Consolidated gross written and earned premiums by our four primary insurance lines were as follows:
Included in losses and loss adjustment expense for the year ended December 31, 2017 was $107.6 million related to Ariel Re. Net catastrophe losses for the year ended December 31, 2017 totaled $127.2 million resulting from Hurricanes Harvey, Irma and Maria, the California wildfires, other storm losses primarily in the United States and the Mexican earthquakes. Partially offsetting these catastrophe losses was $8.2 million of net favorable development on prior accident year loss reserves, which is presented in the table below. We also experienced higher than anticipated non-catastrophe current accident year property losses in 2017.
Included in losses and loss adjustment expenses for 2015 were $24.9 million in catastrophe losses resulting from United States and other storm activity, and the Tianjin explosion. Partially offsetting these current accident year losses was $32.4 million of net favorable development on prior accident year loss reserves, primarily attributable to favorable development in our general liability line, our Syndicate 1200 liability lines and our commercial automobile lines, partially offset by unfavorable development in our workers compensation and commercial multi-peril lines.
The following table summarizes the above referenced loss reserve development as respects prior year loss reserves by line of business for the year ended December 31, 2017:
In determining appropriate reserve levels for the year ended December 31, 2017, we maintained the same general processes and disciplines that were used to set reserves at prior reporting dates. No significant changes in methodologies were made to estimate the reserves since the last reporting date; however, at each reporting date we reassess the actuarial estimate of the reserve for loss and loss adjustment expenses and record our best estimate. Consistent with prior reserve valuations, as claims data becomes more mature for prior accident years, actuarial estimates were refined to weigh certain actuarial methods more heavily in order to respond to any emerging trends in the paid and reported loss data. While prior accident years’ net reserves for losses and loss adjustment expenses for some lines of business have developed favorably in recent years, this does not imply that more recent accident years’ reserves also will develop favorably; pricing, reinsurance costs, legal environment, general economic conditions including changes in inflation and many other factors impact our ultimate loss estimates.
Consolidated interest expense was $27.7 million, $19.6 million and $19.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Included in consolidated interest expense for the year ended December 31, 2017 was $4.2 million from the operations of Ariel Re. The remaining increase was primarily attributable to interest expense on a $125.0 million term loan entered into to fund a portion of the acquisition price of Ariel Re and to a lesser extent, an increase in short-term LIBOR rates. The increase in consolidated interest expense in 2016 as compared to 2015 was the result of slightly higher interest rates on our variable rate debt instruments.
The consolidated income tax benefit was $10.4 million for the year ended December 31, 2017 compared to income tax expense of $35.2 million and $14.3 million for the years ended December 31, 2016 and 2015, respectively. The consolidated income tax provision represents the income tax expense or benefit associated with our operations based on the tax laws of the jurisdictions in which we operate. Therefore, the consolidated provision for income taxes represents taxes on net income for our Belgium, Brazil, Ireland, Luxembourg, Malta, Switzerland, United Kingdom and United States operations. The consolidated effective tax rates were -26.1%, 19.4% and 8.1% for the years ended December 31, 2017, 2016 and 2015, respectively. The decrease in the effective tax rate for the year ended December 31, 2017 as compared to the same period in 2016 was primarily related to the revaluation of our net deferred tax liability due to the reduction of the U.S. corporate statutory income tax rate from 35% to 21% (primarily related to the unrealized gains on our investment portfolio) benefiting our 2017 tax provision by $20.2 million. This benefit, recognized in the fourth quarter of 2017, primarily offset the year-to-date U.S. tax expense. The remaining decrease in our effective tax rate was primarily attributable to a higher pretax loss from our United Kingdom operations in 2017, with an associated income tax benefit of $10.3 million for the year ended December 31, 2017. The increase in the effective tax rate for the year ended December 31, 2016 as compared to the same period ended 2015 was primarily attributable to an increase in pretax income in the United States. Pretax income for our United States operations increased to $115.2 million for the year ended December 31, 2016 from $64.8 million for the same period ended 2015.
