Gross written premium decreased 0.3% in 2017 compared with 2016 primarily from premium adjustments in California of $22.2 million during the first six months of 2017. Refer to Note 13 - Legal and Regulatory Proceedings for a more detailed discussion of the premium adjustments. Refer to Results of Operations - Underwriting - Premium for a more detailed discussion of our gross written premium.
Net catastrophe losses during 2017 were $17.4 million compared with $6.9 million during 2016.
Included in net earnings for the year ended December 31, 2017, was $12.0 million ($18.5 million pre-tax) of favorable development on prior accident year loss and LAE reserves. This development was primarily due to a decrease in ultimate severity estimates in California related to bodily injury and material damage coverages for accident year 2016 and a decrease in ultimate frequency estimates in Florida related to material damage and uninsured motorist bodily injury coverage for accident year 2016. This favorable development was partially offset by increases in ultimate severity estimates in bodily injury coverages in our commercial auto product. This compares with $15.6 million ($24.0 million pre-tax) of favorable development for 2016. The following table displays GAAP combined ratio results by accident year developed through December 31, 2017:
Paid and incurred frequency and severity methods utilizing paid and incurred claims count development and paid and incurred claims cost development to predict ultimate average frequency (claims count per policy or auto insured) or ultimate average severity (cost per claim); and
We believe that our relatively low average policy limit and concentration on the nonstandard auto driver classification generally help stabilize fluctuations in frequency and severity. For example, approximately 92% of our policies include only the state-mandated minimum policy limits for bodily injury, which somewhat mitigates the challenge of estimating average severity. These low limits tend to reduce the exposure of the loss reserves on this coverage to medical cost inflation on severe injuries since the minimum policy limits will limit the total payout.
As compared with loss and LAE reserves held at December 31, 2017, our best estimate of reserve ranges using indicated results from utilized estimates of loss and LAE could range from a deficiency of 8%, or $55.5 million, to a redundancy of 9%, or $59.9
As noted above, the highest degree of uncertainty is associated with reserves in the first 12 to 18 months. The following table displays the accident year combined ratios developed through December 31, 2017, for the four most recent accident years along with the potential combined ratios based on the low and high outcomes of the loss and LAE tests utilized:
The $18.5 million favorable reserve development during the twelve months ended December 31, 2017, was primarily due to decreases in ultimate frequency and severity estimates from the bodily injury and material damage coverages in California for accident year 2016 and decreases in ultimate frequency and severity estimates from material damage coverages along with decreases in severity estimates from uninsured motorist bodily injury coverage in Florida for accident year 2016. This favorable development was partially offset by increases in ultimate severity estimates in bodily injury coverages in our commercial auto product.
The October 1, 2017, test results indicated that the fair value of our goodwill exceeded our carrying value and therefore no impairment charge was required at that date. Additionally, there was no indication of impairment at December 31, 2017.
As of December 31, 2017, the holding company had $171.0 million of cash and investments. In 2018, our insurance subsidiaries may pay us up to $67.9 million in ordinary dividends without prior regulatory approval. Rating agency capital requirements, among other factors, will be considered when determining the actual amount of dividends paid in 2018.
At December 31, 2017, we had $275 million principal outstanding of 5.0% senior notes due September 2022 (the "5.0% Senior Notes"). The 5.0% Senior Notes accrue interest at 5.0%, payable semiannually each March and September. Refer to Note 4 - Long-Term Debt to the Consolidated Financial Statements for more information on our long-term debt.
The payments for post-retirement benefits do not represent actual contractual obligations. The payments presented represent the best estimate of future contributions.
We engage three unaffiliated money managers for our fixed income portfolio and we own a Vanguard exchange-traded fund designed to track the FTSE Global All Cap Index for our equity portfolio. The investment managers conduct, in accordance with our investment guidelines, all of our investment purchases and sales. Our Chief Financial Officer and the Investment Committee, at least quarterly, review the performance of the money managers and compliance with our investment guidelines. National banks unaffiliated with the money managers maintain physical custody of securities.
Because we carry all of these securities at fair value in the Consolidated Balance Sheets, there is virtually no effect on liquidity or financial condition upon the sale and ultimate realization of unrealized gains and losses. The average duration of our fixed maturity portfolio was 3.3 years at December 31, 2017.
Summarized information for our investment portfolio at December 31, 2017, follows ($ in thousands):
The $1.7 million and $0.8 million balances in receivable for securities sold at December 31, 2017, and December 31, 2016, respectively, represents fixed income securities sold in the normal course of business that had not settled prior to the end of their respective years.
