receivable from Zurich; $98.1 million, or 7.3%, was receivable from C.V. Starr; and $82.2 million, or 6.1%, was receivable from Munich Re. The receivables from Resolution Group and C.V. Starr are fully collateralized by individual trust agreements. No other retrocessionaire accounted for more than 5% of our receivables.
Loss and LAE Reserves. Gross loss and LAE reserves totaled $11,884.3 million and $10,312.3 million at December 31, 2017 and 2016, respectively.
On July 13, 2015, we sold Mt. McKinley to Clearwater Insurance Company. Concurrently with the closing, we entered into a retrocession treaty with an affiliate of Clearwater. Per the retrocession treaty, we retroceded 100% of the liabilities associated with certain Mt. McKinley policies, which had been reinsured by Bermuda Re. As consideration for entering into the retrocession treaty, Bermuda Re transferred cash of $140.3 million, an amount equal to the net loss reserves as of the closing date. Of the $140.3 million of net loss reserves retroceded, $100.5 million were related to A&E business. The maximum liability retroceded under the retrocession treaty will be $440.3 million, equal to the retrocession payment plus $300.0 million. We will retain liability for any amounts exceeding the maximum liability retroceded under the retrocession treaty.
Our two main operating companies Bermuda Re and Everest Re are regulated by the Bermuda Monetary Authority ("BMA") and the State of Delaware, Department of Insurance, respectively. Both regulatory bodies have their own capital adequacy models based on statutory capital as opposed to GAAP basis equity. Failure to meet the required statutory capital levels could result in various regulatory restrictions, including business activity and the payment of dividends to their parent companies.
(1) Regulatory targeted capital represents the target capital level from the applicable year's BSCR calculation.
During 2017, we repurchased 0.2 million shares for $50.0 million in the open market and paid $207.2 million in dividends to adjust our capital position and enhance long term expected returns to our shareholders. During 2016, we repurchased 2.1 million shares for $386.3 million in the open market and paid $195.4 million in dividends. We may at times enter into a Rule 10b5-1 repurchase plan agreement to facilitate the repurchase of shares. On November 19, 2014, our existing Board authorization to purchase up to 25 million of our shares was amended to authorize the purchase of up to 30 million shares. As of December 31, 2017, we had repurchased 28.2 million shares under this authorization.
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 $1,162.7 million, $1,383.6 million and $1,108.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Additionally, these cash flows reflected net tax payments of $53.7 million, $42.6 million and $164.9 million for the years ended December 31, 2017, 2016 and 2015, respectively, and net catastrophe loss payments of $745.0 million, $206.0 million and $167.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.
If disbursements for claims and benefits, policy acquisition costs and other operating expenses were to exceed premium inflows, cash flow from reinsurance and insurance operations would be negative. The effect on cash flow from insurance operations would be partially offset by cash flow from investment income. Additionally, cash inflows from investment maturities and dispositions, both short-term investments and longer term maturities are available to supplement other operating cash flows.
Management generally expects annual positive cash flow from operations, which reflects the strength of overall pricing. However, given the recent set of catastrophic events, cash flow from operations will probably decline and could become negative in the near term as significant claim payments are made related to the catastrophes. However, as indicated above, the Company has ample liquidity to settle its catastrophe claims.
The Group Credit Facility requires Group to maintain a debt to capital ratio of not greater than 0.35 to 1 and to maintain a minimum net worth. Minimum net worth is an amount equal to the sum of $5,371.0 million plus 25% of consolidated net income for each of Group's fiscal quarters, for which statements are available ending on or after March 31, 2016 and for which consolidated net income is positive, plus 25% of any increase in consolidated net worth during such period attributable to the issuance of ordinary and preferred shares, which at December 31, 2017, was $5,867.7 million. As of December 31, 2017, the Company was in compliance with all Group Credit Facility covenants.
At December 31, 2017 and 2016, Everest International Credit Facility had £0.0 million and £130.6 million, respectively, outstanding letters of credit.
Costs incurred in connection with the Group Credit Facility and Everest International Credit Facility were $0.4 million and $0.8 million for December 31, 2017 and 2016, respectively.