As discussed in Note 1 “Basis of Presentation” and Note 19 “Segment Information,” during the first quarter of 2017, we evaluated and modified the presentation of our reportable segments to reflect our new operating framework and management structure. As a result, we have organized our business into two ongoing reporting segments: U.S. Operations and International Operations. U.S. Operations includes the former Excess & Surplus and Commercial Specialty reportable segments. International Operations includes the former Syndicate 1200 and International Specialty reportable segments, and the Ariel Re business which we acquired during the first quarter of 2017. (See Note 3 “Acquisition of Maybrooke” for further information related to the acquisition.) Consistent with prior periods, Run-off Lines and Corporate segments include all other activity of Argo Group and are included in our consolidated financial results. It is the business unit that produces the risk and not the location of the underlying exposure that is the primary characteristic in distinguishing U.S. Operations from International Operations. For example, a U.S. property exposure underwritten through our Syndicate platform would be included in our International Operations.
Property includes both property insurance and reinsurance products. Insurance products cover commercial properties primarily in North America with some residential and international covers. Reinsurance covers underlying exposures that are located throughout the world, including the United States. These offerings include coverages for man-made and natural disasters.
Specialty includes niche insurance coverages including Marine & Energy, Accident & Health and Surety product offerings.
In evaluating the operating performance of our segments, we focus on core underwriting and investing results before consideration of realized gains or losses from the sales of investments. Intersegment transactions are allocated to the segment that initiated the transaction. Realized investment gains and losses are reported as a component of the Corporate and Other segment, as decisions regarding the acquisition and disposal of securities reside with the corporate investment function and are not under the control of the individual business segments. Although this measure of profit (loss) does not replace net income (loss) computed in accordance with GAAP as a measure of profitability, management uses this measure of profit (loss) to focus our reporting segments on generating operating income.
The increase in gross written and earned premiums for the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to new programs launched in 2017 and late 2016 that capitalized on targeted growth initiatives in the specialty and general casualty lines. Our workers compensation business grew during the comparative periods, benefiting from the improving U.S. economy and the upturn in the coal market.
The growth in gross written and earned premiums for the year ended December 31, 2016 as compared to the same period in 2015 was due to strategic growth in our specialty and general casualty lines, partially offset by reductions from planned exits in certain programs.
The increase in the loss ratio for the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to increased non-catastrophe current accident year property losses in 2017. The decrease in the loss ratio for the year ended December 31, 2016 compared to the same period in 2015 was primarily attributable to higher net favorable loss reserve development on prior accident years and improvement in non-catastrophe current accident year results, partially offset by increased catastrophe losses.
Included in losses and loss adjustment expense for the year ended December 31, 2015 was $10.7 million in catastrophe losses from storm activity in the United States. Offsetting the catastrophe losses was $23.0 million of net favorable loss reserve development on prior accident years primarily due to favorable development in the general liability, commercial auto liability and surety lines, partially offset by unfavorable development in the commercial multiple peril and workers compensation lines.
Fee and other income, and the associated fee and other expense, decreased for the year ended December 31, 2017 as compared to the same period in 2016 primarily due to closing a transaction in the third quarter of 2017 related to transferring to a third party the distribution rights and operations of certain business managed on behalf of unaffiliated insurance companies, as the fee income and expense related to this program were previously recorded as part of our fee and other income and expense, respectively. The decrease
in fee and other income in 2017 was net of the $8.5 million gain recognized upon the completion of this transaction. Fee and other income increased for the year ended December 31, 2016 as compared to the same period ended 2015 due to the recognition of a $1.7 million gain on the sale of certain business units. The decline in fee and other expenses was primarily attributable to certain programs that were previously non-risk bearing converting to risk bearing programs.
The increase in gross written and earned premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily attributable to growth in our Lloyd’s Syndicate 1200 driven by the addition of a new international direct and facultative property line in 2016, as well as growth in Asia following the startup of those operations in 2015.
The increase in gross written premiums for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to growth in our Bermuda casualty business due to the introduction of new products and a rate increase on a large policy that renewed during the third quarter of 2017. We also experienced growth from our European operations where we diversified and expanded our liability business in 2017. The decline in earned premiums for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to changes to the reinsurance structure in 2017, whereby we increased the amount of premiums we cede to external reinsurers.