The $5.6 million and $13.9 million balances in payable for securities purchased at December 31, 2017, and December 31, 2016, respectively, represent fixed income securities and treasury stock purchased in the normal course of business that had not settled prior to the end of their respective years.
It is our policy to close our policy and claim systems on the last Friday of the month, which resulted in 2016 being a 53-week year. Excluding the impact of this extra week, gross written premium in 2017 would have increased 1.0%.
The decrease in Personal Auto gross written premium was primarily due to premium adjustments in California of $22.2 million during the first six months of 2017. Refer to Note 13 - Legal and Regulatory Proceedings for a more detailed discussion of the premium adjustments. Excluding the premium adjustments, gross written premium increased 1.3% during 2017 driven by growth in Texas, Arizona and Commercial Auto, partially offset by reductions in new business in Florida and renewal business in California. Growth in Texas was primarily due to new and renewal business growth and higher average premiums. Growth in Arizona was primarily due to new business growth and higher average premiums.
During 2017, adjustments were made to written and earned premium as a result of premium returned to policyholders in California. Refer to Note 13 - Legal and Regulatory Proceedings for a more detailed discussion of the premium adjustments. For the twelve months ended December 31, 2017, written and earned premiums were reduced by $22.1 million and $16.2 million, respectively. Excluding the adjustments, the statutory combined ratio for the twelve months ended December 31, 2017, would have been 92.5%. The GAAP combined ratio for the same period would have been 94.0%.
The statutory combined ratio for the twelve months ended December 31, 2017, decreased by 1.7 points from the same period of 2016. The twelve months ended December 31, 2017, included $18.5 million of favorable development on prior year loss and LAE reserves compared with $24.0 million of favorable development on prior year loss and LAE reserves in 2016. Excluding the effect of development from both periods, the statutory combined ratio decreased by 2.0 points for the twelve months ended December 31, 2017, compared with 2016.
The GAAP combined ratio for the twelve months ended December 31, 2017, decreased by 1.5 points compared with the same period of 2016. Excluding the effect of development from both periods, the GAAP combined ratio decreased by 1.9 points for the twelve months ended December 31, 2017, compared with 2016.
Losses from catastrophes totaled $17.4 million during 2017, compared with $6.9 million in 2016.
The GAAP combined ratio for the twelve months ended December 31, 2016, increased by 1.1 points compared with the same period of 2015. Excluding the effect of development from both periods, the GAAP combined ratio increased by 0.7 point for the twelve months ended December 31, 2016, compared with 2015.
The 2.8 points decline in the Commercial Auto product combined ratio during the twelve months ended December 31, 2016, was due to an improvement in the current accident year loss and LAE ratio primarily due to an increase in average earned premium.
Pre-tax net investment income increased from $35.5 million in 2016 to $37.3 million in 2017 primarily due to an increase in make whole interest and bond issuer tender offers during 2017 totaling $1.0 million and an increase in interest income on cash equivalents due to an increase in yield.
Pre-tax net investment income declined from $36.8 million in 2015 to $35.5 million in 2016 primarily due to a decline of $0.9
million in make whole proceeds and a decrease in book yield caused by continued low reinvestment yields.
Other income was primarily comprised of commission from the sales of third party insurance policies and items of a non-recurring nature. Other income for the year ended December 31, 2017, increased $0.4 million primarily as a result of a growth in the sales of these policies.
Other expenses for the twelve months ended December 31, 2016, decreased primarily due to losses in 2015 on subleases related to the closure of offices in Georgia, Nevada and Pennsylvania as well as a partial lease buyout on our existing corporate headquarters. In addition, we incurred an impairment to bring the book values of two properties down to the appraised value after the demolition of buildings that were on the premises at the time of purchase.
The GAAP effective tax rate increased in 2017 primarily as a result of the inclusion of the adjustment to net deferred taxes in the Provision for income taxes relating to the reduction in the enacted corporate tax rate under the Tax Cuts and Jobs Act from 35% to 21% and an increase in pre-tax income. The GAAP effective tax rate decreased in 2016 primarily as a result of a more significant impact from tax-exempt interest and the dividends-received deduction due to lower pre-tax income. Refer to Note 5 - Income Taxes to the Consolidated Financial Statements for additional information on income taxes.
Consolidated Statements of Comprehensive Income: Years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Changes in Shareholders’ Equity: Years ended December 31, 2017, 2016 and 2015