Our business operations depend on the proper functioning and availability of our information technology platform, which includes data processing and related electronic communications. We communicate electronically internally and with our brokers, program managers, clients and third party vendors. Some of these electronic communications involve personal, confidential and proprietary information. We seek to ensure that all of our systems, data and electronic transmissions are appropriately protected from cybersecurity attacks with the latest technology safeguards. These include, but are not limited to, requiring an independent assessment of outside vendor's computing environment relative to the services they are providing us.
Loss and LAE reserves represent management's best estimate of losses from claim and related settlement costs. Both the amounts and timing of such payments are estimates, and the inherent variability of resolving claims as well as changes in market conditions make the timing of cash flows uncertain. Therefore, the ultimate amount and timing of loss and LAE payments could differ from our estimates.
Accounting for Deferred Taxes in Accumulated Other Comprehensive Income (AOCI). In February 2018, FASB issued ASU 2018-02 which outlines guidance on the treatment of trapped deferred taxes contained within AOCI on the consolidated balance sheets. The new guidance allows the amount of trapped deferred taxes in AOCI, resulting from the change in the U.S. tax rate from 35% to 21% upon enactment of the TCJA, to be reclassed as part of retained earnings in the consolidated balance sheets. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, but early adoption is allowed. The Company has decided to early adopt the guidance as of December 31, 2017. The adoption has resulted in a reclass of $1.3 million between AOCI and retained earnings, which is disclosed separately within the consolidated statement of changes in shareholders equity.
Intra-Entity Asset Transfers. In October 2016, FASB issued ASU 2016-16 which outlines guidance on the tax accounting for intra-entity asset sales and transfers, other than inventory. The new guidance requires that reporting entities recognize tax expense from the intra-entity transfer of an asset in the seller's tax jurisdiction at the time of transfer and recognize any deferred tax asset in the buyer's tax jurisdiction at the time of transfer. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2016-16 to have a material impact on its financial statements.
The following table presents certain financial statement line items as previously reported in 2016 and 2015, the effect of those line items due to treating the cost of shares withheld upon settlement of share-based compensation awards as a financing activity with the Statements of Cash Flows and the line items as currently reported within the financial statements.
Recognition and Measurement of Financial Instruments. In January 2016, the FASB issued ASU 2016-01 which outlines revised guidance on the accounting for equity investments. The new guidance states that all equity investments in unconsolidated entities will be measures at fair value, with the change in value being recorded through the income statement rather than being recorded within other comprehensive income. The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2016-01 to have material impact on its financial statements.
Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share. In May 2015, the FASB issued ASU 2015-07, which removes the requirement to categorize, within the fair value hierarchy, investments for which fair values are estimated using the net asset value practical expedient provided by Accounting Standards Codification 820, Fair Value Measurement. The updated guidance is effective for annual reporting periods beginning after December 15, 2015. The Company implemented this guidance effective in the fourth quarter of 2016. The adoption did not have a material impact on the Company's financial statements.
Debt Issuance Costs. In April 2015, The FASB issued ASU 2015-03, authoritative guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs be presented within the balance sheet as a reduction of the carrying value of the debt liability, rather than as a separate asset. This guidance is effective for annual reporting periods beginning after December 15, 2015 and related interim reporting periods. The Company implemented this guidance effective in the second quarter of 2016. The adoption did not have a material impact on the Company's financial statements.
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09 which outlines revised guidance on the recognition of revenue arising from contracts with customers. The new guidance states that reporting entities should apply certain steps to determine when revenue should be recognized, based upon fulfillment of performance obligations to complete contracts. The updated guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2014-09 to have a material impact on its financial statements.
Our current investment strategy seeks to maximize after-tax income through a high quality, diversified, taxable and tax-preferenced fixed maturity portfolio, while maintaining an adequate level of liquidity. Our mix of taxable and tax-preferenced investments is adjusted periodically, consistent with our current and projected operating results, market conditions and our tax position. The fixed maturity securities in the investment portfolio are comprised of non-trading available for sale securities. Additionally, we have invested in equity securities.
Interest Rate Risk. Our $18.6 billion investment portfolio, at December 31, 2017, is principally comprised of fixed maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk, and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the dollar value of foreign currency denominated liabilities and their associated income statement impact.
income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income.