The increase in gross written premiums for professional lines for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to growth in our Bermuda, Brazil and European professional lines. Growth in Bermuda professional was driven by new wage and hour and cyber accounts. In Europe, gross written premiums increased due to new business in the German market, as well as capitalizing on additional cyber and directors and officers opportunities in the United Kingdom. Our Brazil business experienced growth through our digital platform. Earned premiums were slightly lower for the year ended December 31, 2017 as compared to the same period in 2016 primarily due to increased ceded reinsurance and the reduction in our ownership participation in Syndicate 1200. For the year ended December 31, 2017, Ariel Re’s professional lines business contributed $2.1 million and $0.5 million of gross written and earned premiums, respectively
The increase in gross written premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily attributable to growth in new lines including marine liability, political risks and contingency. We also saw growth in yachts and hull business, as new underwriters were added to the team during 2016. These increases were partially offset by our reduced ownership participation in Syndicate 1200 in 2016. Earned premiums were relatively flat for the comparative periods.
Included in losses and loss adjustment expense for the year ended December 31, 2015 was $14.2 million in catastrophe losses resulting from the Tianjin explosion and other storms primarily in the United States. Offsetting the catastrophe losses was $18.0 million in net favorable loss reserve development on prior accident years, primarily attributable to general liability lines, various liability lines underwritten by our Lloyd’s Syndicate 1200 and the property reinsurance lines.
The increase in fee and other expenses for the year ended December 31, 2017 as compared to the same period in 2016 is primarily due to the costs incurred in 2017 associated with the startup of our digital affinity group business. In addition, the reduction to profit commissions payable to trade capital providers were less than in 2017 when compared to the reductions in 2016. These reduced profit commissions for the year ended December 31, 2016 were also the primary driver behind the decline in fee and other expenses as compared to the same period in 2015.
Losses and loss adjustment expenses for the year ended December 31, 2016 included $18.6 million of net unfavorable loss reserve development on prior accident years primarily attributable to $9.1 million from our asbestos exposure, $6.5 million from our run-off risk management lines and $3.0 million from our other run-off lines. The unfavorable development from our asbestos exposure was due to increased defense costs and a final settlement with a large primary insured.
The following table represents a reconciliation of total gross and net reserves for the Run-off Lines. Amounts in the net column are reduced by reinsurance recoverables.
The following table represents a reconciliation of the number of asbestos and environmental claims outstanding:
Because of the types of coverage within the Run-off Lines of business still being serviced by Argonaut Insurance Company, a significant amount of subjectivity and uncertainty exists in establishing the reserves for losses and loss adjustment expenses. Factors that increase these uncertainties are: (1) lack of historical data, (2) inapplicability of standard actuarial projection techniques, (3)
Cash provided by operating activities can fluctuate due to timing difference in the collection of premiums and reinsurance recoveries and the payment of losses and expenses. For the years ended December 31, 2017, 2016 and 2015, cash provided by operating activities was $165.0 million, $182.0 million and $283.2 million, respectively. The decrease in cash flows provided by operating activities in 2017 compared to 2016 and in 2016 compared to 2015 was driven by the timing of reinsurance recoveries and premium cash receipts in the respective periods.
For the years ended December 31, 2017, 2016 and 2015, net cash provided by (used in) financing activities was $48.0 million, ($72.7) million, and ($50.6) million, respectively. During 2017, 2016 and 2015, we repurchased approximately 0.8 million, 0.8 million and 0.6 million shares, respectively, of our common shares for a total cost of $45.2 million, $47.1 million and $29.7 million, respectively. We paid dividends to our shareholders totaling $33.2 million, $26.6 million and $22.7 million during the years ended December 31, 2017, 2016 and 2015, respectively.
In addition, our ability to receive dividends from our downstream subsidiaries is subject to the ability of each parent corporation within the corporate ownership structure to receive dividends from its respective subsidiary(ies) based upon the subsidiary’s domiciliary regulations. Argo Re is the primary direct subsidiaries of Argo Group and are subject to Bermuda insurance laws. As part of the Maybrooke liquidation, Ariel Re Insurance, Ltd. was merged into Argo Re, Ltd effective December 31, 2017 (see Note 2, “Acquisition of Maybrooke”). Argo Ireland is indirectly owned by Argo Re and is a mid-level holding company subject to Irish laws, and its primary subsidiary is Argo Group US, Inc. Argo Group US, Inc. is a mid-level holding company subject to Delaware laws. Argo Group US, Inc. is the parent of all of our U.S. insurance subsidiaries.
Effective February 6, 2017, we completed the acquisition of Maybrooke Holdings, S.A. for $235.3 million. We drew $125.0 million under our Credit Agreement in order to help fund the acquisition and paid the remaining $110.3 million with available cash on hand. In addition to the cash needs related to this acquisition, we will have continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends and taxes. Funds to meet these obligations will come primarily from parent company cash, dividends and other payments from our insurance company subsidiaries.
Under certain insurance programs (i.e., large deductible programs and surety bonds) and various reinsurance agreements, collateral and LOCs are held for our benefit to secure performance of insureds and reinsurers in meeting their obligations. At December 31, 2017, the amount of such collateral and LOCs held under insurance and reinsurance agreements were $841.9 million and $904.8 million, respectively. Collateral can be provided in the form of trust accounts. As we are the beneficiary of these trust accounts only to secure future performance, these amounts are not reflected in our Consolidated Balance Sheets. Collateral provided by an insured or reinsurer may exceed or fall below their total outstanding obligation.
A summary of our outstanding junior subordinated debentures at December 31, 2017 is presented below:
Unsecured junior subordinated debentures with a principal balance of $91.8 million were assumed through the acquisition of Maybrooke (“the Maybrooke debt”). As part of the liquidation of the Maybrooke holding company and the organizational restructuring of its former subsidiary companies, the acquired debt was ultimately assigned to Argo Re and is carried on our consolidated balance sheet at $83.9 million, which represents the debt’s fair value at the date of acquisition plus accumulated accretion of discount to par value, as required by accounting for business combinations under ASC 805 (see Note 2, “Acquisition of Maybrooke”). At December 31, 2017, the Maybrooke debt was eligible for redemption at par. Interest accrues on the Maybrooke debt based on a variable rate, which is reset quarterly. Interest payments are payable quarterly. A summary of the terms of the Maybrooke debt outstanding at December 31, 2017 is presented below:
We assumed debt through the acquisition of Syndicate 1200. These notes are unsecured. All are redeemable subject to certain terms and conditions at a price up to 100% of the principal plus accrued and unpaid interest. Interest on the U.S. Dollar and Euro notes is due semiannually and quarterly, respectively. A summary of the notes outstanding at December 31, 2017 is presented below:
We invest excess cash in a variety of investment securities. As of December 31, 2017, our investment portfolio consisted of 70.5% fixed maturities, 10.3% equity securities, 11.4% other investments 7.8% short-term investments (based on fair value) compared to 67.9% fixed maturities, 10.3% equity securities, 12.4% other investments and 9.4% short-term investments as of December 31, 2016. We classify the majority of our investment portfolio as available-for-sale; resulting in these investments being reported at fair market value with unrealized gains and losses, net of tax, being reported as a component of shareholders’ equity. At December 31, 2017, no investments were designated as trading. No issuer (excluding United States Government and United States Governmental agencies) of fixed maturity or equity securities represents more than 5.1% of shareholders’ equity at December 31, 2017.
We believe we maintain sufficient liquidity to pay claims and expenses, as well as satisfy our commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates or reserve deficiencies.
We have committed to invest up to a total of $454.7 million in a series of hedge funds, private equity and long only funds, of which $324.8 million was funded and included in Other invested assets in our consolidated balance sheet. As of December 31, 2017, we have a remaining obligation to the private equity partnerships to invest up to an additional $129.9 million, which can be called at any time. We have not recorded this commitment in our consolidated financial statements. The investment will be recorded at such time as the capital partnership requires the additional investment. Additionally, we have not recorded the liabilities for our operating leases in our consolidated financial statements.
Our estimated contractual obligations and commitments as of December 31, 2017 were as follows:
Interest only on Senior Unsecured Fixed Rate Notes through 2042. Interest calculated based on the rate in effect at December 31, 2017. Principal due September 2042.
Interest only on Floating Rate Loan Stock through 2034. Interest calculated based on the rate in effect at December 31, 2017. Principal due beginning November 2034.
The discussion of the adoption and pending adoption of recently issued accounting policies is included in Note 1, “Business and Significant Accounting Policies” in the Notes to the Consolidated Financial Statements, included in Item 8, “Financial Statements and Supplementary Data” beginning on page.
We establish reserves for the estimated total unpaid costs of losses including loss adjustment expenses (“LAE”), for claims that have been reported as well as claims that have been incurred but not yet reported. Unless otherwise specified below, the term “loss reserves” encompasses reserves for both losses and LAE. Loss reserves reflect management’s best estimate. Loss reserves established are not an exact calculation of our liability. Rather, loss reserves represent management’s best estimate of our liability based on application of actuarial techniques and other projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss reserves is complex and necessarily imprecise, as it involves using judgment that is impacted by many internal and external variables such as past loss experience, current claim trends and the prevailing social, economic and legal environments. In determining loss reserves, we give careful consideration to all available data and applicable actuarial analyses.
For long-tail lines such as general liability and automobile liability, the loss experience is not deemed fully credible for several years. At the end of the accident year, we rely primarily on the BF methods and continue to rely on those methods for several years. We assign greater weight to the paid and incurred development methods as the data matures.
Each business segment is analyzed individually, with development characteristics for each short-tail and long-tail line of business identified and applied accordingly. In comparing loss reserve methods and assumptions used at December 31, 2017 as compared with methods and assumptions used at December 31, 2016, management has not changed or adjusted methodologies or assumptions in any significant manner.
Case reserves and expense reserves for costs of related litigation have been established where sufficient information has been developed. Additionally, IBNR has been established to cover additional exposure on known and unknown claims.
Use of preferred provider networks and other medical cost containment practices;
The commercial automobile liability product line is a long-tail coverage, mainly due to exposures arising out of bodily injury claims. Losses in this line associated with bodily injury claims generally are more difficult to accurately estimate and take longer to resolve. Claim reporting lags also can occur. Examples of loss and LAE risk factors that can change over time and result in adjustments to commercial automobile liability loss reserves include, but are not limited to, the following:
Recorded gross reserves for general liability were $1,681.0 million, with approximately 3% of that amount related to run-off asbestos and environmental exposures as of December 31, 2017. For general liability losses relating to ongoing operations, reported loss development patterns are a key assumption for this line of business. Historically, assumptions on reported loss development patterns have been impacted by, among other things, emergence of new types of claims (e.g., construction defect claims) or a shift in the mixture between smaller, more routine claims and larger, more complex claims. We have reviewed the historical variation in reported loss development patterns for general liability losses deriving from continuing operations. If the reported loss development patterns change by 10%, a change that we have experienced in the past and that management considers possible, the estimated net reserve could change by $75.0 million, in either direction.
Recorded gross reserves for workers compensation were $566.9 million as of December 31, 2017. The two most important assumptions for workers compensation reserves are loss development factors and loss cost trends, particularly medical cost inflation. Loss development patterns are dependent on medical cost inflation. Approximately 55% of the workers compensation net reserves are related to future medical costs. A review of National Council on Compensation Insurance data suggests that the annual growth in industry medical claim costs has varied from -2% to +13% since 1991. Across the entire reserve base, a 1% change in calendar year medical inflation could change the estimated net reserve by $15.0 million, in either direction.
Recorded gross reserves for our Lloyd’s Syndicate 1200 business were $849.1 million as of December 31, 2017. Estimation of our international liability reserves are subject to late emergence and mix shifts between smaller, more routine claims and larger, more complex claims. Our international property reserves are analyzed by the characteristics of the underlying exposures. Property loss reserves are characterized by relatively short periods between occurrence, reporting, determination of coverage and ultimate claims settlement. These property loss reserves tend to be the most predictable. Catastrophic loss reserves tend to exhibit more volatility due to the nature of the underlying loss event which may cause delays and complexity in estimating ultimate loss exposure.
In establishing our best estimate for reserves, we consider facts currently known and the present judicial and legislative environment. However, given the expansion of coverage and liability by the courts, legislatures in the recent past and possibility of similar interpretations in the future, particularly with regard to asbestos and environmental claims, additional loss reserves may develop in future periods. These potential increases cannot be reasonably estimated at the present time. Any increases could have an adverse impact on future operating results, liquidity, risk-based capital ratios and ratings assigned to our insurance subsidiaries by the nationally recognized insurance rating agencies.
We regularly monitor the difference between the estimated fair values of our investments and their cost or book values to identify underperforming investments and whether declines in value are temporary in nature or “other-than-temporary.” If a decline in the value of a particular investment is believed to be temporary, the decline is recorded as an unrealized loss, net of tax, in other comprehensive income as a separate component of shareholders’ equity. If the decline is believed to be “other-than-temporary,” the carrying value of the investment is written down and recorded as a realized loss in our Consolidated Statements of Income. We evaluate our investments for impairment. For fixed maturities securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized book value. For mortgage-backed securities, frequency and severity inputs are used in projecting future cash flows of the securities. Loss frequency is measured as the credit default rate, which includes such factors as loan-to-value ratios and credit scores of borrowers. Loss severity includes such factors as trends in overall housing prices and house prices that are obtained at foreclosure. For equity securities, the length of time and the
amount of decline in fair value are the principal factors in determining other-than-temporary impairment. For the years ended December 31, 2017, 2016 and 2015, we recorded $2.5 million, $10.2 million and $11.9 million, respectively, of realized losses due to the recognition of other-than-temporary impairments.
The evaluation of the recoverability of our gross deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the net deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. At each balance sheet date, management assesses the need to establish a valuation allowance that reduces deferred tax assets when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. The valuation allowance is based on all available information including projections of future taxable income from each tax-paying component in each tax jurisdiction, principally derived from business plans and available tax planning strategies. If our assumptions and estimates that resulted in our forecast of future taxable income for each tax-paying component prove to be incorrect, an additional valuation allowance could become necessary, which could have a material adverse effect on our financial condition, results of operations, and liquidity.
At December 31, 2017, we had goodwill of $161.4 million assigned to the following reporting units: U.S. Operations - $123.5 million, and International Operations - $37.9 million. Additionally, at December 31, 2017, we had other intangible assets totaling $96.8 million, including indefinite-lived intangible assets of $89.0 million relating to our Lloyd’s Syndicates 1200 and 1910, including $28.5 million recognized as part of the Maybrooke acquisition, as described in further detail in Note 3 “Acquisition of Maybrooke” in the Consolidated Financial Statements. Due to the nature of our Lloyd’s Syndicates’ business, for purposes of the annual impairment evaluation, we have aggregated the fair values between the indefinite-lived intangible asset and goodwill.
For the years ended December 31, 2017, 2016 and 2015, all of our reporting units passed Step 1 of the goodwill impairment analysis as the fair value of each reporting unit was in excess of their carrying values. Therefore, Step 2 of the goodwill impairment analysis was not required. Any decline in the fair value of these reporting units could result in the carrying value of the reporting unit being in excess of fair value, triggering Step 2 of the impairment testing model, which could result in an impairment of goodwill.
As noted above, we have elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill and other indefinite-lived intangible assets. An impairment analysis subsequent to this date has not been performed as we believe that no additional indicators of impairment have arisen, such as significant additional pricing competition, unexpected significant declines in operating results, divestiture of a significant component of the business or further significant decline in market capitalization.
Our market capitalization has increased in 2017, as our stock has traded at or above book value in the fourth quarter of 2017. We considered the market capitalization as one of the data points in performing our annual impairment test. We consider the changes in our market capitalization to be primarily attributable to global financial market conditions, as well as current trends within the insurance industry. The valuation analysis discussed above supports our view that goodwill and other indefinite-lived intangible assets are not impaired at October 1, 2017. Through December 31, 2017, there have been no indicators of impairment of goodwill and other indefinite-lived intangible assets. During 2018, we will monitor relevant internal and external factors and their potential impact on the fair value of our reporting segments, and if required, we will update our impairment analysis.
While we believe the estimates and assumptions are reasonable in determining the fair value of reporting units, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, we may be required to perform Step 2 in future periods and impairment of goodwill and/or other indefinite-lived assets could result. We cannot predict future events that might impact the fair value of reporting units and goodwill impairment. Such events include, but are not limited to, increased competition in insurance markets and global economic changes.
We evaluated our definite lived intangibles for indicators of impairment. If indicators of impairment had been identified, we would have been required to test definite lived intangible assets for impairment. As of October 1, 2017, the testing date, no indicators of impairment were identified. Therefore, we were not required to test for impairment. As with the indefinite-lived intangible assets, we will continue to monitor for indicators of impairment and test as required.